Section 145.5  Purpose and Definitions

 

a)         Purpose

The purpose of the Act and this Part is to protect consumers who enter into agreements with debt settlement providers and to regulate debt settlement providers. [225 ILCS 429/5]

 

b)         Definitions

 

"Act" means the Debt Settlement Consumer Protection Act [225 ILCS 429].

 

"Consumer", "customer" or "debtor" means any person who purchases or contracts for the purchase of debt settlement services.  [225 ILCS 429/10]

 

"Debt settlement provider" or "provider" means any person or entity engaging in, or holding itself out as engaging in, the business of providing debt settlement service in exchange for any fee or compensation, or any person who solicits for or acts on behalf of any person or entity engaging in, or holding itself out as engaging in, the business of providing debt settlement service in exchange for any fee or compensation. "Debt settlement provider" does not include:

 

attorneys licensed, or otherwise authorized, to practice in Illinois who are engaged in the practice of law;

 

escrow agents, accountants, broker dealers in securities, or investment advisors in securities, when acting in the ordinary practice of their professions and through the entity used in the ordinary practice of their profession;

 

any bank, agent of a bank, operating subsidiary of a bank, affiliate of a bank, trust company, savings and loan association, savings bank, credit union, crop credit association, development credit corporation, industrial development corporation, title insurance company, title insurance agent, independent escrowee or insurance company operating or organized under the laws of a state or the United States, or any other person authorized to make loans under State law while acting in the ordinary practice of that business;

 

any person who performs credit services for his or her employer while receiving a regular salary or wage when the employer is not engaged in the business of offering or providing debt settlement service;

 

a collection agency licensed pursuant to the Collection Agency Act [225 ILCS 425] that is collecting a debt on its own behalf or on behalf of a third party; an organization that is described in 26 USC 501(c)(3) and subject to 26 USC 501(q) and exempt from tax under 26 USC 501(a) and governed by the Debt Management Service Act [205 ILCS 665];

 

public officers while acting in their official capacities and persons acting under court order;

 

any person while performing services incidental to the dissolution, winding up, or liquidating of a partnership, corporation, or other business enterprise; or

 

persons licensed under the Real Estate License Act of 2000 [225 ILCS 454] when acting in the ordinary practice of their profession and not holding themselves out as debt settlement providers.  [225 ILCS 429/10]

 

"Debt settlement services" means:

 

offering to provide advice or service, or acting as an intermediary between or on behalf of a consumer and one or more of a consumer's creditors, when the primary purpose of the advice, service, or action is to obtain a settlement, adjustment, or satisfaction of the consumer's unsecured debt to a creditor in an amount less than the full amount of the principal amount of the debt or in an amount less than the current outstanding balance of the debt; or

 

offering to provide services related to or providing services advising, encouraging, assisting, or counseling a consumer to accumulate funds for the primary purpose of proposing or obtaining or seeking to obtain a settlement, adjustment, or satisfaction of the consumer's unsecured debt to a creditor in an amount less than the full amount of the principal amount of the debt or in an amount less than the current outstanding balance of the debt.

 

"Debt settlement services" does not include:

 

the services of attorneys licensed, or otherwise authorized, to practice in Illinois who are engaged in the practice of law; or

 

debt management service as defined in the Debt Management Service Act.  [225 ILCS 429/10]

 

"Department" means the Department of Financial and Professional Regulation.

 

"Division" means the Department of Financial and Professional Regulation-Division of Financial Institutions.

 

"Provider fee" means the fee charged by the provider in return for debt settlement services.  Provider fees generally consist of:

 

enrollment or set up fees paid by the consumer in connection with establishing a contract or other agreement related to the provision of debt settlement service; and/or

 

maintenance fees paid by the consumer on a periodic basis for contractually outlined debt settlement service.

 

"Secretary" means the Secretary of the Department of Financial and Professional Regulation.

 

Section 145.10  Office Records

 

a)         Required Files

 

1)         Every debt settlement provider shall keep the following records, if applicable, or their equivalent in accord with generally accepted accounting principles as approved by the Department of Financial and Professional Regulation-Division of Financial Institutions:

 

A)        Client File

 

B)        Client Activity Record

 

C)        Payment Detail Report

 

D)        Index System

 

2)         If a computerized system is in use, debt settlement provider shall maintain a permanent file of back-up computer media for the end of each month.

 

3)         All books and records shall be kept current and available for examination by the Division.

