99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
SB1397

 

Introduced 2/20/2015, by Sen. William R. Haine

 

SYNOPSIS AS INTRODUCED:
 
See Index

    Creates the Non-Recourse Consumer Lawsuit Funding Act. Provides that all contracts for non-recourse consumer lawsuit funding shall be written, provide the total funding amount to the customer, itemize one-time fees, allow the customer to cancel contract within 10 business days following receipt of the funding amount without penalty or further obligation, and other specified criteria. Provides that any attorney's fee or medical lien takes priority over any lien of the non-recourse consumer lawsuit funding company. Contains a provision concerning standards and practices of non-recourse consumer lawsuit funding companies. Provides criteria for non-recourse consumer lawsuit funding companies to receive and retain licenses, the closing of its business or surrendering of the license, and prohibited acts. Contains provisions for enforcement, rulemaking, bonding, and judicial review. Provides that the total amount of financing provided by a non-recourse consumer lawsuit funding company per consumer per legal claim shall not exceed $40,000. Provides that under no circumstances shall the total amount of charges, interest, fees, or any other charges, when taken together, exceed 80% of the proceeds from the legal claim. Amends the Regulatory Sunset Act to provide for the repeal of the Non-Recourse Consumer Lawsuit Funding Act on May 31, 2016. Amends the Consumer Fraud and Deceptive Business Practices Act to provide that a person who knowingly violates the Non-Recourse Consumer Lawsuit Funding Act commits an unlawful practice. Amends the Consumer Installment Loan Act. Provides that no licensee shall engage in the business of providing non-recourse consumer lawsuit funding, except in compliance with that Act. Effective immediately.


LRB099 10114 MGM 30337 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB1397LRB099 10114 MGM 30337 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4
ARTICLE 1.

 
5    Section 1-1. Short title. This Act may be cited as the
6Non-Recourse Consumer Lawsuit Funding Act.
 
7    Section 1-5. Definitions. In this Act:
8    "Consumer" means a natural person residing or domiciled in
9Illinois or who elects to enter into a transaction under this
10Act in Illinois, whether it be in-person, over the internet, by
11facsimile, or any other electronic means, and who has a pending
12legal claim and is represented by an attorney at the time he or
13she enters into a contract for non-recourse consumer lawsuit
14funding.
15    "Contract" means a written agreement between a consumer and
16a non-recourse consumer lawsuit funding company that the
17non-recourse consumer lawsuit funding company agrees to
18provide non-recourse consumer lawsuit funding to the consumer
19in compliance with Article 2.
20    "Department" means the Illinois Department of Financial
21and Professional Regulation.
22    "Funding amount" means the dollar amount of funds provided

 

 

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1to the consumer by the non-recourse consumer lawsuit funding
2company subsequent to the execution of the contract as
3consideration for the assignment of or purchase of a contingent
4right to receive a portion of the proceeds of the legal claim.
5    "Funding date" means the date on which the funding amount
6is paid to the consumer by the non-recourse consumer lawsuit
7funding company.
8    "Legal claim" means a civil or statutory claim or action.
9    "Licensee" means any non-recourse consumer lawsuit funding
10company licensed in accordance with Article 3.
11    "Non-recourse consumer lawsuit funding" means a lending
12transaction, regulated under this Act, of any amount in which a
13non-recourse consumer lawsuit funding company purchases and a
14consumer assigns to the non-recourse consumer lawsuit funding
15company the contingent right to receive a portion of the
16potential proceeds of a settlement, judgment, award, or verdict
17obtained in the consumer's legal claim as repayment of the loan
18principle and accrued interest.
19    "Non-recourse consumer lawsuit funding company" means a
20person or entity that enters into a non-recourse consumer
21lawsuit funding transaction with a consumer. "Non-recourse
22consumer lawsuit funding company" includes any affiliate or
23subsidiary of a non-recourse consumer lawsuit funding company;
24an entity or person who buys a whole or partial interest in a
25non-recourse consumer lawsuit funding, acts as an agent to
26provide non-recourse consumer lawsuit funding from a third

 

 

