Full Text of HB1519 103rd General Assembly
HB1519sam001 103RD GENERAL ASSEMBLY | Sen. Elgie R. Sims, Jr. Filed: 4/24/2023
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| 1 | | AMENDMENT TO HOUSE BILL 1519
| 2 | | AMENDMENT NO. ______. Amend House Bill 1519 by replacing | 3 | | everything after the enacting clause with the following:
| 4 | | "Section 5. The Student Loan Servicing Rights Act is | 5 | | amended by changing Sections 1-5 and 25-5 and by adding | 6 | | Article 7 as follows: | 7 | | (110 ILCS 992/1-5)
| 8 | | Sec. 1-5. Definitions. As used in this Act: | 9 | | "Applicant" means a person applying for a license pursuant | 10 | | to this Act. | 11 | | "Borrower" or "student loan borrower" means a person who | 12 | | has received or agreed to pay a student loan for his or her own | 13 | | educational expenses. | 14 | | "Cosigner" means a person who has agreed to share | 15 | | responsibility for repaying a student loan with a borrower. | 16 | | "Department" means the Department of Financial and |
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| 1 | | Professional Regulation. | 2 | | "Division of Banking" means the Division of Banking of the | 3 | | Department of Financial and Professional Regulation. | 4 | | "Federal loan borrower eligible for referral to a | 5 | | repayment specialist" means a borrower who possesses any of | 6 | | the following characteristics: | 7 | | (1) requests information related to options to reduce | 8 | | or suspend his or her monthly payment; | 9 | | (2) indicates that he or she is experiencing or | 10 | | anticipates experiencing financial hardship, distress, or | 11 | | difficulty making his or her payments; | 12 | | (3) has missed 2 consecutive monthly payments; | 13 | | (4) is at least 75 days delinquent; | 14 | | (5) is enrolled in a discretionary forbearance for | 15 | | more than 9 of the previous 12 months; | 16 | | (6) has rehabilitated or consolidated one or more | 17 | | loans out of default within the past 12 months; or | 18 | | (7) has not completed a course of study, as reflected | 19 | | in the servicer's records, or the borrower identifies | 20 | | himself or herself as not having completed a program of | 21 | | study. | 22 | | "Federal education loan" means any loan made, guaranteed, | 23 | | or insured under Title IV of the federal Higher Education Act | 24 | | of 1965. | 25 | | "Income-driven payment plan certification" means the | 26 | | documentation related to a federal student loan borrower's |
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| 1 | | income or financial status the borrower must submit to renew | 2 | | an income-driven repayment plan. | 3 | | "Income-driven repayment options" includes the | 4 | | Income-Contingent Repayment Plan, the Income-Based Repayment | 5 | | Plan, the Income-Sensitive Repayment Plan, the Pay As You Earn | 6 | | Plan, the Revised Pay As You Earn Plan, and any other federal | 7 | | student loan repayment plan that is calculated based on a | 8 | | borrower's income. | 9 | | "Licensee" means a person licensed pursuant to this Act. | 10 | | "Other repayment plans" means the Standard Repayment Plan, | 11 | | the Graduated Repayment Plan, the Extended Repayment Plan, or | 12 | | any other federal student loan repayment plan not based on a | 13 | | borrower's income. | 14 | | "Private loan borrower eligible for referral to a | 15 | | repayment specialist" means a borrower who possesses any of | 16 | | the following characteristics: | 17 | | (1) requests information related to options to reduce | 18 | | or suspend his or her monthly payments; or | 19 | | (2) indicates that he or she is experiencing or | 20 | | anticipates experiencing financial hardship, distress, or | 21 | | difficulty making his or her payments. | 22 | | "Requester" means any borrower or cosigner that submits a | 23 | | request for assistance. | 24 | | "Request for assistance" means all inquiries, complaints, | 25 | | account disputes, and requests for documentation a servicer | 26 | | receives from borrowers or cosigners. |
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| 1 | | "Secretary" means the Secretary of Financial and | 2 | | Professional Regulation, or his or her designee, including the | 3 | | Director of the Division of Banking of the Department of | 4 | | Financial and Professional Regulation. | 5 | | "Servicing" means: (1) receiving any scheduled periodic | 6 | | payments from a student loan borrower or cosigner pursuant to | 7 | | the terms of a student loan; (2) applying the payments of | 8 | | principal and interest and such other payments with respect to | 9 | | the amounts received from a student loan borrower or cosigner, | 10 | | as may be required pursuant to the terms of a student loan; and | 11 | | (3) performing other administrative services with respect to a | 12 | | student loan. | 13 | | "Student loan" or "loan" means any federal education loan | 14 | | or other loan primarily for use to finance a postsecondary | 15 | | education and costs of attendance at a postsecondary | 16 | | institution, including, but not limited to, tuition, fees, | 17 | | books and supplies, room and board, transportation, and | 18 | | miscellaneous personal expenses. "Student loan" includes a | 19 | | loan made to refinance a student loan. | 20 | | "Student loan" shall not include an extension of credit | 21 | | under an open-end consumer credit plan, a reverse mortgage | 22 | | transaction, a residential mortgage transaction, or any other | 23 | | loan that is secured by real property or a dwelling. | 24 | | "Student loan" shall not include an extension of credit | 25 | | made by a postsecondary educational institution to a borrower | 26 | | if one of the following apply: |
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| 1 | | (1) The term of the extension of credit is no longer | 2 | | than the borrower's education program. | 3 | | (2) The remaining, unpaid principal balance of the | 4 | | extension of credit is less than $1,500 at the time of the | 5 | | borrower's graduation or completion of the program. | 6 | | (3) The borrower fails to graduate or successfully | 7 | | complete his or her education program and has a balance | 8 | | due at the time of his or her disenrollment from the | 9 | | postsecondary institution. | 10 | | "Student loan servicer" or "servicer" means any person | 11 | | engaged in the business of servicing student loans. "Student | 12 | | loan servicer" or "servicer" includes persons or entities | 13 | | acting on behalf of the State Treasurer. "Student loan | 14 | | servicer" includes an income share agreement provider covered | 15 | | under Article 7 of this Act. | 16 | | "Student loan servicer" shall not include: | 17 | | (1) a bank, savings bank, savings association, or | 18 | | credit union organized under the laws of the State or any | 19 | | other state or under the laws of the United States; | 20 | | (2) a wholly owned subsidiary of any bank, savings | 21 | | bank, savings association, or credit union organized under | 22 | | the laws of the State or any other state or under the laws | 23 | | of the United States; | 24 | | (3) an operating subsidiary where each owner of the | 25 | | operating subsidiary is wholly owned by the same bank, | 26 | | savings bank, savings association, or credit union |
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| 1 | | organized under the laws of the State or any other state or | 2 | | under the laws of the United States; | 3 | | (4) the Illinois Student Assistance Commission and its | 4 | | agents when the agents are acting on the Illinois Student | 5 | | Assistance Commission's behalf; | 6 | | (5) a public postsecondary educational institution or
| 7 | | a private nonprofit postsecondary educational institution
| 8 | | servicing a student loan it extended to the borrower; | 9 | | (6) a licensed debt management service under the Debt
| 10 | | Management Service Act, except to the extent that the
| 11 | | organization acts as a subcontractor, affiliate, or
| 12 | | service provider for an entity that is otherwise subject | 13 | | to licensure under this Act; | 14 | | (7) any collection agency licensed under the
| 15 | | Collection Agency Act that is collecting post-default
| 16 | | debt; | 17 | | (8) in connection with its responsibilities as a | 18 | | guaranty agency engaged in default aversion, a State or | 19 | | nonprofit private institution or organization having an | 20 | | agreement with the U.S. Secretary of Education under | 21 | | Section 428(b) of the Higher Education Act (20 U.S.C. | 22 | | 1078(B));
| 23 | | (9) a State institution or a nonprofit private | 24 | | organization designated by a governmental entity to make | 25 | | or service student loans, provided in each case that the | 26 | | institution or organization services fewer than 20,000 |
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| 1 | | student loan accounts of borrowers who reside in Illinois;