 

b)         Client File

The client file shall contain the following: the original contract; a list of creditors, including the balance owed to each and any payments due; the total amount of any fees paid by the debtor; the amount held in trust (if applicable); any settlement offers made and received on each of the debtor's accounts; all evidence of any legally enforceable settlements with the debtor's creditors; a written analysis of the debtor's income and expenses to substantiate that the plan of payment is feasible and practical; and copies of all receipts issued for each payment made by the debtor. 

 

c)         Client Activity Record

The Client Activity Record shall contain the original entry, be a permanent record, and show the debtor's account number, name, address, date of contract, total indebtedness, monthly receipts, any fees charged, amounts disbursed to creditors, if applicable, and the estimated term of the contract to satisfy the amount owed.

 

1)         If a contract is cancelled by a debt settlement provider or debtor and a fee is claimed but not paid, the debtor activity record shall show the reason for cancellation and the amount of any fee claimed to be owed.

 

2)         If legal action is taken to collect an unpaid fee, the client activity record shall include a copy of the judgment or action taken.

 

3)         A separate file of all litigation accounts shall be maintained in the office of the debt settlement provider.

 

d)         Payment Detail Report

An individual Payment Detail Report shall be maintained for each debtor, corresponding to the monthly accounting provided to the debtor pursuant to Section 65(c) of the Act.

 

1)         A file shall be kept containing the paid or canceled Payment Detail Reports for a period of 5 years, showing the receipts and disbursements, if applicable, in full and the total amount of fees collected.  In a non-computerized system, adding machine tapes verifying the receipts against all disbursements, including total fees, shall be attached to each client file.

 

2)         The entries on the Payment Detail Report shall correspond with the monthly accounting given to the debtor and shall reflect all funds submitted by the debtor during the month and all disbursements from those funds, showing all amounts retained by the licensee as provider fees and all amounts paid to creditors.

 

3)         In a non-computerized system, all entries shall be made in ink and no erasures whatsoever may be made on the report.  In case of error, a line should be drawn in ink through the improper entry and the correct entry made on the following line.  No entries shall be masked, covered or rendered illegible.

 

e)         Index System

An alphabetical index system shall be kept indicating name and address of clients, account number, date of contract and total indebtedness.

 

Section 145.20  Disposal of Records

 

a)         When disposing of records that contain personal information, including, but not limited to, social security numbers, driver's license numbers or non-driver identification card numbers, financial account numbers or codes, debit card numbers or codes, automated teller machine card numbers or codes, electronic serial numbers, or personal identification numbers, a debt settlement provider shall take all reasonable measures necessary to protect against unauthorized access to or use of the records.

 

b)         Compliance Methods

 

1)         Debt settlement providers must maintain and enforce policies and procedures to implement this Section, and the measures that may be taken to comply with this Section include the following:

 

A)        implementing and monitoring compliance with policies and procedures that require the burning, pulverizing or shredding of paper documents containing personal information so that the personal information cannot practicably be read or reconstructed;

 

B)        implementing and monitoring compliance with policies and procedures that require the destruction or erasure of electronic media and other nonpaper media containing personal information so that the personal information cannot practicably be read or reconstructed.

 

2)         A debt settlement provider may enter into a written contract with a third party engaged in the business of record destruction to dispose of records containing personal information.

 

Section 145.30  Bank Account, If Applicable

 

a)         Trust account bank statements and cancelled checks shall be retained at the office of the debt settlement provider for a period of 3 years.

 

b)         Copies of the original trust account bank statement and canceled checks, in hard copy, microfilm or microfiche, or by other electronic means, shall be kept at the office of the debt settlement provider, at debt settlement provider's headquarters, or at an off-site storage facility for a period of 5 years.

 

Section 145.40  Application for License

 

a)         At the time of making an application, applicant shall pay to the Secretary the non-refundable sum of $350 as an application fee and the additional sum of $1,000 as an annual license fee.  The applicant shall also, as required by Section 20 of the Act, submit to the Secretary a surety bond in the sum of $100,000.

 

b)        An application for a license must be in writing, under oath, and in the form the Secretary prescribes.

 

1)        The application shall contain the following:

 

A)                The name of the applicant and the address of the proposed place of business;

 

B)        The form of business organization of the applicant, including:

 

i)          a copy of its filed articles of incorporation;

 

ii)         a copy of the filed articles of organization, if the applicant is a limited liability company;

 

iii)        a certified statement of the ownership of the partnership and any subsequent changes to the ownership, if the applicant is a partnership;

 

C)        The name, business and home address, credit report (except for a publicly traded company) and a chronological summary of the business experience, material litigation history, and felony convictions over the preceding 10 years of:

 

i)          the proprietor, if the applicant is an individual;

 

ii)         every general partner, if the applicant is a partnership;

 

iii)        president, secretary, executive and senior vice presidents, directors and individuals owning more than 25% of the corporate stock, if the applicant is a corporation; and

 

iv)        the manager and members, if the applicant is a limited liability company.

