Illinois General Assembly - Full Text of HB5438
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Full Text of HB5438  100th General Assembly




State of Illinois
2017 and 2018


Introduced , by Rep. C.D. Davidsmeyer


815 ILCS 122/1-10
815 ILCS 122/2-5

    Amends the Payday Loan Reform Act. Limits interest on payday loans to an annual percentage rate of 36%. Effective immediately.

LRB100 18342 JLS 33548 b





HB5438LRB100 18342 JLS 33548 b

1    AN ACT concerning business.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Payday Loan Reform Act is amended by
5changing Sections 1-10 and 2-5 as follows:
6    (815 ILCS 122/1-10)
7    Sec. 1-10. Definitions. As used in this Act:
8    "Check" means a "negotiable instrument", as defined in
9Article 3 of the Uniform Commercial Code, that is drawn on a
10financial institution.
11    "Commercially reasonable method of verification" or
12"certified database" means a consumer reporting service
13database certified by the Department as effective in verifying
14that a proposed loan agreement is permissible under this Act,
15or, in the absence of the Department's certification, any
16reasonably reliable written verification by the consumer
17concerning (i) whether the consumer has any outstanding payday
18loans, (ii) the principal amount of those outstanding payday
19loans, and (iii) whether any payday loans have been paid in
20full by the consumer in the preceding 7 days.
21    "Consumer" means any natural person who, singly or jointly
22with another consumer, enters into a loan.
23    "Consumer reporting service" means an entity that provides



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1a database certified by the Department.
2    "Department" means the Department of Financial and
3Professional Regulation.
4    "Secretary" means the Secretary of Financial and
5Professional Regulation.
6    "Gross monthly income" means monthly income as
7demonstrated by official documentation of the income,
8including, but not limited to, a pay stub or a receipt
9reflecting payment of government benefits, for the period 30
10days prior to the date on which the loan is made.
11    "Lender" and "licensee" mean any person or entity,
12including any affiliate or subsidiary of a lender or licensee,
13that offers or makes a payday loan, buys a whole or partial
14interest in a payday loan, arranges a payday loan for a third
15party, or acts as an agent for a third party in making a payday
16loan, regardless of whether approval, acceptance, or
17ratification by the third party is necessary to create a legal
18obligation for the third party, and includes any other person
19or entity if the Department determines that the person or
20entity is engaged in a transaction that is in substance a
21disguised payday loan or a subterfuge for the purpose of
22avoiding this Act.
23    "Loan agreement" means a written agreement between a lender
24and consumer to make a loan to the consumer, regardless of
25whether any loan proceeds are actually paid to the consumer on
26the date on which the loan agreement is made.



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1    "Member of the military" means a person serving in the
2armed forces of the United States, the Illinois National Guard,
3or any reserve component of the armed forces of the United
4States. "Member of the military" includes those persons engaged
5in (i) active duty, (ii) training or education under the
6supervision of the United States preliminary to induction into
7military service, or (iii) a period of active duty with the
8State of Illinois under Title 10 or Title 32 of the United
9States Code pursuant to order of the President or the Governor
10of the State of Illinois.
11    "Outstanding balance" means the total amount owed by the
12consumer on a loan to a lender, including all principal,
13finance charges, fees, and charges of every kind.
14    "Payday loan" or "loan" means a loan with a finance charge
15exceeding an annual percentage rate of 36% and with a term that
16does not exceed 120 days, including any transaction conducted
17via any medium whatsoever, including, but not limited to,
18paper, facsimile, Internet, or telephone, in which:
19        (1) A lender accepts one or more checks dated on the
20    date written and agrees to hold them for a period of days
21    before deposit or presentment, or accepts one or more
22    checks dated subsequent to the date written and agrees to
23    hold them for deposit; or
24        (2) A lender accepts one or more authorizations to
25    debit a consumer's bank account; or
26        (3) A lender accepts an interest in a consumer's wages,



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1    including, but not limited to, a wage assignment.
2    The term "payday loan" includes "installment payday loan",
3unless otherwise specified in this Act.
4    "Principal amount" means the amount received by the
5consumer from the lender due and owing on a loan, excluding any
6finance charges, interest, fees, or other loan-related
8    "Rollover" means to refinance, renew, amend, or extend a
9loan beyond its original term.
10(Source: P.A. 96-936, eff. 3-21-11.)
11    (815 ILCS 122/2-5)
12    Sec. 2-5. Loan terms.
13    (a) Without affecting the right of a consumer to prepay at
14any time without cost or penalty, no payday loan may have a
15minimum term of less than 13 days.
16    (b) Except for an installment payday loan as defined in
17this Section, no payday loan may be made to a consumer if the
18loan would result in the consumer being indebted to one or more
19payday lenders for a period in excess of 45 consecutive days.
20Except as provided under subsection (c) of this Section and
21Section 2-40, if a consumer has or has had loans outstanding
22for a period in excess of 45 consecutive days, no payday lender
23may offer or make a loan to the consumer for at least 7
24calendar days after the date on which the outstanding balance
25of all payday loans made during the 45 consecutive day period