| 2 | | (10) a law firm or licensed attorney that is | 3 | | collecting post-default debt; or | 4 | | (11) the State Treasurer. | 5 | | (Source: P.A. 100-540, eff. 12-31-18; 100-635, eff. 12-31-18; | 6 | | 101-586, eff. 8-26-19.) | 7 | | (110 ILCS 992/Art. 7 heading new) | 8 | | ARTICLE 7. EDUCATIONAL INCOME SHARE AGREEMENTS | 9 | | (110 ILCS 992/7-1 new) | 10 | | Sec. 7-1. Purpose and construction. This Article shall be | 11 | | construed as a consumer protection law for all purposes. This | 12 | | Article shall be liberally construed to effectuate its | 13 | | purpose. | 14 | | (110 ILCS 992/7-3 new) | 15 | | Sec. 7-3. Applicability. This Article applies only to | 16 | | educational income share agreements that: | 17 | | (1) are not made, insured, or guaranteed under Title | 18 | | IV
of the federal Higher Education Act of 1965 or another | 19 | | federally subsidized educational finance
program; and | 20 | | (2) are extended to a consumer expressly, in whole or
| 21 | | in part, for postsecondary educational expenses, tuition,
| 22 | | or other obligations of, or pay amounts to or on behalf
of | 23 | | such an individual, for the costs associated with a
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| 1 | | postsecondary training program or any other program
| 2 | | designed to increase the individual's human capital,
| 3 | | employability, or earning potential, including, but not | 4 | | limited to,
a program eligible to participate as a program | 5 | | under Title
IV of the federal Higher Education Act of | 6 | | 1965, as well as any personal expenses, such as books,
| 7 | | supplies, transportation, and living costs, incurred by
| 8 | | the individual while enrolled in such a program and any
| 9 | | other costs or expenses included in the definition of | 10 | | "qualified higher education expenses" under 26
U.S.C. | 11 | | 529(e)(3)(A), including the refinancing of loans or
income | 12 | | share agreements used for the purposes described in
this | 13 | | paragraph (2) and regardless of whether the income share
| 14 | | agreement is provided by the educational institution that
| 15 | | the consumer attends. | 16 | | (110 ILCS 992/7-5 new) | 17 | | Sec. 7-5. Definitions. As used in this Article: | 18 | | "Amount financed" means the amounts advanced by the income | 19 | | share agreement provider to the consumer or on behalf of the | 20 | | consumer or, if the income share agreement provider is a | 21 | | merchant financing the sale of goods or services to the | 22 | | consumer using an income share agreement, "amount financed" | 23 | | means the amount credited by the income share agreement | 24 | | provider toward the purchase of such goods and services on | 25 | | behalf of the consumer. |
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| 1 | | | 2 | | "Annual percentage rate" or "APR" means the percentage | 3 | | rate calculated according to the Federal Reserve Board's | 4 | | methodology as set forth under Regulation Z, 12 CFR Part 1026. | 5 | | The "annual percentage rate" of an income share agreement is | 6 | | the measure of the cost of the income share agreement, | 7 | | expressed as a yearly rate, that relates to the amount and | 8 | | timing of value received by the consumer to the amount and | 9 | | timing of payments made. The "annual percentage rate" is | 10 | | determined in accordance with either the actuarial method or | 11 | | the United States rule method. | 12 | | "Cash price" means the price that the consumer would pay | 13 | | for the goods or services for which the educational income | 14 | | share agreement proceeds are advanced in an equivalent cash | 15 | | transaction between the consumer and the provider of goods or | 16 | | services. The Cash price excludes any amounts paid by the | 17 | | consumer as a down payment to the income share agreement | 18 | | provider. | 19 | | "Consumer" means a natural person who enters into an | 20 | | Educational Income Share Agreement for educational purposes. | 21 | | "Disposable earnings" means that part of the earnings of | 22 | | an individual remaining after the deduction from total | 23 | | earnings of amounts required by law to be withheld. | 24 | | "Federal poverty guidelines" means the poverty guidelines | 25 | | published by the federal Department of Health and Human | 26 | | Services under the authority of 42 U.S.C. 9902(2) in the |
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| 1 | | Federal Register. | 2 | | "Garnishment" means any legal or equitable procedure | 3 | | through which earnings of an individual are required to be | 4 | | withheld for payment of obligations to an income share | 5 | | agreement provider as set forth in the Code of Civil | 6 | | Procedure. | 7 | | "Income share agreement" or "ISA" means an agreement | 8 | | between a consumer and an ISA provider under which: | 9 | | (1) the ISA provider credits or advances a sum of | 10 | | money to the consumer or to a third party on the consumer's | 11 | | behalf or, if the ISA provider is a seller of goods or | 12 | | services to the consumer, the ISA provider credits or | 13 | | advances toward the purchase of such goods or services; | 14 | | (2) the consumer is obligated to make periodic | 15 | | payments, if any become due, to the ISA provider | 16 | | calculated, based upon, or determined by the consumer's | 17 | | income; | 18 | | (3) the consumer only incurs an obligation in each | 19 | | payment period if the individual's income in that period | 20 | | is above an income threshold specified in the ISA | 21 | | agreement; | 22 | | (4) there is an ISA duration after which the | 23 | | obligation is complete regardless of how much has been | 24 | | paid, as long as the consumer has paid any prior amounts | 25 | | due; and | 26 | | (5) each of these elements is available at the time of |
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| 1 | | contracting of the income share agreement. For purposes of | 2 | | this definition, an income share agreement shall be | 3 | | treated as "credit", within the meaning of that term under | 4 | | 15 U.S.C. 1602(f), and as a "private education loan", | 5 | | within the meaning of that term under 15 U.S.C. | 6 | | 1650(a)(8), to the extent the proceeds of the ISA are used | 7 | | for postsecondary educational expenses in a manner | 8 | | consistent with the definition of that term. | 9 | | "Income threshold" means a fixed dollar amount that is the | 10 | | minimum income per payment period that an ISA recipient is | 11 | | required to earn before the ISA recipient is required to make a | 12 | | payment on an income share agreement for such payment period. | 13 | | "Index" means the Consumer Price Index for Urban Wage | 14 | | Earners and Clerical Workers: U.S. City Average, All Items, | 15 | | 1967=100, compiled by the Bureau of Labor Statistics, United | 16 | | States Department of Labor. | 17 | | "ISA duration" means the maximum time during which a | 18 | | consumer could remain obligated on the income share agreement, | 19 | | other than periods when an income share agreement provider is | 20 | | attempting to collect past-due amounts and absent periods of | 21 | | payment relief pauses, forbearance, military service | 22 | | suspension, or other suspension of obligations at the request | 23 | | of the consumer, regardless of whether the consumer's income | 24 | | is greater than the minimum income. | 25 | | "ISA maximum number of payments" means the maximum number | 26 | | of ISA payments during ISA payment periods in which the |
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| 1 | | consumer's income is equal to or greater than the income | 2 | | threshold that a consumer could be required to make pursuant | 3 | | to the terms of the income share agreement. "ISA maximum | 4 | | number of payments" does not include periods of payment relief | 5 | | pause. | 6 | | "ISA payment" means a calculated monthly payment in excess | 7 | | of $0.00 that counts toward the maximum income-based payments | 8 | | under the ISA. An "ISA payment" is required only for income | 9 | | earned during an ISA payment period in which the consumer's | 10 | | income was equal to or greater than the income threshold. | 11 | | "ISA payment calculation method" means the mechanism, | 12 | | formula, percentage, dollar figure, or other means of | 13 | | calculating a student's payment obligation, based on the | 14 | | student's income, under the terms of the income share | 15 | | agreement. | 16 | | "ISA payment cap" means the maximum amount of money a | 17 | | consumer must pay to satisfy the terms of an income share | 18 | | agreement, which may be expressed as a dollar value, a | 19 | | multiple of the amount funded to the student or on the | 20 | | student's behalf, or as a maximum effective annual percentage | 21 | | rate. | 22 | | "ISA payment cap" does not include charges related to | 23 | | default or other charges and fees that are due under the income | 24 | | share agreement. | 25 | | "Income share agreement provider" means: | 26 | | (1) a person that provides money, payments, or credits |