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1party for a fee, or acts as an agent for a third party in
2providing non-recourse consumer lawsuit funding for a fee,
3regardless of whether approval or acceptance by the third party
4is necessary to create a legal obligation for the third party;
5and any other person or entity if the Department determines
6that the person or entity is engaged in a transaction that is
7in substance a disguised non-recourse consumer lawsuit funding
8or a subterfuge for the purpose of avoiding this Act.
9Notwithstanding anything to the contrary contained in this Act,
10a bank, lender, financing entity, or any other special purpose
11entity that provides financing to a non-recourse consumer
12lawsuit funding company or to which a non-recourse consumer
13lawsuit funding company grants a security interest or transfers
14any rights or interest in non-recourse consumer lawsuit funding
15shall not cause the bank, lender, financing entity, or special
16purpose entity to be deemed a non-recourse consumer lawsuit
17funding company. Notwithstanding anything to the contrary
18contained in this Act, an attorney or accountant who provides
19services to a consumer shall not be deemed a non-recourse
20consumer lawsuit funding company.
21    "Proceeds" means those funds available for payment to the
22non-recourse consumer lawsuit funding company that are
23remaining from any settlement, verdict, final judgment,
24insurance payment, or award obtained in the consumer's legal
25claim after reductions are made under Section 2-15 of this Act.
26    "Resolution date" means the date the funding amount plus

 

 

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1the agreed upon fees from the legal claim are received by the
2non-recourse consumer lawsuit funding company.
3    "Secretary" means the Illinois Secretary of Financial and
4Professional Regulation.
 
5
ARTICLE 2. Non-Recourse Consumer Lawsuit Funding

 
6    Section 2-5. Contract provisions. All contracts for
7non-recourse consumer lawsuit funding shall be in writing and
8comply with all of the following requirements:
9    (1) The contract shall contain on the front page,
10appropriately headed and in at least 12-point, bold face type,
11a chart that clearly contains the following disclosures:
12        (A) the total funding amount paid to the consumer;
13        (B) an itemization of one-time fees;
14        (C) the total dollar amount owed by the consumer to the
15    non-recourse consumer lawsuit funding company, set forth
16    up to 1,080 days beginning at the 11th business day after
17    the funding date, then at 30 days after the funding date
18    and at every 30 days thereafter; the total dollar amount
19    shall be calculated using the identical methodology used by
20    the non-recourse consumer lawsuit funding company to
21    calculate the contracted fee amount under Section 2-10.
22    The Secretary shall prescribe by rule the format of the
23chart that clearly discloses to the consumer all the
24information in this subsection. Until the Secretary makes such

 

 

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1a rule, each non-recourse consumer lawsuit funding company must
2have a chart format approved for distribution by the Secretary.
3    No contract for non-recourse consumer lawsuit funding
4shall be enforceable against the consumer unless it complies
5entirely with this Section 2-5.
6    (2) The contract shall provide that the consumer may cancel
7the contract within 10 business days following the consumer's
8receipt of the funding amount, without penalty or further
9obligation. The contract shall contain the following notice
10written in at least 12-point, bold face type:
11    "Consumer's right to cancellation: You may cancel this
12    contract without penalty or further obligation within 10
13    business days after the funding date.".
14    The contract must also specify that in order for the
15cancellation to be effective, the consumer must either return
16to the non-recourse consumer lawsuit funding company the total
17amount of the funding amount by (a) delivering the non-recourse
18consumer lawsuit funding company's uncashed check to the
19non-recourse consumer lawsuit company's offices in person
20within 10 business days after receipt of the funding amount,
21(b) sending a notice of cancellation via registered or
22certified mail and include in the mailing a return of the total
23amount of funding amount in the form of the non-recourse
24consumer lawsuit funding company's uncashed check within 10
25business days after receipt of the funding amount, or (c)
26sending a registered, certified or cashier's check or money

 

 

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1order, by insured, registered, or certified United States mail,
2postmarked within 10 business days after receipt of the funding
3amount, to the address specified in the contract for
4cancellation.
5    (3) The contract shall contain all of the following
6statements in at least 12-point, bold face type:
7        "(A) [Insert name of the non-recourse consumer lawsuit
8    funding company] agrees that it shall have no right to and
9    will not make any decisions with respect to the conduct of
10    the legal claim or any settlement or resolution thereof and
11    that the right to make those decisions remains solely with
12    you and your attorney in the legal claim. [Insert name of
13    the non-recourse consumer lawsuit funding company] further
14    agrees that it shall have no right to pursue the legal
15    claim on your behalf.
16        (B) [Insert name of the non-recourse consumer lawsuit
17    funding company] agrees that it shall only accept: (i) an
18    assignment of a contingent right to receive a portion of
19    the potential proceeds; (ii) the contracted return of the
20    funding amount; and (iii) any agreed upon fees. Any agreed
21    upon fees to [insert name of the non-recourse consumer
22    lawsuit funding company] shall not be determined as a
23    percentage of your recovery from the legal claim but shall
24    be set as a contractually determined amount based upon
25    intervals of time from the funding date through the
26    resolution date. [Insert name of the non-recourse consumer