 

2)         Unless requested to do so by the Secretary, a licensee shall not submit the information required in subsections (b)(1)(B) and (C) if the licensee has submitted the information to the Division in a previous license application within the last 5 years and there have been no material changes.

 

3)         The most current year end financial statements, prepared in accordance with generally accepted accounting principles, and a balance sheet and statement of operations as of the most recent quarterly report before the date of the application.

 

4)         A list of all states in which the applicant is licensed as a debt settlement provider and whether the license of the applicant has ever been withdrawn, refused, cancelled or suspended in any other state, with full details.

 

c)         The Secretary may not issue a license unless and until he or she makes the findings set forth in Section 25 of the Act. These findings include that the financial responsibility, experience, character and general fitness of the applicant are such as to command the confidence of the community and to warrant the belief that the business will be operated fairly, honestly and efficiently, and within the provisions and purposes of the Act. For purposes of this subsection, community means members of the public. Evidence of fairness, honesty and efficiency includes, but is not limited to, evidence that the applicant will conduct business in accordance with the Act, this Part and all federal and state statutes applicable to its business; that the applicant has no prior felony convictions within the past 10 years; that the applicant has no convictions of any crimes or findings of liability in civil actions involving dishonesty or deceit within the past 10 years; and that the applicant has no previous violations of any provision of the Act or any false statements or representations to the Secretary in applying for a license under this Section. Unless the Secretary makes these findings, he or she shall not issue a license, shall notify the applicant of the denial and shall return to the applicant the sum paid by the applicant as a license fee, but shall retain the $350 application fee. The Secretary shall approve or deny every application for license within 60 days from the filing of the application with the required fee.

 

d)         Debt settlement providers have until June 14, 2011 in which to submit to the Division an application for a debt settlement provider license.

 

e)         Debt settlement providers must be in good standing and in statutory compliance in the state of incorporation or, when the applicant is an entity other than a corporation, must be properly registered under the laws of this State or another state and, if required, the corporation or entity must be authorized to do business in the State of Illinois.

 

f)         A debt settlement provider that is a corporation must notify the Secretary within 15 days after a person becomes a controlling person.  Upon notification, the Secretary may require all information he or she considers necessary to determine if a new application is required.  A debt settlement provider that is an entity other than a corporation shall submit a new application to the Secretary seeking prior approval whenever a person proposes to become a controlling person or acquire an ownership interest.  Controlling person means a person owning or holding the power to vote 25% or more of the outstanding voting securities of a debt settlement provider or the power to vote the securities of another controlling person of the debt settlement provider.  For purposes of determining the percentage of a debt settlement provider controlled by a controlling person, the person's interest shall be combined with the interest of any other person controlled, directly or indirectly, by that person or by a spouse, parent, or child of that person.

 

Section 145.45  Renewal

 

Each licensed debt settlement provider may make application to the Secretary for annual renewal of its license on the form prescribed by the Secretary, accompanied by the annual license fee of $1,000, together with a surety bond in the amount of $100,000 or an additional amount as required by the Secretary, considering the amount of disbursements made by the licensee in the previous year. The application must be received by the Department no later than December 1 of the year preceding the year for which the application is made.

 

Section 145.50  License

 

a)         For purposes of determining an applicant's qualifications for a license as a debt settlement provider, the Division shall find an applicant financially responsible if it has a positive net worth of at least $30,000.  Net worth means total assets minus total liabilities.

 

b)         An applicant shall possess at least 6 months of relevant experience as a debt settlement provider attained prior to August 3, 2010, under a prior debt settlement provider license, as an employee of a licensee, or in another state, or other relevant business experience relating to the field of debt settlement, including but not limited to debt management and credit counseling.

 

c)         Application Reputation

 

1)         In order to determine the applicant's general fitness and character, the Secretary may require applicants to submit letters of recommendation from at least 2 persons familiar with the applicant or the applicant's business and setting forth that the applicant mentioned: is personally known to them to be trustworthy and reputable; has business experience qualifying the applicant to competently conduct, operate, own or become associated with a debt settlement provider; and has a good business reputation and is worthy of a license.