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| 1 | | to or on behalf of a consumer pursuant to the terms of an | 2 | | income share agreement; or | 3 | | (2) any other person engaged in the business of | 4 | | soliciting, making, funding, or extending income share | 5 | | agreements. This definition does not apply to an entity | 6 | | that either (i) has no direct interactions with the | 7 | | consumer and is not responsible for making credit | 8 | | decisions regarding the consumer or (ii) is the provider | 9 | | of the educational services to the consumer, even if the | 10 | | entity may qualify under paragraph (1), or whose role is | 11 | | solely limited to the marketing or advertising of the | 12 | | income share agreement to the consumer on behalf of a | 13 | | licensed income share agreement provider. | 14 | | "Payment relief pause" means a period of time that is | 15 | | requested by the consumer during which the consumer is not | 16 | | required to make payments despite the consumer's income | 17 | | exceeding the income threshold. | 18 | | "Sales price" means, for an educational income share | 19 | | agreement, the sum of the cash price and any other amounts | 20 | | financed by the educational income share agreement. | 21 | | (110 ILCS 992/7-10 new) | 22 | | Sec. 7-10. Monthly payment affordability. | 23 | | (a) Each educational income share agreement shall specify | 24 | | the ISA payment calculation method applicable to the | 25 | | educational income share agreement. An income share agreement |
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| 1 | | provider shall not enter into an educational ISA with a | 2 | | consumer if the consumer would be committing to pay more than | 3 | | 20% of his or her income at any time during the ISA duration, | 4 | | based on information available to the income share agreement | 5 | | provider at the time of the projection, inclusive of any | 6 | | payment obligations that the income share agreement provider | 7 | | knows will arise in the future for other educational ISAs and | 8 | | education loans upon which the consumer is obligated at the | 9 | | time of the projection. The ISA provider must confirm a | 10 | | consumer's educational ISA and education loan liabilities | 11 | | through a verifiable third-party source. At a minimum, the | 12 | | income share agreement provider must confirm such liabilities | 13 | | using information maintained by a nationwide consumer | 14 | | reporting agency, as defined by 15 U.S.C. 1681a(f), and doing | 15 | | so is sufficient for meeting the requirement in this | 16 | | paragraph; however, nothing in this paragraph shall prohibit | 17 | | an income share agreement provider from using other sources to | 18 | | provide additional verification. For the purposes of | 19 | | calculating the portion of a student's future income that | 20 | | would be consumed by the educational ISA for which the student | 21 | | has applied and other educational ISAs and education loans | 22 | | known at the time, the ISA provider shall calculate the | 23 | | aggregate future burden of all such obligations, including the | 24 | | educational ISA for which the student is applying, at | 25 | | hypothetical future income levels ranging from the income | 26 | | threshold of the ISA for which the student has applied up to |
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| 1 | | $70,000, with such number adjusting for inflation each year, | 2 | | in increments of $10,000. The terms of the educational ISA for | 3 | | which the student has applied cannot cause the student's | 4 | | aggregate future burden to exceed the limit in subsection (b) | 5 | | at any of the income increments stated in this paragraph. For | 6 | | the purpose of calculating the percentage burden of an | 7 | | educational ISA at a given future income level, the ISA | 8 | | provider shall use the ISA payment amount that would be | 9 | | applicable for the ISA at such income level. For the purpose of | 10 | | calculating the percentage burden of an educational loan at a | 11 | | given future income level, the ISA provider shall divide the | 12 | | annual payment obligation by income level using the most | 13 | | affordable payment plan or option which would yield the lowest | 14 | | monthly payments that would be available to the student at | 15 | | such income level under such loan. For students enrolled in a | 16 | | Title IV program, as part of this analysis the ISA provider | 17 | | shall assume a federal loan balance equal to the larger of (1) | 18 | | the student's existing federal loan balance, and (2) the | 19 | | aggregate maximum amount the student is eligible to borrow | 20 | | under Federal Direct Stafford Loans for his or her status, | 21 | | dependent or independent. | 22 | | (b) The income share agreement must state that when a | 23 | | consumer has income that is equal to or below the income | 24 | | threshold set forth in the educational income share agreement | 25 | | that the consumer's payment obligation is zero dollars. The | 26 | | income threshold at the time of origination must be high |
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| 1 | | enough such that the consumer's gross income minus any | 2 | | educational income share agreement obligation must leave the | 3 | | consumer with gross income equal to at least 200% of the | 4 | | federal poverty guidelines for a single person. | 5 | | (c) An educational income share agreement must offer at | 6 | | least 3 months of voluntary payment relief pauses, so long as a | 7 | | consumer's current income at the time of requesting the | 8 | | payment relief pause is equal to or less than 400% of the | 9 | | federal poverty guidelines for a single individual, for every | 10 | | 30 income-determined payments required under the educational | 11 | | income share agreement. | 12 | | (110 ILCS 992/7-15 new) | 13 | | Sec. 7-15. Maximum effective annual percentage rate. An | 14 | | educational income share agreement must specify that the | 15 | | maximum amount that a consumer could be required to pay under | 16 | | the educational income share agreement will not result in a | 17 | | consumer ever being required to pay an effective annual | 18 | | percentage rate that is greater than 22%. If at any time the | 19 | | provider accepts a payment of an amount that would cause the | 20 | | limit in this Section to apply, the provider shall refund any | 21 | | amounts, within 20 calendar days, necessary to ensure that the | 22 | | consumer's payments do not result in an effective annual | 23 | | percentage rate that is greater than the limit specified in | 24 | | this Section. |
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| 1 | | (110 ILCS 992/7-20 new) | 2 | | Sec. 7-20. Limits on duration of educational income share | 3 | | agreements. | 4 | | (a) ISA maximum number of payments shall not exceed 180 | 5 | | monthly payments. | 6 | | (b) The ISA duration shall not exceed 240 months, | 7 | | excluding any months in which a consumer has requested and | 8 | | received a payment relief pause. | 9 | | (110 ILCS 992/7-25 new) | 10 | | Sec. 7-25. Risk sharing. | 11 | | (a) An educational income share agreement provider may not | 12 | | contract for educational income share agreement terms that | 13 | | would result in a consumer having income that is less than or | 14 | | equal to 300% of the federal poverty guidelines for a single | 15 | | person for the ISA duration being required to make a stream of | 16 | | ISA payments that would yield an effective APR greater than | 17 | | 8%, or the high yield of the 10-year United States Constant | 18 | | Maturity Treasury Notes auctioned at the final auction held | 19 | | before the current calendar year in which an ISA offering is | 20 | | made plus 7%, whichever is greater. | 21 | | (b) An educational income share agreement provider may not | 22 | | contract for educational income share agreement terms that | 23 | | would result in a consumer having income that is less than or | 24 | | equal to 400% of the federal poverty guidelines for a single | 25 | | person for the ISA duration being required to make a stream of |
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| 1 | | ISA payments that would yield an effective APR greater than | 2 | | 12%, or the high yield of the 10-year United States Constant | 3 | | Maturity Treasury Notes auctioned at the final auction held | 4 | | before the current calendar year in which an ISA offering is | 5 | | made plus 11%, whichever is greater. | 6 | | (c) An educational income share agreement provider may not | 7 | | contract for educational income share agreement terms that | 8 | | would result in a consumer having income that is less than or | 9 | | equal to 500% of the federal poverty guidelines for a single | 10 | | person for the ISA duration being required to make a stream of | 11 | | ISA payments that would yield an effective APR greater than | 12 | | 15%, or the high yield of the 10-year United States Constant | 13 | | Maturity Treasury Notes auctioned at the final auction held | 14 | | before the current calendar year in which an ISA offering is | 15 | | made plus 14%, whichever is greater. | 16 | | (d) An educational income share agreement provider may not | 17 | | contract for educational income share agreement terms that | 18 | | would result in a consumer having income that is less than or | 19 | | equal to 600% of the federal poverty guidelines for a single | 20 | | person for the ISA duration being required to make a stream of | 21 | | ISA payments that would yield an effective APR greater than | 22 | | 18%, or the high yield of the 10-year United States Constant | 23 | | Maturity Treasury Notes auctioned at the final auction held | 24 | | before the current calendar year in which an ISA offering is | 25 | | made plus 17%, whichever is greater. | 26 | | (e) For the purposes of determining the various tiers set |
