815 ILCS 180/ Collateral Protection Act.

(815 ILCS 180/1)

Sec. 1. Short title. This Act may be cited as the Collateral Protection Act.

(Source: P.A. 89-623, eff. 8-9-96.)

(815 ILCS 180/5)

Sec. 5. Definitions. In this Act, unless the context otherwise requires, the following words and phrases shall have the following meanings:

"Collateral" means any or all property pledged or otherwise used to secure payment, repayment, or performance under a credit or lease agreement, whether personal property, real property, fixtures, inventory, receivables, rights, privileges, or otherwise.

"Collateral protection insurance" means:

Insurance coverage that: (1) is purchased unilaterally by a creditor subsequent to the date of a credit agreement; (2) provides monetary protection against loss of or damage to the collateral or against liability arising out of the ownership or use of the collateral; and (3) is purchased according to the terms of a credit agreement as a result of a debtor's failure to provide evidence of insurance or failure to maintain adequate insurance covering the collateral, with the costs of the collateral protection insurance, including interest and any other charges imposed by the creditor in connection with the placement of the collateral protection insurance, payable by the debtor. Collateral protection insurance includes insurance coverage that is purchased to protect only the interest of the creditor and insurance coverage that is purchased to protect both the interest of the creditor and some or all of the interest of the debtor. The term of a collateral protection insurance policy may, but need not, extend to the full term of the credit transaction.

Collateral protection insurance does not include insurance coverage that is: (1) purchased by the creditor for which the debtor is not charged; (2) purchased at the inception of a credit transaction to which the debtor is a party or agrees, whether or not the costs are included in any payment plan under the credit transaction; (3) purchased by the creditor following foreclosure, repossession, or a similar event wherein the creditor gains possession or control over the collateral; (4) maintained by the creditor for the protection of any or all collateral which may come into the possession or control of the creditor through foreclosure, repossession, or a similar event; (5) credit insurance, mortgage protection insurance, insurance issued to cover the life or health of the debtor, or any other insurance maintained to cover the inability or failure of the debtor to make payment under the credit agreement; (6) title insurance; or (7) flood insurance required to be placed by creditors by 42 U.S.C. 4012(a), as amended, pursuant to the National Flood Insurance Reform Act of 1994.

"Credit agreement" means the written document or documents that set forth the terms of the credit transaction.

"Credit transaction" means any transaction the terms of which require the payment or repayment of money, goods, services, property, rights, or privileges, which is to be made on one or more future dates, where such obligation is secured by collateral.

"Creditor" means any person, corporation, partnership, association, or other venture, which is a lender of money or the vendor or lessor of goods, services, property, rights, or privileges, for which repayment is arranged through a credit transaction, and includes any successor to the rights, title, interest, or liens of such lender, vendor, or lessor.

"Debtor" means a borrower of money or a purchaser or lessee of goods, services, property, rights, or privileges, for which payment or repayment is arranged through a credit agreement. Debtor does not include any person who is not the primary obligor under a credit transaction and who is not jointly liable or jointly and severally liable with the debtor for the obligation.

(Source: P.A. 89-623, eff. 8-9-96; 90-35, eff. 6-27-97.)

(815 ILCS 180/10)

Sec. 10. Placement of collateral protection insurance. A creditor may place collateral protection insurance provided the following conditions are met:

(1) the debtor has entered into a credit transaction with the creditor;

(2) the credit transaction has been reduced to a credit agreement, and the credit agreement requires the debtor to maintain insurance on the collateral; and

(3) a notice substantially similar to the following has been included in the credit agreement or on a separate document provided to the debtor and to any cosigner, guarantor, or other person liable with the debtor for the obligation, at the time the credit agreement is entered:

"Unless you provide us with evidence of the insurance coverage required by your agreement with us, we may purchase insurance at your expense to protect our interests in your collateral. This insurance may, but need not, protect your interests. The coverage that we purchase may not pay any claim that you make or any claim that is made against you in connection with the collateral. You may later cancel any insurance purchased by us, but only after providing us with evidence that you have obtained insurance as required by our agreement. If we purchase insurance for the collateral, you will be responsible for the costs of that insurance, including interest and any other charges we may impose in connection with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance may be added to your total outstanding balance or obligation. The costs of the insurance may be more than the cost of insurance you may be able to obtain on your own."

