94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB0600

 

Introduced 1/27/2005, by Rep. James H. Meyer

 

SYNOPSIS AS INTRODUCED:
 
New Act
20 ILCS 1205/8   from Ch. 17, par. 109
815 ILCS 505/2E   from Ch. 121 1/2, par. 262E

    Creates the Short-term Loan Act. Provides for the regulation of entities that make payday loans and motor vehicle title loans having a term of fewer than 93 days and in an amount that does not exceed $1,000. Limits charges that may be imposed in connection with the loans. Requires lenders to obtain a license from the Director of the Division of Financial Institutions in the Department of Financial and Professional Regulation. Amends the Financial Institutions Code to require the Director of the Division of Financial Institutions to establish a complaint registry regarding licensees under the Short-term Loan Act. Amends the Consumer Fraud and Deceptive Business Practices Act to provide that 3 or more violations of the Short-term Loan Act constitute a violation of the Consumer Fraud and Deceptive Business Practices Act. Effective January 1, 2006.


LRB094 06800 MKM 36902 b

CORRECTIONAL BUDGET AND IMPACT NOTE ACT MAY APPLY
FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB0600 LRB094 06800 MKM 36902 b

1     AN ACT concerning regulation.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 1. Short title. This Act may be cited as the
5 Short-term Loan Act.
 
6     Section 5. Definitions.
7     "Director" means the Director of the Division of Financial
8 Institutions in the Department of Financial and Professional
9 Regulation.
10     "Motor vehicle title loan firm" means any business that
11 loans money to a borrower in a transaction in which the
12 borrower turns over custody of a title to a motor vehicle as
13 security for the loan.
14     "Net worth" means total assets minus total liabilities.
15     "Payday loan firm" means any business that loans money to a
16 borrower in a transaction in which the loan is due and payable
17 upon the next payday of the borrower or any member of the
18 borrower's immediate family.
 
19     Section 10. License required to engage in business. No
20 person, partnership, association, limited liability company,
21 or corporation shall engage in the business of making loans of
22 money for terms of 92 days or less except as authorized by this
23 Act after first obtaining a license from the Director.
 
24     Section 15. Application; fees. Application for a license
25 shall be in writing, under oath, and in the form prescribed by
26 the Director. The applicant, at the time of making the
27 application, shall pay to the Director an application fee and
28 annual license fee to be fixed by the Director by rule. The
29 application fee and the annual license fee shall in no case be
30 less than the amounts determined by the Director to be

 

 

HB0600 - 2 - LRB094 06800 MKM 36902 b

1 necessary to cover his or her duties prescribed by this Act,
2 including the cost of maintaining and operating a consumer
3 complaint system.
 
4     Section 20. Positive net worth; bond. Before a license is
5 granted, the applicant shall prove in form satisfactory to the
6 Director that the applicant has a positive net worth of a
7 minimum of $50,000. An applicant shall maintain a surety bond
8 in the principal sum of $5,000 issued by a bonding company
9 authorized to do business in this State and which shall be
10 approved by the Director. This bond shall run to the Director
11 and shall be for the benefit of any person who incurs damages
12 as a result of the actions of a licensee and who is lawfully
13 awarded these damages pursuant to an appropriate court order.
14 If the Director finds at any time that a bond is of
15 insufficient size or otherwise doubtful, an additional bond in
16 any amount determined by the Director shall be filed by the
17 licensee within 30 days after written demand by the Director.
 
18     Section 25. Appointment of attorney-in-fact for service of
19 process. A licensee shall appoint, in writing, the Director as
20 attorney-in-fact upon whom all lawful process against the
21 licensee may be served with the same legal force and validity
22 as if served on the licensee. A copy of the written
23 appointment, duly certified, shall be filed in the office of
24 the Director, and a copy thereof certified by the Director
25 shall be sufficient evidence. This appointment shall remain in
26 effect while any liability remains outstanding in this State
27 against the licensee. When summons is served upon the Director
28 as attorney-in-fact for the licensee, the Director shall
29 immediately notify the licensee by registered mail, enclosing
30 the summons and specifying the hour and day of service.
 
31     Section 30. Investigation to determine whether license
32 shall be issued. Upon the filing of an application and the
33 payment of the required fees, the Director shall investigate to

 

 

HB0600 - 3 - LRB094 06800 MKM 36902 b

1 determine (i) that the reputation of the applicant, including
2 managers, partners, owners, officers, or directors of a limited
3 liability company, is such as to warrant belief that the
4 business will be operated honestly and fairly within the
5 purposes of this Act and (ii) that the applicant meets the
6 positive net worth requirement set forth in Section 20 of this
7 Act. Unless the Director finds that the application meets both
8 of these criteria, the Director shall not issue a license,
9 shall notify the applicant of the denial, and shall return to
10 the applicant the sum paid by the applicant as an annual
11 license fee, but shall retain the application fee. The Director
12 shall approve or deny every application for licensure under
13 this Act within 60 days from the filing of the application and
14 submission of the required fees.
 
15     Section 35. License; consumer information to be posted.
16     (a) The license shall state the address, including city and
17 state, at which the business is to be conducted and shall state
18 fully the name of the licensee. The license shall be
19 conspicuously posted in the place of business of the licensee
20 and shall not be transferable or assignable.
21     (b) In addition to posting the license, the licensee shall
22 legibly post in each of his or her offices where business is
23 done with the public, in a format to be determined by the
24 Director by rule, the name, address, and telephone number of a
25 short-term consumer lending customer complaint gathering
26 service or hotline that the Director shall use to gather
27 information about each licensee and take appropriate action.
 