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| 1 | | forth in this Section, an income share agreement provider | 2 | | shall calculate the effective APR by determining the various | 3 | | federal poverty guidelines tiers at the time the consumer's | 4 | | educational income share agreement is originated and assuming | 5 | | such amounts are fixed through the ISA duration. | 6 | | (f) For the purposes of determining ISA duration in this | 7 | | Section, an income share agreement provider shall assume the | 8 | | ISA duration started after a period equal to the expected | 9 | | length of the program for which a consumer is enrolling. | 10 | | (110 ILCS 992/7-30 new) | 11 | | Sec. 7-30. Limits on covered income. An educational income | 12 | | share agreement must specify the definition of income to be | 13 | | used for the purposes of calculating a consumer's payment | 14 | | obligation under the educational income share agreement. No | 15 | | educational income share agreement shall include any of the | 16 | | following in its definition of income: | 17 | | (1) The income of the consumer's spouse, party to a | 18 | | civil union under the Illinois Religious Freedom and Civil | 19 | | Union Act, children or dependents. | 20 | | (2) Any amount paid by the consumer under Title II or | 21 | | XVI of the Social Security Act, 42 U.S.C. 401 et seq., 42 | 22 | | U.S.C. 1381 et seq.; or under a State program funded by | 23 | | Title IV of the Social Security Act, 42 U.S.C. 601 et seq. | 24 | | (3) Individual retirement account distributions. | 25 | | (4) Pensions and annuities. |
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| 1 | | (5) Social security benefits. | 2 | | (6) Any sources of government aid provided to | 3 | | individuals, including, but not limited to: | 4 | | (A) unemployment programs; | 5 | | (B) disaster relief programs; | 6 | | (C) Medicare or Medicaid benefits; | 7 | | (D) benefits received through the Supplemental | 8 | | Nutrition Assistance Program; | 9 | | (E) economic impact payments; | 10 | | (F) the earned income tax credit or child tax | 11 | | credit; | 12 | | (G) other income excluded from the definition of | 13 | | taxable income set forth by the Internal Revenue | 14 | | Service; or | 15 | | (H) passive income that is not derived as a result | 16 | | of a consumer's active participation in any trade or | 17 | | business. | 18 | | (110 ILCS 992/7-35 new) | 19 | | Sec. 7-35. Fees permitted. In addition to the ISA | 20 | | obligation permitted by this Act, an income share agreement | 21 | | provider may contract for and receive the following additional | 22 | | charges: | 23 | | (1) government fees and taxes; | 24 | | (2) a fee, which shall not exceed the sum of $25, for a | 25 | | failure to provide documentation to the income share |
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| 1 | | agreement provider for the confirmation and reconciliation | 2 | | of the consumer's income within 30 days after the date on | 3 | | which such documentation is due, as reflected in the | 4 | | written notice to the consumer; | 5 | | (3) a fee for processing any forms to confirm the | 6 | | consumer's income with the United States Internal Revenue | 7 | | Service or a State department of revenue or taxation on a | 8 | | dollar-for-dollar, pass-through basis of the expenses | 9 | | incurred by the income share agreement provider; | 10 | | (4) a late payment fee in the amount of $15 or 5% of | 11 | | the late payment, whichever is less, for any payment that | 12 | | is more than 15 days past due; no late payment fee may be | 13 | | charged more than once per late payment; | 14 | | (5) an amount not exceeding $25, plus any actual | 15 | | expenses incurred in connection with a check or draft that | 16 | | is not honored because of insufficient or uncollected | 17 | | funds or because no such account exists; | 18 | | (6) other fees authorized by the Secretary. In | 19 | | determining whether to authorize a charge, the Secretary | 20 | | shall consider whether the charge benefits the consumer | 21 | | and is reasonable; | 22 | | (7) before or after default in payment of a scheduled | 23 | | payment of an educational income share agreement, the | 24 | | parties to the educational income share agreement may | 25 | | agree in writing to a deferral of all or part of one or | 26 | | more unpaid payments and the income share agreement |
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| 1 | | provider may make, at the time of deferral and receive at | 2 | | that time or at any time thereafter, a deferral charge not | 3 | | exceeding an amount equal to 5% of the missed payment. | 4 | | Provided this subsection shall not apply to voluntary | 5 | | payment relief pauses. | 6 | | (110 ILCS 992/7-40 new) | 7 | | Sec. 7-40. Restriction on security interest. Under no | 8 | | circumstances shall an educational income share agreement | 9 | | provider take a security interest in any collateral in | 10 | | connection with an educational income share agreement. | 11 | | (110 ILCS 992/7-45 new) | 12 | | Sec. 7-45. Discharge of obligations. | 13 | | (a) All obligations under an educational income share | 14 | | agreement shall terminate if the consumer is deemed totally | 15 | | and permanently disabled by the applicable governmental | 16 | | agency. | 17 | | (b) All obligations under an educational income share | 18 | | agreement shall terminate upon the death of the consumer. | 19 | | (110 ILCS 992/7-50 new) | 20 | | Sec. 7-50. Prohibition on co-signers. No educational | 21 | | income share agreement shall include or permit the use of a | 22 | | co-signer in connection with any obligation related to an | 23 | | educational income share agreement. |
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| 1 | | (110 ILCS 992/7-55 new) | 2 | | Sec. 7-55. Limitation on acceleration. | 3 | | (a) Income share agreement providers shall not attempt to | 4 | | accelerate or otherwise liquidate a future payment stream | 5 | | under an educational income share agreement. | 6 | | (b) Notwithstanding subsection (a), nothing in this | 7 | | Section shall prevent an income share agreement provider from | 8 | | collecting or pursuing any other remedy available to the | 9 | | income share agreement provider for the collection of amounts | 10 | | that were due from the consumer under an educational income | 11 | | share agreement that were not paid or properly remitted to the | 12 | | income share agreement provider. Nothing in this Section shall | 13 | | prevent an income share agreement provider from calculating a | 14 | | projected future income for a consumer and calculating a | 15 | | consumer's payment obligation using that projection if the | 16 | | consumer does not provide contractually obligated | 17 | | documentation of income. | 18 | | (c) Notwithstanding subsection (a), an educational income | 19 | | share agreement may contain a provision that allows a consumer | 20 | | to terminate his or her educational income share agreement | 21 | | before the events terminating further obligations under the | 22 | | income share agreement. The early termination mechanisms, such | 23 | | as total caps on payments due to the income share agreement | 24 | | provider or other rights to partially or fully terminate | 25 | | further obligations under the educational income share |
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| 1 | | agreement, must be optional to the consumer and within the | 2 | | consumer's control. In such circumstances, such mechanisms | 3 | | shall not be deemed a form of acceleration. | 4 | | (110 ILCS 992/7-60 new) | 5 | | Sec. 7-60. No assignment of wages. | 6 | | (a) An income share agreement provider may not take an | 7 | | assignment of earnings of the consumer for payment or as | 8 | | security for payment of a debt arising out of an educational | 9 | | income share agreement. An assignment of earnings in violation | 10 | | of this Section is unenforceable by the assignee of the | 11 | | earnings and revocable by the consumer. This Section does not | 12 | | prohibit a consumer from authorizing deductions from his or | 13 | | her earnings in favor of a licensee if the authorization | 14 | | complies with the Illinois Wage Assignment Act. | 15 | | (b) A sale of unpaid earnings made in consideration of the | 16 | | payment of money to or for the account of the seller of the | 17 | | earnings is deemed to be a loan to the seller secured by an | 18 | | assignment of earnings. | 19 | | (110 ILCS 992/7-65 new) | 20 | | Sec. 7-65. Limitations on garnishment. Before entry of | 21 | | judgment in an action against a consumer for a payment arising | 22 | | from an educational income share agreement, a licensee may not | 23 | | attach unpaid earnings of the consumer by garnishment or like | 24 | | proceedings. |
