Section 715.100  Establishment of Program

This Part governs the Loan Guarantee Program created by the Community Development Loan Guarantee Act [15 ILCS 516].

Section 715.110  Purpose of Program

a)         The purpose of this Program is to establish a Program for guaranteeing small business loans to borrowers who would otherwise not qualify in low-income communities that have been historically excluded from investment opportunities. [15 ILCS 516/30-5]

b)         The Act allows the Treasurer to allocate up to $10,000,000 of investment earnings each year for the Loan Guarantee Program, provided that no more than $50,000,000 may be used for guaranteeing loans at any given time. [15 ILCS 516/30-35]

Section 715.200  Definitions

The following definitions shall apply to this Part:

"Act" means the Community Development Loan Guarantee Act [15 ILCS 516] that establishes the Community Development Loan Guarantee Program.

"Approved Depository" means a financial institution subject to the federal Community Reinvestment Act of 1977 that meets the Treasurer's required CRA Rating of Satisfactory or Outstanding, has an IDC Rating of 75 or above, and completes all program documentation.

"Business Guarantee Application" means the form provided by the Treasurer to collect required information from a borrower and a participating financial institution for a borrower's enrollment into the Program.

"CRA Rating" means the rating a financial institution receives from the Illinois Department of Financial and Professional Regulation in accordance with the Illinois Community Reinvestment Act [205 ILCS 735] or from the Federal Financial Institutions Examination Council as authorized by the federal Community Reinvestment Act of 1977. (12 U.S.C. 2901)

"FDIC-Insured Financial Institution" means a financial institution that is insured by the Federal Deposit Insurance Corporation.

"Financial Institution" means a bank, a savings and loan association, a savings bank, a credit union, a minority depository institution as designated by the Federal Deposit Insurance Corporation, or a community development financial institution certified by the United States Treasury Community Development Financial Institutions Fund, which is operating in the State of Illinois. [15 ILCS 516/30-10]

"IDC Rating" means the rating a financial institution receives from IDC Financial Publishing, Inc, which is an entity that rates the safety and soundness of banks, holding companies, and credit unions.

"Lender Participation Application" means the application form provided by the Treasurer to collect required information from financial institutions seeking to participate in the Program.

"Loan Guarantee Account" means an account at a financial institution outside the State Treasury of which the State Treasurer is custodian with the purpose of guaranteeing loans made by a financial institution in accordance with the Act. [15 ILCS 516/30-10]

"Loan Guarantee Administrative Trust Fund" means a nonappropriated trust fund within the State treasury. Moneys in the Fund may be used by the State Treasurer to guarantee loans and to cover administrative expenses related to the Program. [15 ILCS 516/30-36]

"Low-Income Community" means:

a geographic area or areas that has a poverty rate of at least 20% according to the latest data from the U.S. Census Bureau; 

in the case of a tract not located within a metropolitan area, the median family income for such tract does not exceed 80% of statewide median family income; or

in the case of a tract located within a metropolitan area, the median family income for such tract does not exceed 80% of the greater of statewide median family income or the metropolitan area median family income. (See 26 U.S.C. Section 45D(e)).

"NCUA" means the National Credit Union Administration.

"Participating Financial Institution" means a financial institution that:

applies to participate in the program; and

is allocated guarantee funds for the Program.

"Presence in Illinois" means at least one physical office and one full-time employee within the geographic borders of the State.

"Program" means the Community Development Loan Guarantee Program.

"Program Depository" means the host financial institutions awarded the contract for providing banking services as it relates to the Loan Guarantee Accounts for the Program.

"Small Business" or "Business" means a business operating in Illinois with less than 500 employees at the time of application to the Program. "Small business" shall not include businesses in the following industries:  investment real estate, tobacco, adult entertainment, or gambling. "Small business" shall not include goodwill related to change in ownership.

"Treasurer" means the duly elected Treasurer of the State of Illinois or the Treasurer's designees.

Section 715.300  Treasurer Responsibilities

The Treasurer is responsible for establishing and administering the Program and will be responsible for the following:

a)         allocating funds from investment earnings to the Loan Guarantee Administrative Trust Fund in accordance with Section 30-35 of the Act;

b)         establishing one or more loan guarantee accounts at program depositories;

c)         procuring any necessary custodial, investment, or banking services;

d)         determining the administrative fees necessary to manage the Program in accordance with Section 30-25 of the Act and Section 715.430;

e)         determining the eligibility of financial institutions to participate in the Program in accordance with Section 715.400;

f)         establishing the terms and conditions for eligible financial institutions to participate in the Program;

g)         accepting and processing applications for loan guarantees;

h)         directing the payment of moneys in the loan guarantee account to be paid to participating financial institutions to cover losses on guaranteed loans; and

i)          retaining documents in compliance with State statutes, including the State Records Act [5 ILCS 160] and the State Records Commission (44 Ill. Adm. Code 4400) administrative rules.