 

2)         Evidence of a lack of trustworthiness, competency and good business reputation includes, but is not limited to, the applicant's record of having defaulted in the payment of money collected for others, discharge of debt through bankruptcy proceedings, any felony conviction or conviction of any crime involving dishonesty or deceit within the past 10 years, previous violations of any provision of the Act or any false statements or representations to the Secretary in applying for a license under this Section.

 

d)         Any applicant applying as a debt settlement provider shall submit the required bond, the application for license and all required information at the time of application for a license.

 

Section 145.60  Examination

 

a)         The Division will conduct an examination of a licensee's or license applicant's records and business practices when necessary to make a licensure determination or in investigation of a complaint.  The Division will also conduct examinations as it deems necessary to determine compliance with the Act and this Part.

 

b)         The Division shall charge $400 for each examiner day or part thereof and actual travel costs for any examination of records conducted pursuant to the Act.

 

c)         The Division may conduct an examination for the purpose of verifying that the debt settlement provider has taken necessary actions to correct violations of the Act and/or this Part and shall charge the licensee $550 for each examiner day or portion of a day when the Secretary determines the verification examination must be performed on site at any facility of the debt settlement provider.

 

Section 145.70  Prohibited Activities

 

a)         A debt settlement provider shall not take:

 

1)         Any contract, promise to pay, or other instrument that has any blank spaces when signed by a debtor;

 

2)         Any negotiable instrument for the debt settlement provider's charges;

 

3)         Any note, wage assignment, real estate or chattel mortgage, or other security to secure the licensee's charges;

 

4)         Any confession of judgment or power of attorney to confess judgment against the debtor or to appear for the debtor in a judicial proceeding;

 

5)         Any real or personal property as security for payment of a fee;

 

6)         Concurrent with the signing of the contract or as part of the application for the contract, a release of any obligation to be performed on the part of the debt settlement provider.

 

b)         A debt settlement provider shall not take an appointment as attorney in fact or power of attorney.

 

c)         A debt settlement provider shall not take any legal instrument from the debtor other than the service contract and authorized rider.

 

d)         A debt settlement provider shall not accept a fee from any person or other entity in exchange for referring potential customers.

 

e)         No fees shall be paid to an attorney, lending institution, or any other source for the referral of customers.

 

f)         A debt settlement provider shall not solicit or require a debtor to purchase, or agree to purchase, any policy of insurance.

 

g)         A debt settlement provider shall not lend money or extend credit or include in the contract any debts not established prior to the execution of the contract.

 

h)         No advance of the debt settlement provider's funds on the debtor's behalf shall be made by a debt settlement provider to any creditor or to the debtor.

 

i)          A debt settlement provider shall not charge any fees for providing account statements or proofs of payment.

 

Section 145.80  Revocation – Suspension – Surrender of License

 

a)         If it is determined that the Secretary had the authority to issue the suspension or revocation of a license pursuant to Section 50 of the Act, the Secretary may issue orders as may be reasonably necessary to correct, eliminate or remedy the situation.

 

b)         A debt settlement provider may surrender any license by delivering to the Secretary written notice that it surrenders the license, but the surrender shall not affect the debt settlement provider's civil or criminal liability for acts committed prior to the surrender, or affect the liability on its bond or bonds, or entitle the debt settlement provider to a return of any part of the annual license fee.

 

c)         An applicant or licensee affected by a licensure action of the Secretary may request a hearing within 10 days after the date of service of the action or order.  If an alternative time frame is set forth in the Act or applicable law, the applicant or licensee may request a hearing pursuant to that time frame.  All administrative hearings shall be conducted in accordance with 38 Ill. Adm. Code 100. Final administrative decisions of the Secretary are subject to review under the Administrative Review Law [735 ILCS 5/Art. III].

 

(Source:  Amended at 46 Ill. Reg. 12522, effective July 8, 2022)

 

Section 145.90  Annual Report

 

a)         A debt settlement provider must file an annual report with the Secretary pursuant to Section 33 of the Act on or before March 1 for the previous calendar year.  The annual report must contain a declaration executed by an official authorized by the debt settlement provider under penalty of perjury that states that the report complies with Section 33 of the Act. The report shall be in a form prescribed by the Secretary.  The Secretary will maintain the annual report form on the Division's website for a period of 2 years after submittal. 