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| 1 | | (110 ILCS 992/7-70 new) | 2 | | Sec. 7-70. Use of multiple agreements. An income share | 3 | | agreement provider shall not use multiple agreements with | 4 | | respect to a single educational income share agreement with | 5 | | intent to violate any limitations of this Act. | 6 | | (110 ILCS 992/7-75 new) | 7 | | Sec. 7-75. Required disclosures. | 8 | | (a) An income share agreement provider shall disclose the | 9 | | following information to each consumer, clearly and | 10 | | conspicuously, in a form that the consumer can keep at the time | 11 | | the transaction is consummated: | 12 | | (1) The date of the educational income share | 13 | | agreement. | 14 | | (2) The dollar amount of the amount financed. | 15 | | (3) The sales price of the transaction if different | 16 | | from the amount financed; | 17 | | (4) The ISA payment calculation method. Any | 18 | | percentages used in the ISA payment calculation method | 19 | | shall be rounded to the nearest one-hundredth of 1% if the | 20 | | percentage is not a whole number. | 21 | | (5) The maximum number of payments expressed as a | 22 | | whole number. | 23 | | (6) The maximum duration expressed as a whole number | 24 | | of the period of time. |
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| 1 | | (7) The income threshold expressed as a dollar amount | 2 | | and a statement that payments will only be required during | 3 | | periods when the consumer's income is equal to or exceeds | 4 | | the income threshold. | 5 | | (8) An itemization of the amount financed; if the ISA | 6 | | provider is a seller of goods or services, then the amount | 7 | | of any down payment and any additional fees or costs shall | 8 | | be itemized. | 9 | | (9) The definition of income to be used for the | 10 | | purposes of calculating the consumer's obligations under | 11 | | the educational income share agreement. | 12 | | (10) A description of the terms under which the | 13 | | obligations of the consumer under the educational income | 14 | | share agreement will be extinguished before the full ISA | 15 | | duration. | 16 | | (11) A payment schedule that shows the date on which | 17 | | the first payment will be due and reflects each date | 18 | | thereafter during the ISA duration that a payment may be | 19 | | due. | 20 | | (12) An itemization of any permissible fees associated | 21 | | with the ISA. | 22 | | (13) A description of the methods used by the ISA | 23 | | provider to engage in a process of reconciliation and | 24 | | verification to determine if the consumer's payments are | 25 | | more than, equal to, or less than the payments owed by the | 26 | | consumer under his or her educational income share |
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| 1 | | agreement; this description shall include the following: | 2 | | (i) a description of the frequency or triggers for | 3 | | the commencement of the income verification process; | 4 | | (ii) a description of the requirements and timing | 5 | | of the process in which the consumer must participate | 6 | | in order for the ISA provider to verify the consumer's | 7 | | income; and | 8 | | (iii) a description of any records or forms, | 9 | | including tax records, that the consumer may be | 10 | | required to execute or submit. | 11 | | (14) The name and address of the ISA provider. | 12 | | (15) A table displaying the dollar amounts of each | 13 | | payment, the number of payments, the effective annual | 14 | | percentage rate, and the total of all payments that a | 15 | | consumer would be required to pay under the educational | 16 | | income share agreement at a range of annual income levels | 17 | | based on the ISA duration. The comparison table shall | 18 | | include a statement that "This comparison table is for | 19 | | illustrative purposes only and may not reflect the amounts | 20 | | that you are likely to pay under this educational income | 21 | | share agreement. This table assumes you have the same | 22 | | income over the entire term of your educational income | 23 | | share agreement. It does not take into account changes in | 24 | | income. Your income will likely change over time. This | 25 | | table does not represent the income or range of incomes | 26 | | that you are likely to earn in the future.". In computing |
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| 1 | | the APR, the ISA provider shall use the amount financed | 2 | | and may assume that the educational income share agreement | 3 | | will be disbursed in the amount and with the disbursement | 4 | | schedule that it reasonably expects to follow for such | 5 | | educational income share agreement and that payments would | 6 | | commence on the date set forth in the educational income | 7 | | share agreement. The income used in this disclosure shall | 8 | | include, at minimum, the obligations at the following | 9 | | incomes: | 10 | | (i) no income; | 11 | | (ii) income equal to the annual equivalent of the | 12 | | income threshold; | 13 | | (iii) various income scenarios with at least | 14 | | calculations at annual incomes of $40,000, $60,000, | 15 | | $80,000, $100,000, $125,000, $150,000, $175,000, and | 16 | | $200,000; and | 17 | | (iv) if known by the ISA provider, the consumer's | 18 | | current income. | 19 | | (16) A statement that the educational income share | 20 | | agreement is not a fixed payment installment loan and that | 21 | | the amount the consumer will be required to pay under the | 22 | | educational income share agreement: | 23 | | (i) may be more or less than the amount financed by | 24 | | the ISA provider; and | 25 | | (ii) will vary in proportion with the consumer's | 26 | | income. |
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| 1 | | (b) The disclosures required by this Section shall be | 2 | | grouped together and segregated from all other information. | 3 | | (c) The disclosures required by this Section may be | 4 | | provided to a consumer in electronic form, subject to | 5 | | compliance with the consumer's consent and other applicable | 6 | | provisions of the Electronic Signatures in Global and National | 7 | | Commerce Act, 15 U.S.C. 7001 et seq., and applicable State | 8 | | law. | 9 | | (d) If model documents are established pursuant to any | 10 | | federal law covering income share agreements, compliance with | 11 | | those forms shall be considered compliance with this Act with | 12 | | respect to the disclosure requirements contained in this Act. | 13 | | (110 ILCS 992/7-80 new) | 14 | | Sec. 7-80. Early completion. An educational income share | 15 | | agreement shall specify the terms and conditions by which the | 16 | | consumer may extinguish his or her obligations under the | 17 | | educational income share agreement before the end of the | 18 | | educational income share agreement's duration. An educational | 19 | | income share agreement may include any method to determine the | 20 | | early completion payment; however, a consumer may always | 21 | | cancel an educational income share agreement by making | 22 | | aggregate payments, excluding payments to fees, equal to the | 23 | | ISA payment cap, and an ISA must include at least one | 24 | | time-value cap that may not exceed the limits specified in | 25 | | Section 7-15. The consumer is entitled to this early |
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| 1 | | completion regardless of whether the consumer makes this early | 2 | | completion payment by making regularly scheduled payments or | 3 | | by making a single lump sum payment in the amount of the early | 4 | | completion payment. | 5 | | This Section shall create an early completion mechanism | 6 | | for educational income share agreements that is in lieu of | 7 | | other State laws regarding prepayment penalties. | 8 | | (110 ILCS 992/7-85 new) | 9 | | Sec. 7-85. Assumption of increase in future income. | 10 | | (a) If a consumer fails to provide income documentation as | 11 | | reasonably required by an educational income share agreement, | 12 | | an income share agreement provider may assign an amount of | 13 | | income to the consumer and compute the consumer's monthly | 14 | | payment amount by any of the following methods, to the extent | 15 | | disclosed in the educational income share agreement: | 16 | | (1) assigning an income amount obtained from a | 17 | | reasonably reliable third party or a credit reporting | 18 | | agency; | 19 | | (2) if the consumer previously provided income | 20 | | documentation or has had an income assigned in the prior | 21 | | 12-month period that has increased by an amount not to | 22 | | exceed 10%, but such increase may not be applied more than | 23 | | once per 12-month period; | 24 | | (3) contacting the consumer's employer, or any person | 25 | | or entity reasonably believed to represent the consumer's |
