Full Text of HB1437 095th General Assembly
HB1437 95TH GENERAL ASSEMBLY
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95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008 HB1437
Introduced 2/21/2007, by Rep. David E. Miller SYNOPSIS AS INTRODUCED: |
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815 ILCS 122/1-10 |
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815 ILCS 122/2-5 |
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815 ILCS 122/2-55 |
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815 ILCS 122/4-5 |
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815 ILCS 122/4-30 |
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Amends the Payday Loan Reform Act. Changes the definition of "payday loan" to include any loan with a finance charge exceeding an annual percentage rate of 36% (instead of with a finance charge exceeding an annual percentage rate of 36% and with a term that does not exceed 120 days). Provides that no lender may make a payday loan with periodic payments unless the periodic payments are substantially equal term payments and, if paid as scheduled, result in full payment of the principal and interest owed on the loan at the end of the loan term. Requires the licensee, as part of the information that he or she must collect and maintain, to include the total number of lawsuits filed by the licensee or its agent against consumers to collect on payday loans from consumers during the preceding calendar year. Prohibits a licensee or a person making payday loans from evading the requirements and prohibitions of the Act by use of a device or subterfuge including, but not limited to, (i) disguising a payday loan as a different type of transaction, or (ii) characterizing a required fee as a purchase of a good or service in connection with a payday loan. Authorizes the Department to develop rules to determine if any person or entity seeks to evade the applicability of this Act by any device, subterfuge, or pretense. Effective immediately.
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A BILL FOR
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HB1437 |
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LRB095 08216 LCT 28386 b |
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| AN ACT concerning business.
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| Be it enacted by the People of the State of Illinois,
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| represented in the General Assembly:
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| Section 5. The Payday Loan Reform Act is amended by | 5 |
| changing Sections 1-10, 2-5, 2-55, 4-5, and 4-30 as follows: | 6 |
| (815 ILCS 122/1-10)
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| Sec. 1-10. Definitions. As used in this Act: | 8 |
| "Check" means a "negotiable instrument", as defined in | 9 |
| Article 3 of the Uniform Commercial Code, that is drawn on a | 10 |
| financial institution. | 11 |
| "Commercially reasonable method of verification" or | 12 |
| "certified database" means a consumer reporting service | 13 |
| database certified by the Department as effective in verifying | 14 |
| that a proposed loan agreement is permissible under this Act, | 15 |
| or, in the absence of the Department's certification, any | 16 |
| reasonably reliable written verification by the consumer | 17 |
| concerning (i) whether the consumer has any outstanding payday | 18 |
| loans, (ii) the principal amount of those outstanding payday | 19 |
| loans, and (iii) whether any payday loans have been paid in | 20 |
| full by the consumer in the preceding 7 days. | 21 |
| "Consumer" means any natural person who, singly or jointly | 22 |
| with another consumer, enters into a loan. | 23 |
| "Consumer reporting service" means an entity that provides |
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LRB095 08216 LCT 28386 b |
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| a database certified by the Department. | 2 |
| "Department" means the Department of Financial and | 3 |
| Professional Regulation. | 4 |
| "Secretary" means the Secretary of Financial and | 5 |
| Professional Regulation. | 6 |
| "Gross monthly income" means monthly income as | 7 |
| demonstrated by official documentation of the income, | 8 |
| including, but not limited to, a pay stub or a receipt | 9 |
| reflecting payment of government benefits, for the period 30 | 10 |
| days prior to the date on which the loan is made. | 11 |
| "Lender" and "licensee" mean any person or entity, | 12 |
| including any affiliate or subsidiary of a lender or licensee, | 13 |
| that offers or makes a payday loan, buys a whole or partial | 14 |
| interest in a payday loan, arranges a payday loan for a third | 15 |
| party, or acts as an agent for a third party in making a payday | 16 |
| loan, regardless of whether approval, acceptance, or | 17 |
| ratification by the third party is necessary to create a legal | 18 |
| obligation for the third party, and includes any other person | 19 |
| or entity if the Department determines that the person or | 20 |
| entity is engaged in a transaction that is in substance a | 21 |
| disguised payday loan or a subterfuge for the purpose of | 22 |
| avoiding this Act. | 23 |
| "Loan agreement" means a written agreement between a lender | 24 |