28     Section 40. More than one license to same licensee. Not
29 more than one place of business shall be maintained under the
30 same license, but the Director may issue more than one license
31 to the same licensee upon compliance with all the provisions of
32 this Act governing an original issuance of a license.
 
33     Section 45. Changing place of business. Whenever a licensee

 

 

HB0600 - 4 - LRB094 06800 MKM 36902 b

1 changes his or her place of business to a location other than
2 that set forth in his or her license, the licensee shall give
3 written notice of the change to the Director at least 10 days
4 prior to the relocation. However, if the new location is more
5 than 15 miles from the previous location, the licensee shall
6 obtain written approval from the Director prior to the
7 relocation.
 
8     Section 50. Annual license fee. A licensee shall, on or
9 before December 15 of each year, pay to the Director the annual
10 license fee required by Section 15 of this Act for the next
11 succeeding calendar year. The license shall expire on January 1
12 unless the license fee has been timely paid to renew the
13 license.
 
14     Section 55. Expenses. In addition to the licensee fee, the
15 licensee shall bear the reasonable expense of any examination,
16 investigation, or custody by the Director under any provisions
17 of this Act.
 
18     Section 60. License expirations and reinstatements. If a
19 licensee fails to renew a license by December 31 of any year,
20 the license shall automatically expire and the licensee is not
21 entitled to a hearing. The Director, at his or her discretion,
22 may reinstate an expired license upon payment of the annual
23 renewal fee and proof of good cause for failure to renew.
 
24     Section 65. Deposits. All moneys received by the Director
25 under this Act shall be deposited in the Financial Institution
26 Fund created under Section 6z-26 of the State Finance Act.
 
27     Section 70. Fines, suspension, or revocation of license.
28     (a) The Director may, after 10 days notice by registered
29 mail to the licensee at the address set forth in the license,
30 stating the contemplated action and the general grounds for
31 that action, fine the licensee an amount not exceeding $10,000

 

 

HB0600 - 5 - LRB094 06800 MKM 36902 b

1 per violation, or revoke or suspend any license issued under
2 this Act, if the Director finds that:
3         (1) the licensee has failed to comply with any
4     provision of this Act or any order, decision, finding,
5     rule, or direction of the Director lawfully made pursuant
6     to the authority of this Act; or
7         (2) any fact or condition exists which, if it had
8     existed at the time of the original application for the
9     license, clearly would have warranted the Director in
10     refusing to issue the license.
11     (b) The Director may fine, suspend, or revoke only the
12 particular license with respect to the grounds for which the
13 fine, revocation, or suspension occur or exist. If the Director
14 finds that the grounds for the fine, suspension, or revocation
15 are of general application to all offices or to more than one
16 office of the licensee, the Director shall fine, suspend, or
17 revoke every license to which those grounds apply.
18     (c) No revocation, suspension, or surrender of any license
19 shall impair or affect the obligation of any pre-existing
20 lawful contract between the licensee and any obligor.
21     (d) The Director may issue a new license to a licensee
22 whose license has been revoked if the facts or conditions that
23 warranted the Director's original refusal to issue the license
24 no longer exist.
25     (e) In every case in which a license is suspended or
26 revoked or an application for a license or renewal of a license
27 is denied, the Director shall serve the licensee with notice of
28 the suspension, revocation, or denial, including a statement of
29 the reasons for the suspension, revocation, or denial, either
30 personally, or by certified mail, return receipt requested.
31 Service by certified mail shall be deemed completed when the
32 notice is deposited in the U.S. Mail.
33     (f) An order assessing a fine, an order revoking or
34 suspending a license, and an order denying renewal of a license
35 shall take effect upon service of the order on the licensee,
36 unless the licensee requests a hearing, in writing, within 10

 

 

HB0600 - 6 - LRB094 06800 MKM 36902 b

1 days after the date of service. If a hearing is requested, the
2 order shall be stayed until a final administrative order is
3 entered.
4     (g) If the licensee requests a hearing, the Director shall
5 schedule a hearing within 30 days after the request for a
6 hearing unless the parties otherwise agree to a later date.
7     (h) The hearing shall be held at the time and place
8 designated by the Director. The Director and any administrative
9 law judge designated by the Director shall have the power to
10 administer oaths and affirmations, subpoena witnesses and
11 compel their attendance, take evidence, and require the
12 production of books, papers, correspondence, and other records
13 or information that he or she considers relevant or material to
14 the inquiry.
15     (i) The costs for the administrative hearing shall be
16 determined by the Director by rule.
17     (j) The Director shall have the authority to prescribe
18 rules for the administration of this Section.
 
