HB5294 94TH GENERAL ASSEMBLY

LRB094 16482 LCT 51742 b

94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB5294

Introduced 1/25/2006, by Rep. Rosemary Mulligan

SYNOPSIS AS INTRODUCED:

815 ILCS 205/4.2	from Ch. 17, par. 6407
815 ILCS 205/4.2b new

Amends the Interest Act. Provides limitations for the increase in the annual percentage rate of interest for credit card accounts under revolving credit arrangements until after the listed time periods for the required notices. Provides that, in the case of any credit card account under a revolving credit arrangement, no fee, including any annual fee, late payment fee, or over-the-limit fee, may be imposed on the account before the end of the 30-day period beginning on the date the obligor receives a specific notice of the imposition of the fee. Provides that, in the case of any credit card account under a revolving credit arrangement containing a universal default provision, no increase in any annual percentage rate of interest due to universal default, applicable to the account, or any portion of any outstanding balance on the account may take effect or apply to any outstanding balance of credit under the plan until the beginning of the billing cycle that begins not less than 30 days after the obligor receives a specific notice of the increase. Requires the notice to be mailed or emailed, if the consumer has requested to receive such notices electronically, to the obligor separately from any statement or other notice and without any advertising or other disclosures. Provides that the notice must have highlighted in a clear and conspicuous manner and in bold and capitalized print any changes to the customers current policy. Provides that in case of a fee, the notice shall include an explanation of how, when, and why a fee will be imposed and what options the obligor may have for addressing the imposition of the fee or any reason for the imposition, including the prevention of any future imposition of the fee. Requires the Department of Financial and Professional Regulation to establish a State-wide data collection of universal default information and rules for the collection of universal default information. Establishes reporting requirements for lenders of revolving credit accounts containing universal default provisions. Requires the Department to file a written report with the General Assembly no later than July 1, 2007, and no later than every July 1 thereafter concerning the universal default information collection. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning business.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Interest Act is amended by changing Section 4.2 and by adding 4.2b as follows:

(815 ILCS 205/4.2) (from Ch. 17, par. 6407)

Sec. 4.2. Revolving credit; billing statements; disclosures. On a revolving credit which complies with subparagraphs (a), (b), (b-3), (b-5), (b-7), (c), (d) and (e) of this Section 4.2, it is lawful for any bank that has its main office or, after May 31, 1997, a branch in this State, a state or federal savings and loan association with its main office in this State, a state or federal credit union with its main office in this State, or a lender licensed under the Consumer Finance Act, the Consumer Installment Loan Act or the Sales Finance Agency Act, as such Acts are now and hereafter amended, to receive or contract to receive and collect interest in any amount or at any rate agreed upon by the parties to the revolving credit arrangement. It is lawful for any other lender to receive or contract to receive and collect interest in an amount not in excess of 1 1/2% per month of either the average daily unpaid balance of the principal of the debt during the billing cycle, or of the unpaid balance of the debt on approximately the same day of the billing cycle. If a lender under a revolving credit arrangement notifies the debtor at least 30 days in advance of any lawful increase in the amount or rate of interest to be charged under the revolving credit arrangement, and the debtor, after the effective date of such notice, incurs new debt pursuant to the revolving credit arrangement, the increased interest amount or rate may be applied only to any such new debt incurred under the revolving credit arrangement. For purposes of determining the balances to which the increased interest rate applies, all payments and other credits may be deemed to be applied to the balance existing prior to the change in rate until that balance is paid in full. The face amount of the drafts, items, orders for the payment of money, evidences of debt, or similar written instruments received by the lender in connection with the revolving credit, less the amounts applicable to principal from time to time paid thereon by the debtor, are the unpaid balance of the debt upon which the interest is computed. If the billing cycle is not monthly, the maximum interest rate for the billing cycle is the percentage which bears the same relation to the monthly percentage provided for in the preceding sentence as the number of days in the billing cycle bears to 30. For the purposes of the foregoing computation, a "month" is deemed to be any time of 30 consecutive days. In addition to the interest charge provided for, it is lawful to receive, contract for or collect a charge not exceeding 25 cents for each transaction in which a loan or advance is made under the revolving credit or in lieu of this additional charge an annual fee for the privilege of receiving and using the revolving credit in an amount not exceeding $20. In addition, with respect to revolving credit secured by an interest in real estate, it is also lawful to receive, contract for or collect fees lawfully paid to any public officer or agency to record, file or release the security, and costs and disbursements actually incurred for any title insurance, title examination, abstract of title, survey, appraisal, escrow fees, and fees paid to a trustee in connection with a trust deed.

(a) At or before the date a bill or statement is first rendered to the debtor under a revolving credit arrangement, the lender must mail or deliver to the debtor a written description of the conditions under which a charge for interest may be made and the method, including the rate, of computing these interest charges. The rate of interest must be expressed as an annual percentage rate.

(b) If during any billing cycle any debit or credit entry is made to a debtor's revolving credit account, and if at the end of that billing cycle there is an unpaid balance owing to the lender from the debtor, the lender must give to the debtor the following information within a reasonable time after the end of the billing cycle:

(i) the unpaid balance at the beginning of the billing cycle;

(ii) the date and amount of all loans or advances made during the billing cycle, which information may be supplied by enclosing a copy of the drafts, items, orders for the payment of money, evidences of debt or similar written instruments presented to the lender during the billing cycle;

(iii) the payments by the debtor to the lender and any other credits to the debtor during the billing cycle;

(iv) the amount of interest and other charges, if any, charged to the debtor's account during the billing cycle;

(v) the amount which must be currently paid by the debtor and the date on which that amount must be paid in order to avoid delinquency;

(vi) the total amount remaining unpaid at the end of the billing cycle and the right of the debtor to prepay that amount in full without penalty; and

(vii) information required by (iv), (v) and (vi) must be set forth in type of equal size and equal conspicuousness.

