SB1879 95TH GENERAL ASSEMBLY

LRB095 15221 MJR 41202 b

95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008
SB1879

Introduced 1/10/2008, by Sen. Jacqueline Y. Collins

SYNOPSIS AS INTRODUCED:

New Act

Creates the Mortgage Steering Act. Prohibits mortgage loan steering or other specified fee and loan practices, based upon (i) the borrower's credit history, (ii) the borrower's capacity to repay the loan, and (iii) the property on which the loan is secured, because of that borrower's race, gender, age, disability, or national origin. Provides that the Attorney General shall enforce the Act and grants the Attorney General the additional listed enforcement powers. Provides for injunctive relief, restitution, and civil penalties for violations of the Act. Provides that a person who suffers actual damages as a result of a violation of the Act by a lender may bring an action against that lender and may be awarded actual economic damages or any other relief that the court deems proper. Provides that any waiver or modification of the rights, provisions, or remedies of the Act shall be void and unenforceable.

FISCAL NOTE ACT MAY APPLY

HOUSING AFFORDABILITY IMPACT NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning regulation.

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

Section 1. Short title. This Act may be cited as the Mortgage Steering Act.

Section 5. Definitions. As used in this Act:

"Mortgage loan" means that term as it is defined in subsection (f) of Section 1-4 of the Residential Mortgage License Act of 1987.

"Borrower" means a person seeking a mortgage loan.

"Lender" means a natural or artificial person who transfers, deals in, offers, brokers, or makes a residential loan. "Lender" includes, but is not limited to, banks, savings banks, savings and loan associations, credit unions, and insurance companies organized, chartered, or holding a certificate of authority to do business under the laws of this State or any other state or under the laws of the United States, or licensees under the Consumer Installment Loan Act or the Residential Mortgage License Act of 1987.

Section 10. Steering.

(a) A lender shall not engage in steering.

(b) A lender engages in steering when the lender:

(1) directs or attempts to direct a borrower, because of that borrower's race, gender, disability, or national origin, from applying for a mortgage loan where the interest rates or fees are excessively higher than the borrower could have at the time received from the lender based on (A) the borrower's credit history, (B) the borrower's capacity to repay the loan, and (C) the property on which the loan is secured; or

(2) originates and closes a residential loan where the interest rates or fees are excessively higher than the borrower could have at the time received from the lender based on (A) the borrower's credit history, (B) the borrower's capacity to repay the loan, and (C) the property on which the loan is secured, because of that borrower's race, gender, age, disability, or national origin.

(c) Any lender who engages in steering violates this Act and commits an unlawful practice within the meaning of this Act.

Section 15. Notice; limiting liability. If a borrower could receive a significantly more favorable interest rate or fees based on (A) the borrower's credit history, (B) the borrower's capacity to repay the loan, and (C) the property on which the loan is secured, but the lender does not offer such a product, the lender shall not be liable if it presents the following notice to the borrower for the borrower's signature at the time the interest rate and fees are given to the borrower:

"You may, based on (A) your credit history, (B) your capacity to repay the loan, and (C) the property on which the loan is secured, be eligible for a more favorable interest rate or fees which we, the lender, do not offer. This notice shall immunize the lender from liability under the Mortgage Steering Act."

Section 20. Enforcement.

(a) When it appears to the Attorney General that a lender has engaged in, is engaging in, or is about to engage in any practice declared to be unlawful by this Act; when the Attorney General receives a written complaint from a consumer or borrower of the commission of a practice declared to be unlawful under this Act; or when he or she believes it to be in the public interest that an investigation should be made to ascertain whether a lender in fact has engaged in, is engaging in or is about to engage in, any practice declared to be unlawful by this Act, the Attorney General may:

(1) require that lender to file on such terms as he or she prescribes a statement or report in writing under oath or otherwise, as to all information as he or she may consider necessary;

(2) examine under oath any person in connection with the conduct;

(3) examine any record, book, document, account, or paper as he or she may consider necessary; and

(4) pursuant to an order of the circuit court, impound any record, book, document, account, or paper that is produced in accordance with this Act, and retain it in his or her possession until the completion of all proceedings in connection with which it is produced.