19     Section 75. Closing of business; surrender of license.
20     (a) At least 10 days prior to a licensee ceasing
21 operations, closing business, or filing for bankruptcy, the
22 licensee shall notify the Director of its action in writing,
23 and, unless the licensee is filing for bankruptcy, the licensee
24 shall surrender its license to the Director for cancellation.
25 The surrender of the license shall not affect the licensee's
26 civil or criminal liability for acts committed prior to the
27 surrender or entitle the licensee to a return of any part of
28 the annual license fee.
29     (b) The licensee shall notify the Director of the location
30 where the books, accounts, contracts, and records will be
31 maintained and of the procedure to ensure prompt return of
32 contracts, titles, and releases to customers.
33     (c) The accounts, books, records, and contracts shall be
34 maintained and serviced by the licensee or another licensee
35 under this Act or an entity exempt from licensure under this

 

 

HB0600 - 7 - LRB094 06800 MKM 36902 b

1 Act.
2     (d) The Director shall have the authority to conduct
3 examinations of the books, records, and loan documents at any
4 time after surrender of the license, filing of bankruptcy, or
5 the cessation of operations.
 
6     Section 80. Investigation of conduct of business. For the
7 purpose of discovering violations of this Act or securing
8 information lawfully required under this Act, the Director may
9 at any time investigate the loans and business and examine the
10 books, accounts, records, and files of any licensee and of any
11 person, partnership, association, limited liability company,
12 or corporation engaged in the business described in Section 10
13 of this Act, whether the person, partnership, association,
14 limited liability company, or corporation acts or claims to act
15 as principal or agent or within or without the authority of
16 this Act. For the purposes of this Section, the Director shall
17 have free access to the offices and places of business and the
18 books, accounts, papers, records, files, safes, and vaults of
19 those persons, partnerships, associations, limited liability
20 companies, and corporations. The Director may require the
21 attendance of and examine under oath all persons whose
22 testimony the Director may require relative to the loans or the
23 business, and the Director shall have the power to administer
24 oaths to all persons called as witnesses.
25     The Director shall make an examination of the affairs,
26 business, office, and records of each licensee at least once
27 each year. The Director shall establish by rule the fee to be
28 charged for each examination day, including travel expenses for
29 out-of-state licensed locations. The fee shall reasonably
30 reflect actual costs. The Director shall also have authority to
31 examine the books and records of any business made by a former
32 licensee that is being liquidated, as the Director deems
33 necessary, and may charge the examination fees otherwise
34 required for licensees.
 

 

 

HB0600 - 8 - LRB094 06800 MKM 36902 b

1     Section 85. Books and records. A licensee shall retain and
2 use in its business or at another location approved by the
3 Director any records required to enable the Director to
4 determine whether the licensee is complying with the provisions
5 of this Act and the rules promulgated under this Act. A
6 licensee shall preserve the records of any loan for at least 2
7 years after making the final entry for the loan. Accounting
8 systems maintained in whole or in part by mechanical or
9 electronic data processing methods that provide information
10 equivalent to information that is otherwise required and that
11 follow generally accepted accounting principles are acceptable
12 for that purpose if approved by the Director in writing.
 
13     Section 90. Reports. A licensee shall annually, on or
14 before the first day of March, file a report with the Director
15 giving any information that the Director may reasonably require
16 concerning the business and operations during the preceding
17 calendar year for each licensed place of business conducted by
18 the licensee. The report shall be made under oath and in a form
19 prescribed by the Director. Whenever a licensee operates 2 or
20 more licensed offices or whenever 2 or more affiliated
21 licensees operate licensed offices, a composite report of that
22 group of licensed offices may be filed in lieu of individual
23 reports. The Director may make and publish annually an analysis
24 and recapitulation of the reports. The Director may fine each
25 licensee $25 per day for each day after March 1 that the
26 licensee fails to file the reports required under this Section.
 
27     Section 95. Other business; rules. Upon application by the
28 licensee, the Director may approve the conduct of other
29 business not specifically permitted by this Act in the
30 licensee's place of business, unless the Director finds that
31 the conduct of that business will conceal or facilitate evasion
32 or violation of this Act. Any approval granted by the Director
33 under this Section shall be in writing and shall describe the
34 other businesses that may be conducted in the licensed office.

 

 

HB0600 - 9 - LRB094 06800 MKM 36902 b

1 The Director shall make and enforce reasonable rules for the
2 conduct of business under this Section. The Director may
3 investigate any business conducted in the licensed office to
4 determine whether any evasion or violation of this Act has
5 occurred.
 
6     Section 100. Prohibition against taking power of attorney.
7 No licensee shall take any power of attorney except to
8 acknowledge the execution of an instrument or to confess
9 judgement.
 
10     Section 105. Pledge or sale of note. No licensee or other
11 person shall pledge, hypothecate, or sell a note entered into
12 under the provisions of this Act by an obligor except to
13 another licensee under this Act, a licensee under the Sales
14 Finance Agency Act, a bank, a savings bank, a savings and loan
15 association, or a credit union created under the laws of this
16 State or the United States, or to other persons or entities
17 authorized by the Director in writing. Sales of notes by
18 licensees under this Act or other persons shall be made by
19 agreement in writing and shall authorize the Director to
20 examine the loan documents.
 