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| 1 | | employer, to obtain, verify, or update the consumer's | 2 | | income information; | 3 | | (4) contacting the Department of Revenue or the | 4 | | Internal Revenue Service to obtain the most recent | 5 | | information available about the student's income; or | 6 | | (5) assigning a reasonable qualified income based on | 7 | | the incomes of: | 8 | | (A) the nearest reasonably relevant quantile of | 9 | | income for individuals working in the profession for | 10 | | which the consumer's educational program was intended | 11 | | to prepare the participant, as determined by | 12 | | information published by the Bureau of Labor | 13 | | Statistics or other reasonably reliable publicly | 14 | | available data sources; or | 15 | | (B) the nearest reasonably relevant quantile of | 16 | | income of consumers who attended the same or a | 17 | | reasonably comparable covered educational program or | 18 | | course of study, as determined by information | 19 | | published by the Bureau of Labor Statistics or other | 20 | | reasonably reliable publicly available data sources. | 21 | | (b) If an income share agreement provider assigns an | 22 | | income to a consumer's educational income share agreement, | 23 | | then it shall notify the consumer in the monthly billing | 24 | | statement, and in each billing statement thereafter while the | 25 | | assigned income remains applicable to the consumer's | 26 | | educational income share agreement, that income has been |
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| 1 | | assigned and of the consumer's rights under this Section. | 2 | | (c) If the consumer does provide income information as | 3 | | reasonably required by the educational income share agreement | 4 | | within one year of the date on which the income share agreement | 5 | | provider notified the consumer that assigned income will be | 6 | | applied to the educational income share agreement, then, | 7 | | within 15 days after the income share agreement provider's | 8 | | receipt of such information, the income share agreement | 9 | | provider shall update each prior instance in which assigned | 10 | | income was applied using the income information provided by | 11 | | the consumer; if the consumer provides income information more | 12 | | than one year after the income share agreement provider first | 13 | | assigned income to the consumer's educational income share | 14 | | agreement, then the income share agreement provider may, but | 15 | | is not obligated to, update each prior instance in which | 16 | | assigned income was applied using the income information | 17 | | provided by the consumer. | 18 | | (d) An income share agreement provider that assigns income | 19 | | to an educational income share agreement shall retain all | 20 | | applicable records relating to the method and data sources | 21 | | used to make such estimation for 3 years after the end of that | 22 | | educational income share agreement. | 23 | | (110 ILCS 992/7-90 new) | 24 | | Sec. 7-90. Receipts; statements of account; evidence of | 25 | | payment. |
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| 1 | | (a) The income share agreement provider shall deliver or | 2 | | mail to the consumer, without request, a written receipt for | 3 | | each payment made pursuant to an educational income share | 4 | | agreement. A periodic statement showing a payment received by | 5 | | mail complies with this subsection (a). | 6 | | (b) Upon written request of a consumer, the income share | 7 | | agreement provider shall provide a written statement of the | 8 | | dates and amounts of payments made within the 12 months | 9 | | preceding the month in which the request is received. The | 10 | | statement shall be provided without charge once during each | 11 | | year of the term of the obligation. If additional statements | 12 | | are requested, the income share agreement provider may charge | 13 | | an amount not to exceed $5.00 for each additional statement. | 14 | | (c) After a consumer has fulfilled all obligations with | 15 | | respect to an educational income share agreement, the income | 16 | | share agreement provider, upon request of the consumer, shall | 17 | | deliver or mail to the consumer written evidence acknowledging | 18 | | termination of all obligations with respect to the income | 19 | | share agreement. | 20 | | (110 ILCS 992/7-95 new) | 21 | | Sec. 7-95. Adjustment of dollar amounts. | 22 | | (a) From time to time the dollar amounts in this Act | 23 | | designated as subject to change shall change, as provided in | 24 | | this Section, according to and to the extent of changes in the | 25 | | index. |
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| 1 | | (b) The index for December of the year preceding the year | 2 | | in which this Act becomes effective is the reference base | 3 | | index. | 4 | | (c) The designated dollar amounts shall change on July 1 | 5 | | of each even-numbered year if the percentage of change, | 6 | | calculated to the nearest whole percentage point, between the | 7 | | index and the end of the preceding year and the reference base | 8 | | index is 10% or more, but: | 9 | | (1) the portion of the percentage change in the index | 10 | | in excess of a multiple of 10% shall be disregarded and the | 11 | | dollar amounts shall change only in multiples of 10% of | 12 | | the amounts provided in this Act on the date of enactment; | 13 | | and | 14 | | (2) the dollar amounts shall not change if the amounts | 15 | | required by this Section are those currently in effect | 16 | | pursuant to this Act as a result of earlier application of | 17 | | this Section. | 18 | | (d) If the index is revised, the percentage of change | 19 | | pursuant to this Section shall be calculated on the basis of | 20 | | the revised index. If a revision of the index changes the | 21 | | reference base index, a revised reference base index shall be | 22 | | determined by multiplying the reference base index then | 23 | | applicable by the rebasing factor furnished by the Bureau of | 24 | | Labor Statistics. If the index is superseded, the index | 25 | | referred to in this Section is the one represented by the | 26 | | Bureau of Labor Statistics as reflecting most accurately |
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| 1 | | changes in the purchasing power of the dollar for consumers. | 2 | | (e) The Department shall adopt a rule setting forth, on or | 3 | | before April 30 of each year in which dollar amounts are to | 4 | | change, the changes in dollar amounts required by this | 5 | | Section. As soon as practical after the changes occur, the | 6 | | Department shall adopt a rule setting forth the changes in the | 7 | | index required by subsection (d), including, if applicable, | 8 | | the numerical equivalent of the reference base index under a | 9 | | revised reference base index and the designation or title of | 10 | | any index superseding the index. | 11 | | (f) A person does not violate this Act with respect to a | 12 | | transaction otherwise complying with this Act if he or she | 13 | | relies on dollar amounts either determined according to | 14 | | subsection (c) or appearing in the last rule of the Department | 15 | | announcing the then-current dollar amounts. | 16 | | (110 ILCS 992/7-100 new) | 17 | | Sec. 7-100. Construction against implicit authority. This | 18 | | Act is a general Act intended as a unified coverage of its | 19 | | subject matter; no part of this Act shall be construed to be | 20 | | impliedly repealed by subsequent legislation if that | 21 | | construction can reasonably be avoided. | 22 | | (110 ILCS 992/7-105 new) | 23 | | Sec. 7-105. Application of other Acts. Educational income | 24 | | share agreements and income share agreement providers are |
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| 1 | | subject to other Articles of this Act, the Know Before You Owe | 2 | | Private Education Loan Act, and the Predatory Loan Prevention | 3 | | Act and shall comply with their requirements and any rules | 4 | | adopted by the Department of Financial and Professional | 5 | | Regulation pursuant to those Acts. Nothing in this Section is | 6 | | intended to imply that an educational income share agreement | 7 | | (i) is not a credit transaction or (ii) upon an obligation | 8 | | accruing, does not create a debt. | 9 | | (110 ILCS 992/7-110 new) | 10 | | Sec. 7-110. Rulemaking. Notwithstanding any other | 11 | | provision of this Act, the Secretary may enact rules for the | 12 | | regulation of any educational income share agreement provider | 13 | | that does not engage in the servicing of student loans, | 14 | | including, but not limited to, educational income share | 15 | | agreements. The Secretary's authority to adopt rules shall | 16 | | include, but is not limited to, licensure, examination, | 17 | | supervision, investigation, confidentiality, and enforcement. | 18 | | Such rules may supersede and expressly waive the application | 19 | | of any provision of this Act that conflicts with such rules, | 20 | | except the provisions in this Article. | 21 | | (110 ILCS 992/25-5)
| 22 | | Sec. 25-5. Enforcement; Consumer Fraud and Deceptive | 23 | | Business Practices Act. The Attorney General may enforce a | 24 | | violation of Article 5 or 7 of this Act as an unlawful practice |
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| 1 | | under the Consumer Fraud and Deceptive Business Practices Act.