(b) To accomplish the objectives and to carry out the duties prescribed by this Act, the Attorney General, in addition to other powers conferred upon him or her by this Act, may issue subpoenas to any person, administer an oath or affirmation to any person, conduct hearings in aid of any investigation or inquiry, prescribe such forms and promulgate such rules and regulations as may be necessary, which rules and regulations shall have the force of law.

(c) Service by the Attorney General of any notice requiring a person to file a statement or report, or of a subpoena upon any person, shall be made:

(1) personally by delivery of a duly executed copy thereof to the person to be served, or if a person is not a natural person, in the manner provided in the Code of Civil Procedure when a complaint is filed; or

(2) by mailing by certified mail a duly executed copy thereof to the person to be served at his or her last known abode or principal place of business within this State.

(d) If any person fails or refuses to file any statement or report, or obey any subpoena issued by the Attorney General, the Attorney General may file a complaint in the circuit court for the:

(1) granting of injunctive relief, restraining the sale or advertisement of any mortgage by such persons, or the conduct of any trade or commerce that is involved;

(2) vacating, annulling, or suspending of the corporate charter of a corporation created by or under the laws of this State or the revoking or suspending of the certificate of authority to do business in this State of a foreign corporation or the revoking or suspending of any other licenses, permits, or certificates issued pursuant to law to such person that are used to further the allegedly unlawful practice; and

(3) granting of such other relief as may be required, until the person files the statement or report, or obeys the subpoena.

(e) In the administration of this Act, the Attorney General may accept an Assurance of Voluntary Compliance with respect to any method, act, or practice deemed to be in violation of this Act from any lender who has engaged in, is engaging in, or was about to engage in such method, act, or practice. Evidence of a violation of an Assurance of Voluntary Compliance shall be prima facie evidence of a violation of this Act in any subsequent proceeding brought by the Attorney General against the alleged violator.

Section 25. Injunctive relief; restitution; and civil penalties.

(a) Whenever the Attorney General has reason to believe that any lender is using, has used, or is about to use any method, act, or practice declared by this Act to be unlawful, and that proceedings would be in the public interest, he or she may bring an action in the name of the People of the State of Illinois against such lender to restrain by preliminary or permanent injunction the use of such method, act, or practice. The court, in its discretion, may exercise all powers necessary, including but not limited to: injunction; revocation, forfeiture or suspension of any license, charter, franchise, certificate, or other evidence of authority of any person to do business in this State; appointment of a receiver; dissolution of a domestic corporation or association or suspension or termination of the right of a foreign corporation or association to do business in this State; and restitution.

(b) In addition to the remedies provided herein, the Attorney General may request and the court may impose a civil penalty in a sum not to exceed $50,000 against any lender found by the court to have engaged in any method, act, or practice declared unlawful under this Act.

(c) In addition to any other civil penalty provided in this Section, if a lender is found by the court to have engaged in any method, act, or practice declared unlawful under this Act, and the violation was committed against a person 65 years of age or older, the court may impose an additional civil penalty not to exceed $10,000 for each violation.

A civil penalty imposed under this subsection (c) shall be paid to the State Treasurer who shall deposit the money in the State treasury in a special fund designated the Elderly Victim Fund. The Treasurer shall deposit such moneys into the Fund monthly. All of the moneys deposited into the Fund shall be appropriated to the Department on Aging for grants to senior centers in Illinois.

In determining whether to impose a civil penalty under this subsection (c) and the amount of any penalty, the court shall consider the following:

(1) Whether the defendant's conduct was in willful disregard of the rights of the person 65 years of age or older.

(2) Whether the defendant knew or should have known that the defendant's conduct was directed to a person 65 years of age or older.