| and consumer to make a loan to the consumer, regardless of | 25 |
| whether any loan proceeds are actually paid to the consumer on | 26 |
| the date on which the loan agreement is made. |
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LRB095 08216 LCT 28386 b |
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| "Member of the military" means a person serving in the | 2 |
| armed forces of the United States, the Illinois National Guard, | 3 |
| or any reserve component of the armed forces of the United | 4 |
| States. "Member of the military" includes those persons engaged | 5 |
| in (i) active duty, (ii) training or education under the | 6 |
| supervision of the United States preliminary to induction into | 7 |
| military service, or (iii) a period of active duty with the | 8 |
| State of Illinois under Title 10 or Title 32 of the United | 9 |
| States Code pursuant to order of the President or the Governor | 10 |
| of the State of Illinois. | 11 |
| "Outstanding balance" means the total amount owed by the | 12 |
| consumer on a loan to a lender, including all principal, | 13 |
| finance charges, fees, and charges of every kind. | 14 |
| "Payday loan" or "loan" means a loan with a finance charge | 15 |
| exceeding an annual percentage rate of 36% and with a term that | 16 |
| does not exceed 120 days , including any transaction conducted | 17 |
| via any medium whatsoever, including, but not limited to, | 18 |
| paper, 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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LRB095 08216 LCT 28386 b |
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| including, but not limited to, a wage assignment. | 2 |
| "Principal amount" means the amount received by the | 3 |
| consumer from the lender due and owing on a loan, excluding any | 4 |
| finance charges, interest, fees, or other loan-related | 5 |
| charges. | 6 |
| "Rollover" means to refinance, renew, amend, or extend a | 7 |
| loan beyond its original term.
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| (Source: P.A. 94-13, eff. 12-6-05.) | 9 |
| (815 ILCS 122/2-5)
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| Sec. 2-5. Loan terms. | 11 |
| (a) Without affecting the right of a consumer to prepay at | 12 |
| any time without cost or penalty, no payday loan may have a | 13 |
| minimum term of less than 13 days. | 14 |
| (b) No payday loan may be made to a consumer if the loan | 15 |
| would result in the consumer being indebted to one or more | 16 |
| payday lenders for a period in excess of 45 consecutive days. | 17 |
| Except as provided under Section 2-40, if a consumer has or has | 18 |
| had loans outstanding for a period in excess of 45 consecutive | 19 |
| days, no payday lender may offer or make a loan to the consumer | 20 |
| for at least 7 calendar days after the date on which the | 21 |
| outstanding balance of all payday loans made during the 45 | 22 |
| consecutive day period is paid in full. For purposes of this | 23 |
| subsection, the term "consecutive days" means a series of | 24 |
| continuous calendar days in which the consumer has an | 25 |
| outstanding balance on one or more payday loans; however, if a |
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LRB095 08216 LCT 28386 b |
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| payday loan is made to a consumer within 6 days or less after | 2 |
| the outstanding balance of all loans is paid in full, those | 3 |
| days are counted as "consecutive days" for purposes of this | 4 |
| subsection. | 5 |
| (c) No lender may make a payday loan to a consumer if the | 6 |
| total principal amount of the loan, when combined with the | 7 |
| principal amount of all of the consumer's other outstanding | 8 |
| payday loans, exceeds $1,000 or 25% of the consumer's gross | 9 |
| monthly income, whichever is less.
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| (d) No payday loan may be made to a consumer who has an | 11 |
| outstanding balance on 2 payday loans. | 12 |
| (e) No lender may charge more than $15.50 per $100 loaned | 13 |
| on any payday loan over the term of the loan. Except as | 14 |
| provided in Section 2-25, this charge is considered fully | 15 |
| earned as of the date on which the loan is made. | 16 |
| (f) A lender may not take or attempt to take an interest in | 17 |
| any of the consumer's personal property to secure a payday | 18 |
| loan. | 19 |
| (g) A consumer has the right to redeem a check or any other | 20 |
| item described in the definition of payday loan under Section | 21 |
| 1-10 issued in connection with a payday loan from the lender | 22 |
| holding the check or other item at any time before the payday | 23 |
| loan becomes payable by paying the full amount of the check or | 24 |
| other item.
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| (h) No lender may make a payday loan with periodic payments | 26 |
| unless the periodic payments are substantially equal term |
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LRB095 08216 LCT 28386 b |
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| payments and, if paid as scheduled, result in full payment of | 2 |
| the principal and interest owed on the loan at the end of the | 3 |
| loan term.