| 2 | | (Source: P.A. 100-540, eff. 12-31-18 .) | 3 | | Section 10. The Consumer Installment Loan Act is amended | 4 | | by changing Section 1 as follows:
| 5 | | (205 ILCS 670/1) (from Ch. 17, par. 5401)
| 6 | | Sec. 1. License required to engage in business. No person, | 7 | | partnership, association, limited liability
company, or | 8 | | corporation shall engage in
the business of making loans of | 9 | | money and charge, contract for, or receive on any
such loan a
| 10 | | greater annual percentage rate than 9% except as authorized by | 11 | | this Act after first obtaining a license
from the Director of | 12 | | Financial Institutions (hereinafter called the Director). No | 13 | | licensee, or employee or affiliate thereof, that is licensed | 14 | | under the Payday Loan Reform Act shall obtain a license under | 15 | | this Act except that a licensee under the Payday Loan Reform | 16 | | Act may obtain a license under this Act for the exclusive | 17 | | purpose and use of making title-secured loans, as defined in | 18 | | subsection (a) of Section 15 of this Act and governed by Title | 19 | | 38, Section 110.300 of the Illinois Administrative Code. For | 20 | | the purpose of this Section, "affiliate" means any person or | 21 | | entity that directly or indirectly controls, is controlled by, | 22 | | or shares control with another person or entity. A person or | 23 | | entity has control over another if the person or entity has an | 24 | | ownership interest of 25% or more in the other. A person or |
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| 1 | | entity licensed to provide educational income share agreements | 2 | | is exempt from the requirements of this Act to the extent of | 3 | | its operation under Article 7 of the Student Loan Servicing | 4 | | Rights Act.
| 5 | | In this Act, "Director" means the Director of Financial | 6 | | Institutions of the Department of Financial and Professional | 7 | | Regulation. | 8 | | (Source: P.A. 101-658, eff. 3-23-21.)
| 9 | | Section 15. The Interest Act is amended by changing | 10 | | Section 4 as follows: | 11 | | (815 ILCS 205/4) (from Ch. 17, par. 6404) | 12 | | Sec. 4. General interest rate. | 13 | | (1) Except as otherwise provided in Section 4.05, in all | 14 | | written contracts it shall be lawful for the parties to
| 15 | | stipulate or agree that an annual percentage rate of 9%, or any | 16 | | less sum, shall be
taken and paid upon every $100 of money | 17 | | loaned or in any manner due and
owing from any person to any | 18 | | other person or corporation in this state, and
after that rate | 19 | | for a greater or less sum, or for a longer or shorter time,
| 20 | | except as herein provided. | 21 | | The maximum rate of interest that may lawfully be | 22 | | contracted for is
determined by the law applicable thereto at | 23 | | the time the contract is
made. Any provision in any contract, | 24 | | whether made before or after July
1, 1969, which provides for |
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| 1 | | or purports to authorize, contingent upon a
change in the | 2 | | Illinois law after the contract is made, any rate of
interest | 3 | | greater than the maximum lawful rate at the time the contract
| 4 | | is made, is void. | 5 | | It is lawful for a state bank or a branch of an | 6 | | out-of-state bank, as those
terms are defined in Section 2 of | 7 | | the Illinois Banking Act, to receive or to
contract to receive
| 8 | | and collect interest and charges at any rate or rates agreed | 9 | | upon by
the bank or branch and the borrower.
It is lawful for a | 10 | | savings bank chartered under the Savings Bank Act or a
savings | 11 | | association chartered under the Illinois Savings and Loan Act | 12 | | of 1985
to receive or contract to receive and collect interest | 13 | | and charges at any rate
agreed upon by the savings bank or | 14 | | savings association and the borrower. | 15 | | It is lawful to receive or to contract to receive and | 16 | | collect
interest and charges as authorized by this Act and as | 17 | | authorized by the
Consumer Installment Loan Act, the Payday | 18 | | Loan Reform Act, the Retail Installment Sales Act, the | 19 | | Illinois Financial Services Development Act, the Motor Vehicle | 20 | | Retail Installment Sales Act, or the Consumer Legal Funding | 21 | | Act , or the Student Loan Servicing Rights Act . It is lawful to | 22 | | charge, contract
for, and receive any rate or amount of | 23 | | interest or compensation, except as otherwise provided in the | 24 | | Predatory Loan Prevention Act, with
respect to the following | 25 | | transactions: | 26 | | (a) Any loan made to a corporation; |
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| 1 | | (b) Advances of money, repayable on demand, to an | 2 | | amount not less
than $5,000, which are made upon warehouse | 3 | | receipts, bills of lading,
certificates of stock, | 4 | | certificates of deposit, bills of exchange, bonds
or other | 5 | | negotiable instruments pledged as collateral security for | 6 | | such
repayment, if evidenced by a writing; | 7 | | (c) Any credit transaction between a merchandise | 8 | | wholesaler and
retailer; any business loan to a business | 9 | | association or copartnership
or to a person owning and | 10 | | operating a business as sole proprietor or to
any persons | 11 | | owning and operating a business as joint venturers, joint
| 12 | | tenants or tenants in common, or to any limited | 13 | | partnership, or to any
trustee owning and operating a | 14 | | business or whose beneficiaries own and
operate a | 15 | | business, except that any loan which is secured (1) by an
| 16 | | assignment of an individual obligor's salary, wages, | 17 | | commissions or
other compensation for services, or (2) by | 18 | | his household furniture or
other goods used for his | 19 | | personal, family or household purposes shall be
deemed not | 20 | | to be a loan within the meaning of this subsection; and
| 21 | | provided further that a loan which otherwise qualifies as | 22 | | a business
loan within the meaning of this subsection | 23 | | shall not be deemed as not so
qualifying because of the | 24 | | inclusion, with other security consisting of
business | 25 | | assets of any such obligor, of real estate occupied by an
| 26 | | individual obligor solely as his residence. The term |
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| 1 | | "business" shall
be deemed to mean a commercial, | 2 | | agricultural or industrial enterprise
which is carried on | 3 | | for the purpose of investment or profit, but shall
not be | 4 | | deemed to mean the ownership or maintenance of real estate
| 5 | | occupied by an individual obligor solely as his residence; | 6 | | (d) Any loan made in accordance with the provisions of | 7 | | Subchapter I
of Chapter 13 of Title 12 of the United States | 8 | | Code, which is designated
as "Housing Renovation and | 9 | | Modernization"; | 10 | | (e) Any mortgage loan insured or upon which a | 11 | | commitment to insure
has been issued under the provisions | 12 | | of the National Housing Act,
Chapter 13 of Title 12 of the | 13 | | United States Code; | 14 | | (f) Any mortgage loan guaranteed or upon which a | 15 | | commitment to
guaranty has been issued under the | 16 | | provisions of the Veterans' Benefits
Act, Subchapter II of | 17 | | Chapter 37 of Title 38 of the United States Code; | 18 | | (g) Interest charged by a broker or dealer registered | 19 | | under the
Securities Exchange Act of 1934, as amended, or | 20 | | registered under the
Illinois Securities Law of 1953, | 21 | | approved July 13, 1953, as now or
hereafter amended, on a | 22 | | debit balance in an account for a customer if
such debit | 23 | | balance is payable at will without penalty and is secured | 24 | | by
securities as defined in Uniform Commercial | 25 | | Code-Investment Securities; | 26 | | (h) Any loan made by a participating bank as part of |
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| 1 | | any loan
guarantee program which provides for loans and | 2 | | for the refinancing of
such loans to medical students, | 3 | | interns and residents and which are
guaranteed by the | 4 | | American Medical Association Education and Research
| 5 | | Foundation; | 6 | | (i) Any loan made, guaranteed, or insured in | 7 | | accordance with the
provisions of the Housing Act of 1949, | 8 | | Subchapter III of Chapter 8A of
Title 42 of the United | 9 | | States Code and the Consolidated Farm and Rural
| 10 | | Development Act, Subchapters I, II, and III of Chapter 50 | 11 | | of Title 7 of
the United States Code; | 12 | | (j) Any loan by an employee pension benefit plan, as | 13 | | defined in Section
3 (2) of the Employee Retirement Income | 14 | | Security Act of 1974 (29 U.S.C.A.