21     Section 110. Charges permitted.
22     (a) A licensee may lend to any borrower a principal amount
23 not exceeding $1,000 for a period not exceeding 92 days and may
24 charge, contract for, and receive interest thereon at a rate
25 agreed upon by the licensee and the obligor, but in no case
26 exceeding 24% per year. All transactions between licensees and
27 their contractors on the one hand, and obligors on the other,
28 shall be subject to the provisions of this Act. Nothing in this
29 authorization shall permit the further lending by any licensee
30 of any additional sum of money to any borrower in violation of
31 Section 140 of this Act.
32     (b) For purpose of this Section, the following terms shall
33 have the meanings ascribed herein:

 

 

HB0600 - 10 - LRB094 06800 MKM 36902 b

1     "Applicable interest" for a precomputed loan contract
2 means the amount of interest attributable to each monthly
3 installment period. It is computed as if each installment
4 period were one month and any interest charged for extending
5 the first installment period beyond one month is ignored. The
6 applicable interest for any monthly installment period is that
7 portion of the precomputed interest that bears the same ratio
8 to the total precomputed interest as the balances scheduled to
9 be outstanding during that month bear to the sum of all
10 scheduled monthly outstanding balances in the original
11 contract.
12     "Interest-bearing loan" means a loan in which the debt is
13 expressed as a principal amount plus interest charged on actual
14 unpaid principal balances for the time actually outstanding.
15     "Precomputed loan" means a loan in which the debt is
16 expressed as the sum of the original principal amount plus
17 interest computed actuarially in advance, assuming all
18 payments will be made when scheduled.
19     (c) Loans may be interest-bearing or precomputed. To
20 compute time for either interest-bearing or precomputed loans
21 for the calculation of interest and other purposes, a month
22 shall be 1/12th of a year. A day shall be 1/365th of a year when
23 calculation is made for a fraction of a month. When a period of
24 time includes one or more whole months plus a fraction of a
25 month, the licensee may charge interest for the fraction of the
26 month at the rate of 1/365th of the agreed annual rate for each
27 day actually elapsed.
28     (d) With respect to interest-bearing loans:
29         (1) Interest shall be computed on unpaid principal
30     balances outstanding from time to time, for the time
31     outstanding, until fully paid. Each payment shall be
32     applied first to the accumulated interest and the remainder
33     of the payment applied to the unpaid principal balance;
34     provided, that, if the amount of the payment is
35     insufficient to pay the accumulated interest, the unpaid
36     interest continues to accumulate to be paid from the

 

 

HB0600 - 11 - LRB094 06800 MKM 36902 b

1     proceeds of subsequent payments and is not added to the
2     principal balance.
3         (2) Interest shall not be payable in advance or
4     compounded.
5         (3) Loans may be payable as agreed between the parties,
6     including payment at irregular times or in unequal amounts
7     and rates that may vary with an index that is independently
8     verifiable and beyond the control of the licensee.
9         (4) The lender or creditor may, if the contract
10     provides, collect a delinquency or collection charge on
11     each installment in default for a period of not less than
12     10 days in an amount not exceeding 5% of the installment on
13     installments in excess of $200 or $10 on installments of
14     $200 or less, but only one delinquency and collection
15     charge may be collected on any installment regardless of
16     the period during which it remains in default.
17     (e) With respect to precomputed loans:
18         (1) Payments shall be applied in the order in which
19     they become due.
20         (2) When any loan contract is paid in full before the
21     due date, the licensee shall refund or credit the obligor
22     with the total of the applicable interest for all fully
23     unexpired days.
24         (3) The lender or creditor may, if the contract
25     provides, collect a delinquency or collection charge on
26     each installment in default for a period of not less than
27     10 days in an amount not exceeding 5% of the installment on
28     installments in excess of $200 or $10 on installments of
29     $200 or less, but only one delinquency or collection charge
30     may be collected on any installment regardless of the
31     period during which it remains in default.
32         (4) Fifteen days after the final installment as
33     originally scheduled or deferred, the licensee may, upon
34     giving notice to the obligor, convert a precomputed loan to
35     an interest-bearing loan and compute and charge interest on
36     that loan at any rate of interest previously agreed to by

 

 

HB0600 - 12 - LRB094 06800 MKM 36902 b

1     the parties to the loan.
 
2     Section 115. Credit insurance. Voluntary credit life
3 insurance, credit accident and health insurance, involuntary
4 unemployment insurance, credit property insurance, or other
5 credit insurance policies approved or permitted by the Director
6 of the Division of Insurance in the Department of Financial and
7 Professional Regulation and any charge therefor which is
8 deducted from the loan or paid by the obligor shall comply with
9 the Illinois Insurance Code and all lawful requirements of the
10 Director of the Division of Insurance. When there are 2 or more
11 obligors on the loan contract, only one charge for credit life
12 insurance and credit accident and health insurance may be made
13 and only one of the obligors need be required to be insured,
14 except that joint credit insurance may cover 2 obligors.
15 Insurance obtained from, by, or through a licensee shall be in
16 effect when the loan is transacted. The purchase of insurance
17 through the licensee or from an agent, broker, or insurer
18 specified by the licensee shall not be a condition precedent to
19 the granting of the loan.
 
20     Section 120. Property insurance.
21     (a) A licensee may require the obligor to provide property
22 damage insurance on real and personal property, all or part of
23 which serves as security, against reasonable risks of loss,
24 damage, and destruction in connection with loans exceeding an
25 original principal amount of $500. The amount and term of the
26 insurance shall be reasonable in relation to the amount and
27 term of the loan contract and the type and value of the
28 property, and the insurance shall be procured in accordance
29 with the insurance laws of this State. The purchase of
30 insurance through the licensee or from an agent, broker, or
31 insurer specified by the licensee shall not be a condition
32 precedent to the granting of the loan. The premium charged
33 shall not exceed that charged by the insurance company.
34     (b) If the obligor fails to furnish evidence that he or she

 

 

HB0600 - 13 - LRB094 06800 MKM 36902 b

1 has procured insurance on the property, the licensee may
2 purchase substitute insurance that may be substantially
3 equivalent to or more limited than coverage the obligor is
4 required to maintain. Such insurance must comply with the
5 Collateral Protection Act.
 