(3) Whether the person 65 years of age or older was substantially more vulnerable to the defendant's conduct because of age, poor health, infirmity, impaired understanding, restricted mobility, or disability, than other persons.

(4) Any other factors the court deems appropriate.

(d) This Section applies if: (i) a court orders a party to make payments to the Attorney General and the payments are to be used for the operations of the Office of the Attorney General; or (ii) a party agrees, in an Assurance of Voluntary Compliance under this Act, to make payments to the Attorney General for the operations of the Office of the Attorney General.

(e) Moneys paid under any of the conditions described in subsection (d) of this Section shall be deposited into the Attorney General Court Ordered and Voluntary Compliance Payment Projects Fund, which is created as a special fund in the State treasury. Moneys in the Fund shall be used, subject to appropriation, for the performance of any function pertaining to the exercise of the duties of the Attorney General, including but not limited to enforcement of any law of this State and conducting public education programs; however, any moneys in the Fund that are required by the court or by an agreement to be used for a particular purpose shall be used for that purpose.

Section 30. Receiver powers. When a receiver is appointed by the court pursuant to this Act, he or she shall have the power to sue for, collect, receive, and take into his or her possession all the goods and chattels, rights and credits, moneys and effects, lands and tenements, books, records, documents, papers, chooses in action, bills, notes, and property of every description, derived by means of any practice declared to be illegal and prohibited by this Act, including property with which such property has been commingled if it cannot be identified in kind because of such commingling, and to sell, convey, and assign the same and hold and dispose of the proceeds thereof under the direction of the court. Any person who has suffered damages as a result of the use or employment of any unlawful practices and submits proof to the satisfaction of the court that he or she has in fact been damaged may participate with general creditors in the distribution of the assets to the extent he has sustained out-of-pocket losses. In the case of a partnership or business entity, the receiver shall settle the estate and distribute the assets under the direction of the court. The court shall have jurisdiction of all questions arising in such proceedings and may make such orders and judgments therein as may be required.

Section 35. Termination of receivership. Subject to an order of the court terminating the business affairs of any lender after receivership proceedings held pursuant to this Act, the provisions of this Act shall not bar any claim against any person who has acquired any moneys or property, real or personal, by means of any practice herein declared to be unlawful.

Section 40. Cost recovery. In any action brought under the provisions of this Act, the Attorney General is entitled to recover costs for the use of this State.

Section 45. Action for actual damages.

(a) Any person who suffers actual damage as a result of a violation of this Act committed by a lender may bring an action against such lender. The court, in its discretion, may award actual economic damages or any other relief which the court deems proper.

(b) Such action may be commenced in the county in which the lender against whom it is brought has its principal place of business, or is doing business, or in the county where the transaction or any substantial portion thereof occurred.

(c) In any action brought by a person under this Act, the court may grant injunctive relief where appropriate and may award, in addition to the relief provided in this Act, reasonable attorney's fees and costs to the prevailing plaintiff.

(d) Upon commencement of any action brought under this Section, the plaintiff shall mail a copy of the complaint or other initial pleading to the Attorney General and, upon entry of any judgment or order in the action, shall mail a copy of such judgment or order to the Attorney General.

(e) Any action for damages under this Section shall be forever barred unless commenced within 3 years after the cause of action accrued; provided that, whenever any action is brought by the Attorney General for a violation of this Act, the running of the foregoing statute of limitations, with respect to every private right of action for damages which is based in whole or in part on any matter complained of in said action by the Attorney General, shall be suspended during the pendency thereof, and for one year thereafter.

Section 50. Waiver. Any waiver or modification of the rights, provisions, or remedies of this Act shall be void and unenforceable.

Section 55. Additional remedies. The relief provided in this Act is in addition to remedies otherwise available against the same conduct under the common law or other statutes of this State.

Section 60. Construction. This Act shall be liberally construed to effect the purposes thereof.