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| (Source: P.A. 94-13, eff. 12-6-05.) | 5 |
| (815 ILCS 122/2-55)
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| Sec. 2-55. Information, reporting, and examination. | 7 |
| (a) A licensee shall keep and use books, accounts, and | 8 |
| records that
will enable the Secretary to determine if the | 9 |
| licensee is complying with the
provisions of this Act and | 10 |
| maintain any other records as required by the
Secretary.
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| (b) A licensee shall collect and maintain information | 12 |
| annually for a report that shall
disclose in detail and under | 13 |
| appropriate headings:
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| (1) the total number of payday loans made during the
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| preceding calendar year;
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| (2) the total number of payday loans outstanding as of | 17 |
| December 31 of
the preceding calendar year;
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| (3) the minimum, maximum, and average dollar amount of | 19 |
| payday loans made during the preceding calendar year;
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| (4) the average annual percentage rate and the average | 21 |
| term of payday loans made during the preceding calendar | 22 |
| year; and
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| (5) the total number of payday loans paid in full, the | 24 |
| total number of loans that went into default, and the
total | 25 |
| number of loans written off during the preceding calendar |
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LRB095 08216 LCT 28386 b |
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| year ; and
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| (6) the total number of lawsuits filed by the licensee | 3 |
| or its agent against consumers to collect on payday loans | 4 |
| from consumers during the preceding calendar year.
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| The report shall be verified by the oath or affirmation of | 6 |
| the owner,
manager, or president of the licensee. The report | 7 |
| must be filed with the
Secretary no later than March 1 of the | 8 |
| year following the year for which
the report discloses the | 9 |
| information specified in this subsection (b). The
Secretary may | 10 |
| impose upon the licensee a fine of $25 per day for each day
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| beyond the filing deadline that the report is not filed.
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| (c) No later than July 31 of the second year following the | 13 |
| effective date of this Act, the Department shall publish an | 14 |
| annual
a biennial report that contains a compilation of | 15 |
| aggregate data concerning the payday lending industry and shall | 16 |
| make the report available to the Governor, the General | 17 |
| Assembly, and the general public. | 18 |
| (d) The Department shall have the authority to conduct | 19 |
| examinations of
the books, records, and loan documents at any | 20 |
| time.
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| (Source: P.A. 94-13, eff. 12-6-05.) | 22 |
| (815 ILCS 122/4-5)
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| Sec. 4-5. Prohibited acts. A licensee or unlicensed person | 24 |
| or entity making payday
loans may not commit, or have committed | 25 |
| on behalf of the
licensee
or unlicensed person or entity, any |
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LRB095 08216 LCT 28386 b |
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| of the following acts: | 2 |
| (1) Threatening to use or using the criminal process in | 3 |
| this or any
other state to collect on the loan.
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| (2) Using any device or agreement that would have the | 5 |
| effect of
charging or collecting more fees or charges than | 6 |
| allowed by this
Act, including, but not limited to, | 7 |
| entering into a different type of
transaction
with the | 8 |
| consumer.
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| (3) Engaging in unfair, deceptive, or fraudulent | 10 |
| practices in the
making or collecting of a payday loan.
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| (4) Using or attempting to use the check provided by | 12 |
| the consumer in
a payday loan as collateral for a | 13 |
| transaction not related to a payday loan.
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| (5) Knowingly accepting payment in whole or in part of | 15 |
| a payday
loan through the proceeds of another payday loan | 16 |
| provided by any licensee.
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| (6) Knowingly accepting any security, other than that | 18 |
| specified in the
definition of payday loan in Section 1-10, | 19 |
| for a payday loan.
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| (7) Charging any fees or charges other than those | 21 |
| specifically
authorized by this Act.
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| (8) Threatening to take any action against a consumer | 23 |
| that is
prohibited by this Act or making any misleading or | 24 |
| deceptive statements
regarding the payday loan or any | 25 |
| consequences thereof.
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| (9) Making a misrepresentation of a material fact by an |
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LRB095 08216 LCT 28386 b |
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| applicant for licensure in
obtaining or attempting to | 2 |
| obtain a license.
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| (10) Including any of the following provisions in loan | 4 |
| documents
required by subsection (b) of Section 2-20:
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| (A) a confession of judgment clause;
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| (B) a waiver of the right to a jury trial, if | 7 |
| applicable, in any action
brought by or against a | 8 |
| consumer, unless the waiver is included in an | 9 |
| arbitration clause allowed under
subparagraph (C) of | 10 |
| this paragraph (11);
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| (C) a mandatory arbitration clause that is | 12 |
| oppressive, unfair,
unconscionable, or substantially | 13 |
| in derogation of the rights of consumers; or
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| (D) a provision in which the consumer agrees not to | 15 |
| assert any claim
or defense arising out of the | 16 |
| contract.