6     Section 125. Extra charges prohibited. No amount in
7 addition to the charges authorized by this Act shall be
8 directly or indirectly charged, contracted for, or received,
9 except: (i) lawful fees paid to any public officer or agency to
10 record, file, or release security; (ii) costs and disbursements
11 actually incurred in connection with a real estate loan, for
12 any title insurance, title examination, abstract of title,
13 survey, or appraisal, or paid to a trustee in connection with a
14 trust deed; (iii) charges authorized by Section 4.1a of the
15 Interest Act in connection with a real estate loan, whether
16 called "points" or otherwise, that are imposed as a condition
17 of making the loan and are not refundable in the event of
18 prepayment of the loan; (iv) costs and disbursements, including
19 reasonable attorney's fees, incurred in legal proceedings to
20 collect a loan or to realize on a security after default; and
21 (v) an amount not exceeding $25, plus any actual expenses
22 incurred in connection with a check or draft that is not
23 honored because of insufficient or uncollected funds or because
24 no such account exists. This Section does not prohibit the
25 receipt of a commission, dividend, charge, or other benefit by
26 the licensee or by an employee, affiliate, or associate of the
27 licensee from the insurance permitted by Sections 115 and 120
28 of this Act or from insurance in lieu of perfecting a security
29 interest, provided that the premiums for the insurance do not
30 exceed the fees that otherwise could be contracted for by the
31 licensee under this Section. Obtaining any of the items
32 referred to in clause (ii) of this Section through the licensee
33 or from any person specified by the licensee shall not be a
34 condition precedent to the granting of the loan.
 

 

 

HB0600 - 14 - LRB094 06800 MKM 36902 b

1     Section 130. Disclosure of terms of contract. In any loan
2 transaction under this Act, the licensee must disclose all of
3 the following items to the obligor of the loan before the
4 transaction is consummated:
5     (1) The amount and date of the loan contract.
6     (2) The original principal amount of the loan.
7     (3) Any deduction from the loan made by the licensee for
8 any purpose prior to the loan being transferred to the obligor.
9     (4) Any payment made by the obligor in connection with
10 obtaining the loan.
11     (5) The date on which the finance charge begins to accrue,
12 if different from the date of the transaction.
13     (6) The total amount of the loan charge with a description
14 of each amount included using the term "finance charge".
15     (7) The finance charge expressed as an annual percentage
16 rate using the term "annual percentage rate". "Annual
17 percentage rate" means the nominal annual percentage rate of
18 finance charge determined in accordance with the actuarial
19 method of computation with an accuracy at least to the nearest
20 1/4 of 1% or, at the option of the licensee, by application of
21 the United States rule so that it may be disclosed with an
22 accuracy at least to the nearest 1/4 of 1%.
23     (8) For all payday loans, the fact that a post-dated check
24 may be presented to a financial institution for payment in full
25 on the date for which it has been made out.
26     (9) The number, amount, and due dates or periods of
27 payments scheduled to repay the loan and the sum of such
28 payments using the term "total of payments".
29     (10) The amount or method of computing the amount of any
30 default, delinquency, or similar charges payable in the event
31 of late payments.
32     (11) The right of the obligor to prepay the loan in full on
33 any installment date and the fact that such prepayment in full
34 will reduce the insurance charge for the loan.
35     (12) A description or identification of the type of any
36 security interest held or to be retained or acquired by the

 

 

HB0600 - 15 - LRB094 06800 MKM 36902 b

1 licensee in connection with the loan and a clear identification
2 of the property to which the security interest relates. If
3 after-acquired property will be subject to the security
4 interest or if other or future indebtedness is or may be
5 secured by any such property, this fact shall be clearly set
6 forth in conjunction with the description or identification of
7 the type of security interest held, retained, or acquired.
8     (13) A description of any penalty charge that may be
9 imposed by the licensee for prepayment of the principal of the
10 obligation with an explanation of the method of computation of
11 the penalty and the conditions under which it may be imposed.
12     (14) Identification and description of the method of
13 computing any unearned portion of the finance charge in the
14 event of prepayment of the loan, and, if the licensee uses the
15 "Rule of 78ths" method, a statement explaining that method
16 substantially as follows:
17         Unearned finance charges under the Rule of 78ths are
18     computed by calculating for all fully unexpired monthly
19     installment periods, as originally scheduled or deferred,
20     which follow the day of prepayment, the portion of the
21     precomputed interest that bears the same ratio to the total
22     precomputed interest as the balances scheduled to be
23     outstanding during that monthly installment period bear to
24     the sum of all scheduled monthly outstanding balances
25     originally contracted for.
26     The description shall also include an example of its
27 application solely for purposes of illustration in
28 substantially the following form:
29 PREPAYMENT - "RULE OF 78THS"
30 Unearned    Original    Sum of balances due every month after  
31                        prepayment  
32        =            X ___________________________________
33 Charge      Charge*     Sum of balances due every month of  
34                        contract
35 *for Finance Charge (excluding any charges added for a first
36 payment period of more than one month) or credit insurance

 

 