(Source: P.A. 89-623, eff. 8-9-96.)

(815 ILCS 180/15)

Sec. 15. Notice of purchase of collateral protection insurance; repayment terms.

(a) Within 30 calendar days following the purchase of collateral protection insurance, the creditor shall mail to the debtor and to any cosigner, guarantor, or other person liable with the debtor for the obligation, at the last known address on file with the creditor for any such person, a notice entitled "Notice of Placement of Insurance" in a form substantially similar to the following: "NOTICE OF PLACEMENT OF INSURANCE Your credit agreement with us requires you to maintain adequate insurance on your collateral until you pay off your loan. You have not given us proof that you have adequate insurance on your collateral. Under the terms of your credit agreement, we have purchased insurance at your expense to protect our interests in your collateral.

The insurance we purchased will pay claims made by us as the creditor. The insurance we purchased may not pay any claims made by you or against you in connection with your collateral.

You are responsible for the costs of this insurance, including any interest and other charges that we may impose in connection with the purchase of this insurance. The initial premium payment for this insurance will be (amount), which may or may not include any interest or other charges that we may impose. The costs of this insurance will be added to your payment obligations and may be more than for insurance you can buy on your own.

You still may obtain insurance of your own choosing on the collateral. If you provide us with proof that you have obtained adequate insurance on your collateral, we will cancel the insurance that we purchased and refund or credit any unearned premiums to you.

If, within 30 days after the date this notice was sent to you, you provide us with proof that you had adequate insurance on your collateral as of the date we also purchased insurance and that you continue to have the insurance that you purchased yourself, we will cancel the insurance that we purchased without charging you any costs, interest, or other charges in connection with the insurance that we purchased."

(b) The terms for repayment of the costs of the collateral protection insurance, which shall include interest and any other charges imposed by the creditor in connection with the placement of the collateral protection insurance, shall include one or more of the following:

(1) full payment within 30 days after the date of the Notice of Placement of Insurance;

(2) a final balloon payment within 30 days after the last scheduled payment required by the credit agreement; or

(3) full amortization over the term of the credit transaction, the term of the collateral protection insurance policy, or the term for which amortization is used by the creditor.

(Source: P.A. 89-623, eff. 8-9-96; 90-35, eff. 6-27-97.)

(815 ILCS 180/20)

Sec. 20. Coupon books. If any form of amortization is used by the creditor and a coupon book was sent to the debtor at the inception of the credit transaction, the creditor shall send to the debtor either:

(1) a reprinted coupon book with revised calculations of the debtor's payments that includes the amortized costs of the collateral protection insurance; or

(2) a supplemental coupon book with calculations of the debtor's additional payments based upon the amortized costs of the collateral protection insurance, for use by the debtor in addition to the original coupon book.

(Source: P.A. 89-623, eff. 8-9-96.)

(815 ILCS 180/25)

Sec. 25. Cancellation of collateral protection insurance. A debtor may at any time cause the cancellation of collateral protection insurance by providing proper evidence to the creditor that the debtor has obtained insurance as required by the credit agreement. If, within 30 days after notice is sent pursuant to subsection (a) of Section 15, a debtor provides the creditor with proper evidence that the debtor had insurance on the collateral as required by the credit agreement on the date the creditor purchased insurance and that the debtor continues to have insurance on the collateral as required by the credit agreement, the creditor shall cancel the insurance that it purchased and may not charge the debtor any costs, interest, or other charges in connection with the insurance.

(Source: P.A. 89-623, eff. 8-9-96.)