 

b)         The annual report form must include all of the following data:

 

1)         for each Illinois resident:

 

A)        the number of accounts enrolled;

 

B)        the principal amount of debt at the time each account was enrolled;

 

C)        the status of each account (for example, active or terminated);

 

D)        whether the account has been settled and, if so, the settlement amount and the corresponding principal amount of debt enrolled for that account;

 

E)        the total amount of provider fees paid;

 

F)         whether the creditor has filed suit on the account debt;

 

G)        the date the resident is expected to complete the debt settlement program; and

 

H)        the date the resident cancelled, terminated or became inactive in the program, if applicable;

 

2)         for persons completing the program during the reporting period, the median and mean percentage of savings and the median and mean provider fees paid;

 

3)         for persons who cancelled, became inactive, or terminated the program during the reporting period, the median and mean percentage of the savings and the median and mean provider fees;

 

4)         the percentage of Illinois residents who cancelled, terminated, became inactive, or completed the program without the settlement of all of the enrolled debt; and

 

5)         the total amount of fees collected from Illinois residents.

 

Section 145.100  Proof of Payment

 

Upon completion of the contract, the debt settlement provider shall mail a statement to the debtor stating that the account has been closed and listing the name and address of each creditor paid in full and names and addresses of any creditors remaining unpaid.

 

Section 145.105  Trust Funds

 

a)         All funds received by a debt settlement provider or its agent from a debtor, for the purpose of paying bills, invoices or accounts of that debtor, shall constitute trust funds owned by and belonging to the debtor from whom they were received. All such funds received by the provider shall be separated from the funds of the provider not later than the end of the business day following receipt by the provider. All trust funds shall be kept separate and apart at all times from funds belonging to the provider or any of its officers, employees or agents and may be used for no purpose other than paying bills, invoices or accounts of the debtor and for provider fees. All debtor payments received at the main or branch offices of a provider shall be deposited, on or before the close of the business day following receipt, in a federally insured bank in trust for the benefit of the payor.

 

b)         Funds segregated for the debtor are not subject to attachment, lien, levy of execution or sequestration by order of court as assets of the debt settlement provider.

 

c)         A debt settlement provider shall maintain records of the amounts of all deposits into and payments out of the trust account for each consumer it services.  The records shall be maintained for 5 years after the date of transaction.

 

d)         At least once every month, the debt settlement provider shall render an accounting to the debtor that itemizes the total amount received from the debtor, the total amount paid each creditor, the amount of provider fees deducted, and any amount held in reserve, if applicable, and the status of each of the debtor's enrolled accounts. A debt settlement provider shall, in addition, provide an accounting to a debtor within 7 days after written demand, but not more than 3 times per 6 month period.

 

e)         Nothing in the Act requires the establishment of a trust account if no consumer funds are held or controlled by the provider that are to be distributed to creditors, i.e., if the only funds received are in payment of provider fees.

 

Section 145.110  Advertising and Marketing Practices

 

a)         Upon request of the Division, a debt settlement provider shall forward to the supervisor of the Consumer Credit Section the complete text of all advertising copy, whether printed or broadcast, for which questions have been raised concerning compliance with the Act.

 

b)         A debt settlement provider may indicate in advertising and otherwise that its business is "regulated" or "examined" or "supervised" or "licensed" by the State of Illinois.  A debt settlement provider may not advertise in a false, misleading or deceptive manner.

 

c)         Should any advertisement by a debt settlement provider state the amount of any fees or charges, the advertisement shall comply with the provisions of the Act and this Part.

 

d)         A debt settlement provider shall not advertise that business is conducted anywhere other than at the debt settlement providers' principal business location or other location approved by the Secretary.

 

e)         A debt settlement provider must include in any advertisement a prominent statement that legal advice cannot be provided and that it is recommended that consumers consult with an attorney.

 

Section 145.120  Receipts

 

a)         The receipt that a debt settlement provider issues shall include the following:

 

1)         The name and address or other identifying information of the individual who submits the payment to the provider;

 

2)         The amount of money received and the form of payment (cash, check number, money order, etc.);

 

3)         The date the money was received by the provider;

 

4)         The representative of the provider who accepted the payment; and

 

5)         A transaction or confirmation number that can be matched with the office record of the provider.

 

b)         A debt settlement provider shall not charge a fee for issuing any receipt.

 

Section 145.125  Hearing Procedures

 

All administrative hearings shall be conducted in accordance with 38 Ill. Adm. Code 100.

 

(Source:  Amended at 46 Ill. Reg. 12522, effective July 8, 2022)

 

Section 145.130  Name Change

 

Whenever the licensee desires to amend the name of the licensed business, the licensee shall submit to the Division, within 15 days after amending the name, the following:

 

            a)         $300 amended name change fee.

 

b)         Amended Articles of Incorporation, if the licensee is a corporation.

 

c)         Amended organization papers, if the licensee is an entity other than a corporation.