HB0600 - 16 - LRB094 06800 MKM 36902 b

1 charges.
2 Example: 12 monthly payments of $10 (balance is $120 1st month,
3 $110 2nd month, and so on), $20 Finance Charge. If 5 payments
4 are prepaid in full, unearned Finance Charge is:
5
50+40+30+20+10
6 $20 x _________________________________    
=$3.85
7
120+110+100+90+80+70+60+50+40+30+20+10
8     The terms "finance charge" and "annual percentage rate"
9 shall be printed more conspicuously than other terminology
10 required by this Section.
11     At the time disclosures are made, the licensee shall
12 deliver to the obligor a duplicate of the instrument or
13 statement by which the required disclosures are made and on
14 which the licensee and obligor are identified and their
15 addresses stated. All of the disclosures shall be made clearly,
16 conspicuously and in meaningful sequence and made together on
17 either:
18         (i) the note or other instrument evidencing the
19     obligation. If a creditor elects to combine disclosures
20     with the contract, security agreement, and evidence of a
21     transaction in a single document, the disclosures required
22     under this Section shall be made on the face of the
23     document, on the reverse side, or on both sides; provided
24     that the amount of the finance charge and the annual
25     percentage rate shall appear on the face of the document,
26     and, if the reverse side is used, the printing on both
27     sides of the document shall be equally clear and
28     conspicuous, both sides shall contain the following
29     statement: "NOTICE: See other side for important
30     information", and a place for the obligor's signature shall
31     be provided following the full content of the document; or
32         (ii) One side of a separate statement that identifies
33     the transaction.
34     The amount of the finance charge shall be the sum of all
35 charges, payable directly or indirectly by the obligor, and
36 imposed directly or indirectly by the licensee as an incident

 

 

HB0600 - 17 - LRB094 06800 MKM 36902 b

1 to or as a condition to the extension of credit, whether paid
2 or payable by the obligor, by any other person on behalf of the
3 obligor, to the licensee, or to a third party, including any of
4 the following types of charges:
5             (A) Interest, time price differential, and any
6         amount payable under a discount or other system of
7         additional charges.
8             (B) Service, transaction, activity, or carrying
9         charge.
10             (C) Loan fee, points, finder's fee, or similar
11         charge.
12             (D) Fee for an appraisal, investigation, or credit
13         report.
14             (E) Charges or premiums for credit life, accident,
15         health, or loss of income insurance, written in
16         connection with any credit transaction, unless:
17                 (a) the insurance coverage is not required by
18             the licensee and this fact is clearly and
19             conspicuously disclosed in writing to the obligor;
20             and
21                 (b) any obligor desiring the insurance
22             coverage gives specific dated and separately
23             signed affirmative written indication of that
24             desire after receiving written disclosure of the
25             cost of the insurance.
26             (F) Charges or premiums for insurance, written in
27         connection with any credit transaction, against loss
28         of or damage to property or against liability arising
29         out of the ownership or use of property, unless a
30         clear, conspicuous, and specific statement in writing
31         is furnished by the licensee to the obligor setting
32         forth the cost of the insurance if obtained from or
33         through the licensee and stating that the obligor may
34         choose the person through which the insurance is to be
35         obtained.
36             (G) Premium or other charge for any other guarantee

 

 

HB0600 - 18 - LRB094 06800 MKM 36902 b

1         or insurance protecting the licensee against the
2         obligor's default or other credit loss.
3             (H) Any charge imposed by a licensee upon another
4         licensee for purchasing or accepting an obligation of
5         an obligor if the obligor is required to pay any part
6         of that charge in cash, as an addition to the
7         obligation, or as a deduction from the proceeds of the
8         obligation.
9     (15) A late payment, delinquency, default, reinstatement,
10 or other charge is not a finance charge if imposed for actual
11 unanticipated late payment, delinquency, default, or other
12 occurrence.
13     (16) A licensee who complies with the federal Truth in
14 Lending Act and any regulations issued under that Act is deemed
15 to be in compliance with the provisions of this Section, except
16 with respect to the disclosure in item (14), which may be set
17 forth in any manner.
 
18     Section 135. No real estate security. A licensee shall not
19 take any security interest in real estate, except a lien which
20 results from obtaining a judgement.
 
21     Section 140. Maximum term and amount. The loan contract
22 shall provide for repayment of the principal and charges within
23 92 days from the date of the loan contract. No licensee shall
24 furnish, loan, or otherwise provide an additional sum of money
25 to any obligor under any circumstances during, on, or within 24
26 hours after the expiration of the loan contract. Any
27 contractual agreement entered into by the licensee and the
28 obligor with respect to the transfer of money in violation of
29 this Section is null and void. No licensee shall permit an
30 obligor to owe any licensee, any affiliate of a licensee
31 (including a corporation owned or managed by the licensee), or
32 any agent of any licensee an aggregate principal amount of more
33 than $1,000 at any time for loans transacted pursuant to this
34 Act.
 