(815 ILCS 180/30)

Sec. 30. Unearned premiums. Upon cancellation or expiration of collateral protection insurance, the amount of unearned premiums, if any, as calculated in accordance with the policy, shall be refunded to the debtor. The amount of unearned premiums, however, may not be calculated by the Rule of 78ths method. A refund of unearned premiums may be credited to the debtor's obligation under the credit agreement or distributed directly to the debtor by check or other means.

(Source: P.A. 89-623, eff. 8-9-96.)

(815 ILCS 180/35)

Sec. 35. Selection of insurance carrier. Collateral protection insurance may be placed with any insurance carrier selected by the creditor that is licensed to underwrite the insurance by the Department of Insurance. The insurance shall be evidenced by an individual policy or a certificate of insurance.

(Source: P.A. 89-623, eff. 8-9-96.)

(815 ILCS 180/40)

Sec. 40. Substantial compliance.

(a) A creditor that places collateral protection insurance in substantial compliance with the terms of this Act shall not be directly or indirectly liable in any manner to a debtor, co-signor, guarantor, or any other person, in connection with the placement of the collateral protection insurance. Notices and coupon books required to be mailed under this Act shall be mailed by United States Mail, first class, postage prepaid.

(b) A servicer subject to the regulations prescribed by the Consumer Financial Protection Bureau pursuant to Section 1463 of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act (12 C.F.R. 1024.37) that places hazard insurance in substantial compliance with those regulations shall be deemed to be in substantial compliance with the terms of this Act.

(Source: P.A. 98-1120, eff. 8-26-14.)

(815 ILCS 180/45)

Sec. 45. No fiduciary relationship. This Act does not impose a fiduciary relationship between the creditor and the debtor. Placement of collateral protection insurance is for the sole purpose of protecting the interest of the creditor when the debtor fails to insure collateral as required by the credit agreement.

(Source: P.A. 89-623, eff. 8-9-96.)

(815 ILCS 180/50)

Sec. 50. No cause of action created. A creditor is not, by virtue of this Act, required to purchase collateral protection insurance or to otherwise insure collateral. A creditor shall not, by virtue of this Act, be liable to a debtor or to any other person for not purchasing collateral protection insurance, as a result of the amount or level of coverage of collateral protection insurance purchased by the creditor, or because the creditor purchased collateral protection insurance that protects only the interests of the creditor or less than all of the interests of the debtor. This Act shall not be deemed to create a cause of action for damages on behalf of the debtor or any other person in connection with the placement of collateral protection insurance.

(Source: P.A. 89-623, eff. 8-9-96.)

(815 ILCS 180/55)

Sec. 55. Uniform Commercial Code. The obligations and rights of the creditor and the debtor with respect to the collateral as provided by the Uniform Commercial Code are not affected by this Act.

(Source: P.A. 89-623, eff. 8-9-96.)

(815 ILCS 180/60)

Sec. 60. Severability; no impairment of creditor's rights. The provisions of this Act are severable under Section 1.31 of the Statute on Statutes. This Act shall not impair any other remedies, rights, or options available to a creditor pursuant to any law, regulation, ruling, court order, contract, or agreement.

(Source: P.A. 89-623, eff. 8-9-96.)

(815 ILCS 180/65)

Sec. 65. Coverage of Act. Substantial compliance with the provisions of this Act shall be mandatory for the placement of collateral protection insurance in this State by a creditor pursuant to a credit agreement entered into on or after July 1, 1997. No provision of this Act shall be held or applied against a creditor in connection with collateral protection insurance placed prior to July 1, 1997. A creditor that places collateral protection insurance pursuant to a credit agreement entered into prior to July 1, 1997, shall have available to it all of the rights provided by this Act if the creditor is in substantial compliance with the provisions of this Act other than item (3) of Section 10.

(Source: P.A. 89-623, eff. 8-9-96.)

(815 ILCS 180/99)

Sec. 99. Effective date. This Act takes effect upon becoming law.

(Source: P.A. 89-623, eff. 8-9-96.)