Section 715.310  Program Depository Eligibility and Responsibilities

a)         The program depository will be selected through the Treasurer's procurement process and must meet the following criteria:

1)         be authorized to conduct business in Illinois as an Illinois bank or a national bank with a presence in Illinois;

2)         be a member of the Federal Reserve System and have access to all services as a member bank;

3)         be an approved depository for public funds; and

4)         have required licenses, bonding, facilities, equipment, and trained personnel necessary to perform the duties as the program depository.

b)         The program depository will be responsible for the loan guarantee account in which funds will be used to guarantee certain loans made by participating financial institutions. The program depository will provide efficient and cost-effective banking services for the program, which shall include the following:

1)         opening and maintaining a demand deposit account for the Treasurer in which all electronic transfers will be deposited;

2)         opening and maintaining an interest-bearing account in the name of the Treasurer for the funds received in the demand deposit account; and

3)         accepting and processing instructions from the Treasurer to transfer funds from the investment account to the demand deposit account.

Section 715.400  Participating Financial Institution Eligibility and Responsibilities

a)         The Treasurer will determine the eligibility of financial institutions to participate in the Program. In determining the eligibility of the financial institution to participate, the Treasurer will consider the financial institution's commitment to low-income communities…and the financial institution's commitment to communities considered disproportionately impacted areas, depressed areas, or enterprise zones as determined, designated, or certified by the Department of Commerce and Economic Opportunity in accordance with any applicable federal law or program. [15 ILCS 516/30-20]

b)         In order to participate in the Program, financial institutions must meet the following criteria:

1)         have a CRA rating of satisfactory or outstanding or be a credit union that does not have a CRA rating at the time of application;

2)         have an IDC rating of at least 75;

3)         be an FDIC-insured financial institution, or a credit union insured by the NCUA or other approved share insurer pursuant to the Illinois Credit Union Act [205 ILCS 305/58];

4)         be an Illinois or national financial institution that is authorized to do business in Illinois, and be in good standing with the financial institution's regulators;

5)         have a presence in Illinois; and

6)         comply with all Program requirements.

c)         Participating financial institutions are responsible for the following:

1)         understanding and complying with the Program requirements found in Section 715.420;

2)         ensuring that the business meets the eligibility requirements for the Program found in Section 715.500;

3)         the day-to-day management of the loans guaranteed by the Program in accordance with the participating financial institution's established internal loan processes; and

4)         submitting annual reports to the Treasurer that include the following information for each business loan guaranteed through the Program:

A)        the percentage of the loan that is guaranteed by the Program;

B)        the dollar amount of the guarantee;

C)        the type of loan (e.g., fixed or variable rate);

D)        the terms of the loan;

E)        the interest rates being charged to the business for the loan;

F)         the frequency of interest rate changes, if applicable;

G)        the highest interest rate possible over the life of the loan;

H)        any pre-payment penalties that may apply on the loan;

I)         the payment history for loans that have been guaranteed through the Program; and

J)         any other information that is relevant to a full, fair, and effective disclosure of the operations of the Program.

Section 715.410  Financial Institution Application

Each participating financial institution will be required to submit a lender participation application, which will be submitted to the Treasurer for review and approval. The lender participation application shall contain the following:

a)         narrative on the financial institutions' commitment to low-income communities…and the financial institution's commitment to communities considered disproportionately impacted areas, depressed areas, or enterprise zones as determined, designated, or certified by the Department of Commerce and Economic Opportunity in accordance with any applicable federal law or program; [15 ILCS 516/30-20]

b)         certification that the business for which the guarantee is being allocated is located in a low-income community in the State of Illinois, is in good standing with the Illinois Secretary of State, and is not in arrears with the Illinois Department of Revenue; and

c)         such other information that the Treasurer deems useful in administering the Program.

Section 715.420  Program Requirements

a)         Upon approval to participate in the Program, participating financial institutions will be allocated up to $1,000,000 in loan guarantees based on the availability of guarantee funds. Financial institutions must allocate all of their guarantee funds within one year and in the event that the financial institution does not allocate all of its guarantee funds within one year, a new application will need to be completed;

b)         Each business guarantee is for up to a maximum of 5 years;

c)         The maximum allowable guarantee amount is 25% of the business loan amount, which cannot exceed the $1,000,000 in guarantees allocated to the participating financial institution;

d)         Guarantees may not be used to refinance existing debt;

e)         Participating financial institutions must submit a one-time, nonrefundable fee of $1,000 made payable to Treasurer;

f)         Participating financial institutions will have 30 days from the allocation of the guarantee funds to submit the initial business guarantee application to the Treasurer for approval; and

g)         Participating financial institutions must submit annual reports to the Treasurer for each business loan guaranteed through the Program in accordance with Section 715.400.