 

 

HB0600 - 19 - LRB094 06800 MKM 36902 b

1     Section 145. Advertising.
2     (a) Advertising for loans transacted under this Act may not
3 be false, misleading, or deceptive. Advertising that states a
4 rate or amount of charge for a loan must state the rate as an
5 annual percentage rate. No licensee may advertise in any manner
6 that indicates or implies that its interest rates or charges
7 for loans are in any way "recommended", "approved", "set", or
8 "established" by the State or by this Act.
9     (b) If any advertisement to which this Section applies
10 states the amount of any installment payment, the dollar amount
11 of any finance charge, or the number of installments or the
12 period of repayment, then the advertisement shall state all of
13 the following items:
14         (1) The amount of the loan.
15         (2) The number, amount, and due dates or period of
16     payments scheduled to repay the indebtedness if the credit
17     is extended.
18         (3) The rate of the finance charge expressed as an
19     annual percentage rate.
 
20     Section 150. Incentives. A licensee may not pay money or
21 any other thing of value to any person as an incentive or
22 inducement to apply for a loan, to borrow money, or to refer
23 potential borrowers to the licensee.
 
24     Section 155. Redemption of repossessed vehicle; transfer
25 of certificate of title. Where the licensee repossesses a motor
26 vehicle that was used as collateral and which is used primarily
27 for the obligor's personal, family, or household purposes, the
28 licensee shall be subject to the requirements of and shall
29 transfer the certificate of title pursuant to Section 3-114 of
30 the Illinois Vehicle Code.
 
31     Section 160. Collections; disciplinary action. Licensees
32 and their contractors are bound by the Collection Agency Act

 

 

HB0600 - 20 - LRB094 06800 MKM 36902 b

1 and are liable for disciplinary action, including refusal to
2 issue a license, refusal to renew a license, revocation of
3 license, suspension of license, probation, reprimand, or any
4 other disciplinary action the Director deems proper, including
5 fines not to exceed $1,000 per licensee per complaint, for any
6 act or omission that constitutes a violation of Section 9 of
7 the Collection Agency Act.
 
8     Section 165. Collections; elderly or disabled persons.
9     (a) If a licensee violates Section 9 of the Collection
10 Agency Act and if the victim of the violation is an elderly
11 person or disabled person, the licensee is guilty of a Class A
12 misdemeanor. For purposes of this Section, "elderly person"
13 means a person 60 years of age or older and "disabled person"
14 means a person who suffers from a permanent physical or mental
15 impairment resulting from disease, injury, functional
16 disorder, or congenital condition.
17     (b) The fine for a Class A misdemeanor committed under this
18 Section shall not exceed $10,000.
 
19     Section 170. Payday lending; threat of criminal
20 prosecution. No licensee or contractor for any licensee shall
21 at any time communicate with any obligor to threaten the
22 obligor with criminal prosecution, criminal conviction, or
23 criminal sentencing if the alleged criminal act upon which the
24 threat is predicated is the act of writing a postdated personal
25 check that is not made good by the obligor at the time and date
26 written on the check.
 
27     Section 175. Penalties for violation.
28     (a) Any person who engages in business as a short-term
29 lender without the license required by this Act is guilty of a
30 Class 4 felony.
31     (b) The obligor, prior to the expiration of 2 years after
32 the date of his or her last scheduled payment, may recover any
33 reasonable attorney's fees and court costs that a court

 

 

HB0600 - 21 - LRB094 06800 MKM 36902 b

1 assesses against any licensee or lender for a violation of
2 Section 10, 95, 110, 115, 120, 125, 130, 140, 145, 155, 160,
3 165, or 170. The balance due under the terms of the loan
4 contract shall be reduced by the amount that the obligor is
5 thus entitled to recover. A bona fide error by a licensee in
6 calculating charges or rebates is not a violation if the
7 licensee corrects the error within a reasonable time after
8 discovery.
9     (c) A license issued under this Act may be revoked if the
10 licensee or any directors, managers of a limited liability
11 company, partners, or officers of the licensee are convicted of
12 a felony.
13     (d) No provision of this Section imposing any liability
14 shall apply to any act done or omitted in conformity with any
15 rule or written interpretation of a rule by the Director, if,
16 after the act or omission occurs, the rule or interpretation is
17 amended, rescinded, or determined by judicial or other
18 authority to be invalid for any reason. All interpretations
19 must be written and signed by the Chief Counsel of the Division
20 of Financial Institutions and approved by the Director.
 
21     Section 180. Cease and desist.
22     (a) The Director may issue a cease and desist order to any
23 licensee or any person doing business without the required
24 license that the Director determines is violating or is about
25 to violate any provision of this Act or any rule imposed in
26 writing by the Director as a condition of granting any
27 authorization permitted by this Act. The Director may issue a
28 cease and desist order prior to a hearing.
29     (b) The Director shall serve notice of the cease and desist
30 order, including a statement of the reasons for the order,
31 either personally or by certified mail, return receipt
32 requested. Service by certified mail shall be deemed completed
33 when the notice is deposited in the U.S. mail.
34     (c) Within 15 days of service of the cease and desist
35 order, the licensee or other person may request, in writing, a

 

 

HB0600 - 22 - LRB094 06800 MKM 36902 b

1 hearing.
2     (d) The Director shall schedule the hearing within 30 days
3 after the request for a hearing is made unless the parties
4 agree otherwise.
5     (e) The Director shall prescribe rules necessary for the
6 administration of this Section.
7     (f) If it is determined at the hearing that the Director
8 had the authority to issue the cease and desist order, the
9 Director may issue any orders reasonably necessary to correct,
10 eliminate, or remedy the conduct that resulted in the issuance
11 of the order.
12     (g) The powers vested in the Director under this Section
13 are in addition to any and all other powers and remedies vested
14 in the Director by law, and nothing in this Section shall be
15 construed as requiring that the Director employ the powers and
16 remedies conferred in this Section instead of or as a condition
17 precedent to the exercise of any other power or remedy vested
18 in the Director.
19     (h) The cost for the administrative hearing shall be set by
20 the Director by rule.
 