Sec. 1002), to an | 15 | | individual participating in such plan, provided that such
| 16 | | loan satisfies the prohibited transaction exemption | 17 | | requirements of Section
408 (b) (1) (29 U.S.C.A. Sec. 1108 | 18 | | (b) (1)) or Section 2003 (a) (26 U.S.C.A.
Sec. 4975 (d) | 19 | | (1)) of the Employee Retirement Income Security Act of | 20 | | 1974; | 21 | | (k) Written contracts, agreements or bonds for deed | 22 | | providing for
installment purchase of real estate, | 23 | | including a manufactured home as defined in subdivision | 24 | | (53) of Section 9-102 of the Uniform Commercial Code that | 25 | | is real property as defined in the Conveyance and | 26 | | Encumbrance of Manufactured Homes as Real Property and |
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| 1 | | Severance Act; | 2 | | (l) Loans secured by a mortgage on real estate, | 3 | | including a manufactured home as defined in subdivision | 4 | | (53) of Section 9-102 of the Uniform Commercial Code that | 5 | | is real property as defined in the Conveyance and | 6 | | Encumbrance of Manufactured Homes as Real Property and | 7 | | Severance Act; | 8 | | (m) Loans made by a sole proprietorship, partnership, | 9 | | or corporation to
an employee or to a person who has been | 10 | | offered employment by such sole
proprietorship, | 11 | | partnership, or corporation made for the sole purpose of
| 12 | | transferring an employee or person who has been offered | 13 | | employment to another
office maintained and operated by | 14 | | the same sole proprietorship, partnership,
or corporation; | 15 | | (n) Loans to or for the benefit of students made by an | 16 | | institution of
higher education. | 17 | | (2) Except for loans described in subparagraph (a), (c), | 18 | | (d),
(e), (f) or (i) of subsection (1) of this Section, and | 19 | | except to the
extent permitted by the applicable statute for | 20 | | loans made pursuant to
Section 4a or pursuant to the Consumer | 21 | | Installment Loan Act: | 22 | | (a) Whenever the rate of interest exceeds an annual | 23 | | percentage rate of 8% on any
written contract, agreement | 24 | | or bond for deed providing for the installment
purchase of | 25 | | residential real estate, or on any loan secured by a | 26 | | mortgage
on residential real estate, it shall be unlawful |
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| 1 | | to provide for a
prepayment penalty or other charge for | 2 | | prepayment. | 3 | | (b) No agreement, note or other instrument evidencing | 4 | | a loan
secured by a mortgage on residential real estate, | 5 | | or written contract,
agreement or bond for deed providing | 6 | | for the installment purchase of
residential real estate, | 7 | | may provide for any change in the contract rate of
| 8 | | interest during the term thereof. However, if the Congress | 9 | | of the United
States or any federal agency authorizes any | 10 | | class of lender to enter, within
limitations, into | 11 | | mortgage contracts or written contracts, agreements or
| 12 | | bonds for deed in which the rate of interest may be changed | 13 | | during the
term of the contract, any person, firm, | 14 | | corporation or other entity
not otherwise prohibited from | 15 | | entering into mortgage contracts or
written contracts, | 16 | | agreements or bonds for deed in Illinois may enter
into | 17 | | mortgage contracts or written contracts, agreements or | 18 | | bonds
for deed in which the rate of interest may be changed | 19 | | during the term
of the contract, within the same | 20 | | limitations. | 21 | | (3) In any contract or loan which is secured by a mortgage, | 22 | | deed of
trust, or conveyance in the nature of a mortgage, on | 23 | | residential real
estate, the interest which is computed, | 24 | | calculated, charged, or collected
pursuant to such contract or | 25 | | loan, or pursuant to any regulation or rule
promulgated | 26 | | pursuant to this Act, may not be computed, calculated, charged
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| 1 | | or collected for any period of time occurring after the date on | 2 | | which the
total indebtedness, with the exception of late | 3 | | payment penalties, is paid
in full. | 4 | | (4) For purposes of this Section, a prepayment shall mean | 5 | | the payment of the
total indebtedness, with the exception of | 6 | | late payment penalties if
incurred or charged, on any date | 7 | | before the date specified in the contract
or loan agreement on | 8 | | which the total indebtedness shall be paid in full, or
before | 9 | | the date on which all payments, if timely made, shall have been
| 10 | | made. In the event of a prepayment of the indebtedness which is | 11 | | made on a
date after the date on which interest on the | 12 | | indebtedness was last
computed, calculated, charged, or | 13 | | collected but before the next date on
which interest on the | 14 | | indebtedness was to be calculated, computed, charged,
or | 15 | | collected, the lender may calculate, charge and collect | 16 | | interest on the
indebtedness for the period which elapsed | 17 | | between the date on which the
prepayment is made and the date | 18 | | on which interest on the indebtedness was
last computed, | 19 | | calculated, charged or collected at a rate equal to 1/360 of
| 20 | | the annual rate for each day which so elapsed, which rate shall | 21 | | be applied
to the indebtedness outstanding as of the date of | 22 | | prepayment. The lender
shall refund to the borrower any | 23 | | interest charged or collected which
exceeds that which the | 24 | | lender may charge or collect pursuant to the
preceding | 25 | | sentence. The provisions of this amendatory Act of 1985 shall
| 26 | | apply only to contracts or loans entered into on or after the |
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| 1 | | effective
date of this amendatory Act, but shall not apply to | 2 | | contracts or loans
entered into on or after that date that are | 3 | | subject to Section 4a of this
Act, the Consumer Installment | 4 | | Loan Act, the Payday Loan Reform Act, the Predatory Loan | 5 | | Prevention Act, or the Retail Installment Sales
Act, or that | 6 | | provide for the refund of precomputed interest on prepayment
| 7 | | in the manner provided by such Act. | 8 | | (5) For purposes of items (a) and (c) of subsection (1) of | 9 | | this Section, a rate or amount of interest may be lawfully | 10 | | computed when applying the ratio of the annual interest rate | 11 | | over a year based on 360 days. The provisions of this | 12 | | amendatory Act of the 96th General Assembly are declarative of | 13 | | existing law. | 14 | | (6) For purposes of this Section, "real estate" and "real | 15 | | property" include a manufactured home, as defined in | 16 | | subdivision (53) of Section 9-102 of the Uniform Commercial | 17 | | Code that is real property as defined in the Conveyance and | 18 | | Encumbrance of Manufactured Homes as Real Property and | 19 | | Severance Act. | 20 | | (Source: P.A. 101-658, eff. 3-23-21; 102-987, eff. 5-27-22.)
| 21 | | Section 97. Severability. The provisions of this Act are | 22 | | severable under Section 1.31 of the Statute on Statutes. | 23 | | Section 99. Effective date. This Act takes effect upon | 24 | | becoming law.".
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