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1is paid in full. For purposes of this subsection, the term
2"consecutive days" means a series of continuous calendar days
3in which the consumer has an outstanding balance on one or more
4payday loans; however, if a payday loan is made to a consumer
5within 6 days or less after the outstanding balance of all
6loans is paid in full, those days are counted as "consecutive
7days" for purposes of this subsection.
8    (c) Notwithstanding anything in this Act to the contrary, a
9payday loan shall also include any installment loan otherwise
10meeting the definition of payday loan contained in Section
111-10, but that has a term agreed by the parties of not less
12than 112 days and not exceeding 180 days; hereinafter an
13"installment payday loan". The following provisions shall
15        (i) Any installment payday loan must be fully
16    amortizing, with a finance charge not exceeding an annual
17    percentage rate of 36% calculated on the principal balances
18    scheduled to be outstanding and be repayable in
19    substantially equal and consecutive installments,
20    according to a payment schedule agreed by the parties with
21    not less than 13 days and not more than one month between
22    payments; except that the first installment period may be
23    longer than the remaining installment periods by not more
24    than 15 days, and the first installment payment may be
25    larger than the remaining installment payments by the
26    amount of finance charges applicable to the extra days. In



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1    calculating finance charges under this subsection, when
2    the first installment period is longer than the remaining
3    installment periods, the amount of the finance charges
4    applicable to the extra days shall not be greater than
5    $15.50 per $100 of the original principal balance divided
6    by the number of days in a regularly scheduled installment
7    period and multiplied by the number of extra days
8    determined by subtracting the number of days in a regularly
9    scheduled installment period from the number of days in the
10    first installment period.
11        (ii) An installment payday loan may be refinanced by a
12    new installment payday loan one time during the term of the
13    initial loan; provided that the total duration of
14    indebtedness on the initial installment payday loan
15    combined with the total term of indebtedness of the new
16    loan refinancing that initial loan, shall not exceed 180
17    days. For purposes of this Act, a refinancing occurs when
18    an existing installment payday loan is paid from the
19    proceeds of a new installment payday loan.
20        (iii) In the event an installment payday loan is paid
21    in full prior to the date on which the last scheduled
22    installment payment before maturity is due, other than
23    through a refinancing, no licensee may offer or make a
24    payday loan to the consumer for at least 2 calendar days
25    thereafter.
26        (iv) No installment payday loan may be made to a



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1    consumer if the loan would result in the consumer being
2    indebted to one or more payday lenders for a period in
3    excess of 180 consecutive days. The term "consecutive days"
4    does not include the date on which a consumer makes the
5    final installment payment.
6    (d) (Blank).
7    (e) No lender may make a payday loan to a consumer if the
8total of all payday loan payments coming due within the first
9calendar month of the loan, when combined with the payment
10amount of all of the consumer's other outstanding payday loans
11coming due within the same month, exceeds the lesser of:
12        (1) $1,000; or
13        (2) in the case of one or more payday loans, 25% of the
14    consumer's gross monthly income; or
15        (3) in the case of one or more installment payday
16    loans, 22.5% of the consumer's gross monthly income; or
17        (4) in the case of a payday loan and an installment
18    payday loan, 22.5% of the consumer's gross monthly income.
19    No loan shall be made to a consumer who has an outstanding
20balance on 2 payday loans, except that, for a period of 12
21months after March 21, 2011 (the effective date of Public Act
2296-936), consumers with an existing CILA loan may be issued an
23installment loan issued under this Act from the company from
24which their CILA loan was issued.
25    (e-5) No Except as provided in subsection (c)(i), no lender
26may impose a finance charge exceeding an annual percentage rate



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1of 36% more than $15.50 per $100 loaned on any payday loan, or
2more than $15.50 per $100 on the initial principal balance and
3on the principal balances scheduled to be outstanding during
4any installment period on any installment payday loan. Except
5for installment payday loans and except as provided in Section
62-25, this charge is considered fully earned as of the date on
7which the loan is made. For purposes of determining the finance
8charge earned on an installment payday loan, the disclosed
9annual percentage rate shall be applied to the principal
10balances outstanding from time to time until the loan is paid
11in full, or until the maturity date, whichever occurs first. No
12finance charge may be imposed after the final scheduled
13maturity date.
14    When any loan contract is paid in full, the licensee shall
15refund any unearned finance charge. The unearned finance charge
16that is refunded shall be calculated based on a method that is
17at least as favorable to the consumer as the actuarial method,
18as defined by the federal Truth in Lending Act. The sum of the
19digits or rule of 78ths method of calculating prepaid interest
20refunds is prohibited.
21    (f) A lender may not take or attempt to take an interest in
22any of the consumer's personal property to secure a payday
24    (g) A consumer has the right to redeem a check or any other
25item described in the definition of payday loan under Section
261-10 issued in connection with a payday loan from the lender



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1holding the check or other item at any time before the payday
2loan becomes payable by paying the full amount of the check or
3other item.
4(Source: P.A. 100-201, eff. 8-18-17.)
5    Section 99. Effective date. This Act takes effect upon
6becoming law.