21     Section 185. Civil action. A claim of violation of this Act
22 may be asserted in a civil action.
 
23     Section 190. Scope of Act. This Act does not apply to
24 licensees under the Consumer Installment Loan Act making loans
25 of more than $1,000 of any duration or loans of any amount with
26 a term of 93 days or longer, any person, partnership,
27 association, limited liability company, or corporation doing
28 business under and as permitted by any law of this State or of
29 the United States relating to banks, savings and loan
30 associations, savings banks, or credit unions, or licensees
31 under the Residential Mortgage License Act of 1987 for
32 residential mortgage loans made pursuant to that Act. This Act
33 does not apply to business loans.
 

 

 

HB0600 - 23 - LRB094 06800 MKM 36902 b

1     Section 195. Rules. The Director may make and enforce any
2 reasonable rules, orders, decisions, and findings required for
3 the execution and enforcement of the provisions of this Act.
4 All rules shall be printed and copies of the printed rules
5 mailed to all licensees.
 
6     Section 200. Judicial review. All final administrative
7 decisions of the Director under this Act shall be subject to
8 judicial review pursuant to the provisions of the
9 Administrative Review Law.
 
10     Section 205. Injunction; civil penalty; costs. If it
11 appears to the Director that a person or any entity has
12 committed or is about to commit a violation of this Act, a rule
13 promulgated under this Act, or an order of the Director, the
14 Director may apply to the circuit court for an order enjoining
15 the person or entity from violating or continuing to violate
16 this Act, the rule, or order and for injunctive or other relief
17 that the nature of the case may require and may, in addition,
18 request the court to assess a civil penalty of up to $1,000
19 along with costs and attorney's fees.
 
20     Section 210. Severability. The provisions of this Act are
21 severable under Section 1.31 of the Statute on Statutes.
 
22     Section 215. Applicability. This Act shall not apply to any
23 contract or transaction made before January 1, 2006.
 
24     Section 295. The Financial Institutions Code is amended by
25 changing Section 8 as follows:
 
26     (20 ILCS 1205/8)  (from Ch. 17, par. 109)
27     Sec. 8. The Director shall direct and supervise all
28 Department administrative and technical activities, in
29 addition to the duties imposed upon him elsewhere in this Code,
30 and shall:

 

 

HB0600 - 24 - LRB094 06800 MKM 36902 b

1     (1) Apply and carry out this Code and the laws and all
2 rules adopted in pursuance thereof.
3     (2) Appoint, subject to the provisions of the Personnel
4 Code, such employees of the Department and such experts and
5 special assistants as may be necessary to carry out effectively
6 the provisions of this Code.
7     (3) Foster and develop programs with financial
8 institutions, for the best interests of these institutions,
9 their services and the people of the State of Illinois.
10     (4) Attend meetings of the Advisory Boards created by laws
11 relating to financial institutions.
12     (5) Make continuous studies and report his recommendations
13 to the Governor for the improvement of the Department.
14     (6) Make an annual report regarding the work of the
15 Department and such special reports as he may consider
16 desirable to the Governor, or as the Governor may request.
17     (6.5) Operate an electronic consumer complaint reception
18 service by telephone, computer, or any other means that the
19 Director finds appropriate to receive and compile complaints
20 from consumers concerning the operations of licensees under the
21 Short-term Loan Act.
22     (7) Perform any other lawful acts which he may consider
23 necessary or desirable to carry out the purposes and provisions
24 of this Law.
25 (Source: Laws 1957, p. 369.)
 
26     Section 297. The Consumer Fraud and Deceptive Business
27 Practices Act is amended by changing Section 2E as follows:
 
28     (815 ILCS 505/2E)  (from Ch. 121 1/2, par. 262E)
29     Sec. 2E. Any person who is regularly engaged in the
30 business of providing or furnishing merchandise to consumers or
31 in making loans to consumers and who has committed in any
32 calendar year 3 or more violations, as determined in any civil
33 or criminal proceeding, of the "Consumer Finance Act"; the
34 "Consumer Installment Loan Act, "; the "Retail Installment

 

 

HB0600 - 25 - LRB094 06800 MKM 36902 b

1 Sales Act, "; the "Motor Vehicle Retail Installment Sales Act,
2 the Interest Act, the Illinois Wage Assignment Act, the
3 Short-term Loan Act, "; "An Act to revise the law in relation to
4 the rate of interest and to repeal certain acts therein named",
5 approved May 24, 1879, as amended; "An Act to promote the
6 welfare of wage-earners by regulating the assignment of wages,
7 and prescribing a penalty for the violation thereof", approved
8 July 1, 1935, as amended; or Part 8 of Article XII of the Code
9 of Civil Procedure, as amended, or of any 2 or more of those
10 Acts, is guilty of an unlawful practice within the meaning of
11 this Act. Nothing in this Section prohibits the prosecution of
12 a person under the Acts specified herein as well as under this
13 Act.
14 (Source: P.A. 82-783.)
 
15     Section 999. Effective date. This Act takes effect January
16 1, 2006.