Section 715.430  Fees

Administrative fees will be charged to the participating financial institutions to cover expenses associated with the Program.  Participating financial institutions must submit a one-time, nonrefundable fee of $1,000 made payable to the Treasurer.

Section 715.440  Termination of Participation

a)         A participating financial institution may leave the program at a time mutually agreed upon between the participating financial institution and the Treasurer.

b)         If the Treasurer becomes aware that a participating financial institution has violated any applicable State or federal regulatory guidelines and/or lending laws, including State predatory lending laws, the Treasurer may terminate the financial institution's participation in the Program.  Such laws include, but are not limited to:

1)         Federal statutes and regulations:

A)        Equal Credit Opportunity Act [15 U.S.C. 1691] and Regulation B (12 CFR Part 1002);

B)        Fair Housing Act [42 U.S.C. 3601];

C)        Truth in Lending Act [15 U.S.C. 1601] and Regulation Z (12 CFR Part 1026);

D)        Fair Credit Reporting Act [15 U.S.C. 1681] and Regulation V (12 CFR Part 1022);

2)         State of Illinois statutes:

A)        Illinois Human Rights Act [775 ILCS 5];

B)        Illinois Fairness in Lending Act [815 ILCS 120];

C)        Credit Card Issuance Act [815 ILCS 140];

D)        Residential Mortgage License Act of 1987 [205 ILCS 635];

E)        Predatory Loan Prevention Act [815 ILCS 123];

F)         High Risk Home Loan Act [815 ILCS 137]; and

G)        Consumer Fraud and Deceptive Business Practices Act [815 ILCS 505].

c)         A participating financial institution may also be terminated for any violation of program requirements as set forth in Section 715.420 or for failure to adhere to the program responsibilities as set forth in Section 715.400.

Section 715.500  Business Eligibility

To qualify for a loan guarantee under this Program, the business must meet the following criteria:

a)         be in good standing with the Office of the Illinois Secretary of State;

b)         not be in arrears with the Illinois Department of Revenue; and

c)         be located in a low-income community in the State of Illinois.

Section 715.510  Business Guarantee Application

A participating financial institution, in conjunction with a business seeking a loan guarantee, will submit a business guarantee application to the Treasurer for review and approval of the guarantee. The business guarantee application will include the following information for each business seeking a loan guaranteed by the Program:

a)         the name and type of business;

b)         projected annual revenues and expenses;

c)         the current registered business address;

d)         tax identification number associated with the business;

e)         the dollar amount of the loan being sought;

f)         the purpose of the loan;

g)         the reason that existing loan products did not meet the needs of the borrower; and

h)         other information that the Treasurer deems useful in determining the eligibility of the business to participate in the Program.

Section 715.520  Termination of Participation

If the Treasurer becomes aware that a business has violated any of the requirements in Section 715.500 or is found to have misrepresented any of the information provided pursuant to Section 715.510, the Treasurer shall terminate the business' participation in the program following consultation with the participating financial institution. 

Section 715.600  Use of Loan Guarantee Accounts

The Treasurer may establish one or more Loan Guarantee Accounts at approved financial institutions. The Loan Guarantee Accounts may be used to cover the losses on guaranteed loans at a participating financial institution. [15 ILCS 516/30-15]

a)         These accounts may be used to cover losses on guaranteed loans up to the full amount in the account or the amount of loss, whichever is less. [15 ILCS 516/30-30(a)]

b)         Fees established by the Treasurer in accordance with Section 715.430, will be deposited into the account.

c)         The Treasurer will withdraw the full amount in any loan guarantee account in the event the Program is discontinued.

d)         In the event the participating financial institution leaves the Program, the Treasurer will reallocate the funds in the loan guarantee account.

e)         The Treasurer may withdraw funds from any loan guarantee account for a financial institution's failure to comply with Program requirements. [15 ILCS 516/30-30(d)]

Section 715.610  Limitations on Funding

a)         Account Maximum. The Treasurer may set a cap on the total funds held in any Loan Guarantee Account. Funds in excess of the cap may be withdrawn by the Treasurer. [15 ILCS 516/30-30]

b)         Funding Maximum. The Treasurer may allocate up to $10,000,000 of investment earnings each year for the Program, provided that no more than $50,000,000 may be used for guaranteeing loans at any given time. [15 ILCS 516/30-35]