(b-3) In the case of any credit card account under revolving credit arrangement containing a universal default provision, no increase in any annual percentage rate of interest, other than an increase due to the expiration of any introductory percentage rate of interest, applicable to the account, or any portion of any outstanding balance on the account:

(1) may take effect before the beginning of the billing cycle that begins not less than:

(i) 30 days after the obligor receives a specific notice of the increase in accordance with subsection (b-7) of this Section, in the case of any change in any annual percentage rate that is due solely to a change in another rate of interest to which the rate is indexed; or

(ii) 60 days after the obligor receives a specific notice of the increase in accordance with subsection (b-7) of this Section, in the case of any change in any annual percentage rate that is not described in item (i) of this Section; and

(2) may, in the case of any change in any annual percentage rate that is not described in item (1) of this subsection, apply to any outstanding balance of credit under the plan as of the date of the notice of the increase required under item (1) of this subsection.

(b-5) In the case of any credit card account under a revolving credit arrangement, no fee, including any annual fee, late payment fee, or over-the-limit fee, may be imposed on the account before the end of the 30-day period beginning on the date the obligor receives a specific notice of the imposition of the fee in accordance with subsection (b-7) of this Section.

(b-7) Any notice required under subsection (b-3) or (b-5) of this Section shall be mailed or emailed, if the consumer has requested to receive such notices electronically, to the obligor separately from any statement or other notice and without any advertising or other disclosures.

The notice must have highlighted in a clear and conspicuous manner and in bold and capitalized print any changes to the customers current policy.

In the case of any notice pursuant to subsection (b-5) of this Section, the notice shall include an explanation of how, when, and why a fee will be imposed and what options the obligor may have for addressing the imposition of the fee or any reason for the imposition, including the prevention of any future imposition of the fee.

(c) The revolving credit arrangement may provide for the payment by the debtor and receipt by the lender of all costs and disbursements, including reasonable attorney's fees, incurred by the lender in legal proceedings to collect or enforce the debt in the event of delinquency by the debtor or in the event of a breach of any obligation of the debtor under the arrangement.

(d) The lender under a revolving credit arrangement may provide credit life insurance or credit accident and health insurance, or both, with respect to the debtor and may charge the debtor therefor. Credit life insurance and credit accident and health insurance, and any charge therefor made to the debtor, shall comply with Article IX 1/2 of the Illinois Insurance Code, as now or hereafter amended, and all lawful requirements of the Director of Insurance related thereto. This insurance is in force with respect to each loan or advance made under a revolving credit arrangement as soon as the loan or advance is made. The purchase of this insurance from an agent, broker or insurer specified by the lender may not be a condition precedent to the revolving credit arrangement or to the making of any loan or advance thereunder.

(e) Whenever interest is contracted for or received under this Section, no amount in addition to the charges authorized by this Act may be directly or indirectly charged, contracted for or received whether as interest, service charges, costs of investigations or enforcements or otherwise.

(f) The lender under a revolving credit arrangement must compute at year end the total amount charged to the debtor's account during the year, including service charges, finance charges, late charges and any other charges authorized by this Act, and upon request must furnish such information to the debtor within 30 days after the end of the year, or if the account has been terminated during such year, may give such requested information within 30 days after such termination. The lender shall annually inform the debtor of his right to obtain such information.

(g) A lender who complies with the federal Truth in Lending Act, amendments thereto, and any regulations issued or which may be issued thereunder, shall be deemed to be in compliance with the provisions of subparagraphs (a) and (b) of this Section.

(h) Anything in this Section 4.2 to the contrary notwithstanding, if the Congress of the United States or any federal agency authorizes any class of lenders to enter, within limitations, into a revolving credit arrangement secured by a mortgage or deed of trust on residential real property, any person, firm, corporation or other entity, not otherwise prohibited by the Congress of the United States or any federal agency from entering into revolving credit arrangements secured by a mortgage or deed of trust on residential real property, may enter into such arrangements within the same limitations.

(Source: P.A. 89-208, eff. 9-29-95.)

(815 ILCS 205/4.2b new)

Sec. 4.2b. Universal default on revolving credit accounts; annual reporting.

(a) In the case of any credit card account under a revolving credit arrangement, no increase in any annual percentage rate of interest due to universal default, applicable to the account, or any portion of any outstanding balance on the account, may take effect or apply to any outstanding balance of credit under the plan until the beginning of the billing cycle that begins not less than 30 days after the obligor receives a specific notice of the increase.

The notice shall be mailed or emailed, if the consumer has requested to receive such notices electronically, to the obligor separately from any statement or other notice and without any advertising or other disclosures at least twice yearly.

The notice must have highlighted in a clear and conspicuous manner and in bold and capitalized print any changes to the customers current policy.

(b) The Department shall establish a State-wide data collection of universal default information and rules for the collection of the universal default information. The information shall include:

(1) the number of times each lender or issuer of any revolving credit accounts increased the annual percentage rate of interest each year under its universal default provisions;

(2) the specific reason for each increase in the annual percentage rate of interest due to universal default; and

(3) the total number of accounts and the zip code of associated with each account affected by the increase in the annual percentage rate of interest due to universal default.

(c) Each lender under a revolving credit arrangement that contains universal default provisions shall report to the Department the information contained in subsection (b) of this Section according to the rules established by the Department.

(d) No later than July 1, 2007, and no later than July 1 of each year thereafter, the Department shall prepare a written report and shall submit that report to the General Assembly containing the data collection information on universal default required under subsection (b) of this Section.

(e) For purposes of this Section:

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

"Universal default" means a credit card policy that allows a creditor to increase interest rates due to changes in payment history or credit status.

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