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| (11) Selling any insurance of any kind whether or not | 18 |
| sold in
connection with the making or collecting of a | 19 |
| payday loan.
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| (12) Taking any power of attorney.
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| (13) Taking any security interest in real estate.
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| (14) Collecting a delinquency or collection charge on | 23 |
| any installment
regardless of the period in which it | 24 |
| remains in default.
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| (15) Collecting treble damages on an amount owing from | 26 |
| a payday loan.
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LRB095 08216 LCT 28386 b |
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| (16) Refusing, or intentionally delaying or
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| inhibiting, the consumer's right to enter into a repayment | 3 |
| plan pursuant to this
Act. | 4 |
| (17) Charging for, or attempting to
collect, | 5 |
| attorney's fees, court costs, or arbitration costs | 6 |
| incurred in connection with the
collection of a payday | 7 |
| loan. | 8 |
| (18) Making a loan in violation of this Act. | 9 |
| (19) Garnishing the wages or salaries of a consumer who | 10 |
| is a member of the military. | 11 |
| (20) Failing to suspend or defer collection activity | 12 |
| against a consumer who is a member of the military and who | 13 |
| has been deployed to a combat or combat-support posting. | 14 |
| (21) Contacting the military chain of command of a | 15 |
| consumer who is a member of the military in an effort to | 16 |
| collect on a payday loan.
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| (22) Evading the requirements and prohibitions of this | 18 |
| Act by use of a device or subterfuge including, but not | 19 |
| limited to, (i) disguising a payday loan as a different | 20 |
| type of transaction, or (ii) characterizing a required fee | 21 |
| as a purchase of a good or service in connection with a | 22 |
| payday loan.
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| (Source: P.A. 94-13, eff. 12-6-05.) | 24 |
| (815 ILCS 122/4-30)
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| Sec. 4-30. Rulemaking; industry review. |
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LRB095 08216 LCT 28386 b |
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| (a) The Department may make and enforce such reasonable | 2 |
| rules, regulations, directions, orders, decisions, and | 3 |
| findings as the execution and enforcement of the provisions of | 4 |
| this Act require, and as are not inconsistent therewith. The | 5 |
| Department may develop rules to determine if any person or | 6 |
| entity seeks to evade the applicability of this Act by any | 7 |
| device, subterfuge, or pretense. All rules, regulations, and | 8 |
| directions of a general character shall be printed and copies | 9 |
| thereof mailed to all licensees. | 10 |
| (b) Within 6 months after the effective date of this Act, | 11 |
| the Department shall promulgate reasonable rules regarding the | 12 |
| issuance of payday loans by banks, savings banks, savings and | 13 |
| loan associations, credit unions, and insurance companies. | 14 |
| These rules shall be consistent with this Act and shall be | 15 |
| limited in scope to the actual products and services offered by | 16 |
| lenders governed by this Act. | 17 |
| (c) After the effective date of this Act, the Department | 18 |
| shall, over a 3-year period, conduct a study of the payday loan | 19 |
| industry
to determine the impact and effectiveness of this Act. | 20 |
| The Department
shall report its findings to the General | 21 |
| Assembly within 3 months of the
third anniversary of the | 22 |
| effective date of this Act. The study shall
determine the | 23 |
| effect of this Act on the protection of consumers in this
State | 24 |
| and on the fair and reasonable regulation of the payday loan | 25 |
| industry. The
study shall include, but shall not be limited to, | 26 |
| an analysis of the ability
of the industry to use private |
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LRB095 08216 LCT 28386 b |
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| reporting tools that: | 2 |
| (1) ensure substantial compliance with this Act, | 3 |
| including real time reporting of outstanding payday loans; | 4 |
| and | 5 |
| (2) provide data to the Department in an appropriate | 6 |
| form and with appropriate content to allow the Department | 7 |
| to adequately monitor the industry. | 8 |
| The report of the Department shall, if necessary, identify | 9 |
| and recommend specific amendments to this Act to further | 10 |
| protect consumers and to guarantee fair and reasonable | 11 |
| regulation of the payday loan industry.
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| (Source: P.A. 94-13, eff. 12-6-05.)
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| Section 99. Effective date. This Act takes effect upon | 14 |
| becoming law.
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