 

 

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1    lawsuit funding company] is not accepting an assignment of
2    your legal claim.
3        (C) [Insert name of the non-recourse consumer lawsuit
4    funding company] agrees that you may make payments on a
5    funding at any time without additional cost or penalty.
6        (D) [Insert name of the non-recourse consumer lawsuit
7    funding company] is not a law firm and is prohibited from
8    rendering legal advice. Advice about the conduct of the
9    legal claim or any settlement or resolution shall be
10    directed to a properly licensed attorney.".
11    (4) All contracts with the consumer must contain the
12following statement, in plain language in a box with 15-point,
13bold face type, in all capitalized letters, stating the
14following:
15    "THE FUNDING AMOUNT AND AGREED UPON FEES SHALL ONLY BE PAID
16    FROM THE PROCEEDS OF YOUR LEGAL CLAIM AND SHALL ONLY BE
17    PAID TO THE EXTENT THAT THERE ARE AVAILABLE PROCEEDS FROM
18    YOUR LEGAL CLAIM. YOU WILL NOT OWE [INSERT NAME OF THE
19    NON-RECOURSE CONSUMER LAWSUIT FUNDING COMPANY] ANYTHING IF
20    THERE ARE NO PROCEEDS FROM YOUR LEGAL CLAIM.".
21    (5) The contract shall contain the following statement in
22at least 12-point, bold face type located immediately above the
23space where the consumer's signature is required:
24    "Do not sign this Agreement before you read it completely
25    or if it contains any blank spaces. You are entitled to a
26    completely filled-in copy of this Agreement. Before you

 

 

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1    sign this Agreement you should obtain the advice of an
2    attorney. Depending on the circumstances, you may want to
3    consult a tax, public, or private benefit planning or
4    financial professional. You acknowledge that your attorney
5    in the legal claim has provided no tax, public, or private
6    benefit planning regarding this transaction. You further
7    understand and agree that the funds you receive from
8    [insert name of the non-recourse consumer lawsuit funding
9    company] shall not be used to pay for or applied to the
10    payment of attorney's fees or litigation costs related to
11    your legal claim.".
12    (6) The executed contract shall contain a written
13acknowledgment by the consumer that he or she has reviewed the
14contract in its entirety.
15    (7) The non-recourse consumer lawsuit funding company
16shall provide the consumer's attorney with a written
17notification of the non-recourse consumer lawsuit funding
18provided to the consumer 3 business days before the funding
19date by way of postal mail, courier service, facsimile, e-mail
20return receipt acknowledged, or other means of proof of
21delivery method unless there is a written acknowledgment by the
22attorney representing the consumer in the legal claim as to the
23terms of the contract. No communication between a consumer's
24attorney and a non-recourse consumer lawsuit funding company
25pertaining to a consumer's non-recourse consumer lawsuit
26funding transaction shall limit, waive, or abrogate any

 

 

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1statutory or common-law privilege, including the
2attorney-client privilege or the work-product doctrine.
3Notwithstanding notice of the non-recourse consumer lawsuit
4funding, the consumer's attorney is not responsible for paying
5or ensuring payment of the consumer's obligation.
6    (8) Except as provided under subsection (d) of Section 2-10
7of this Act, the contracted return of the funding amount, plus
8any agreed upon fees assigned to the non-recourse consumer
9lawsuit funding company on the resolution date shall not be
10determined as a percentage of the recovery from the legal claim
11but shall be set as a contractually determined amount based
12upon intervals of time from the funding date through the
13resolution date.
 
14    Section 2-10. Contracted fee amount.
15    (a) The total amount of financing provided by a
16non-recourse consumer lawsuit funding company per consumer per
17legal claim shall not exceed $40,000.
18    The company shall not charge a fee in excess of a 40%
19annual percentage rate.
20    For the purposes of this Section, the annual percentage
21rate shall be calculated in accordance with the federal Truth
22in Lending Act.
23    (b) No additional fees shall be applied for any period of
24time beyond 1,080 days from the funding date.
25    (c) Except for the fees set forth in this Section and

 

 

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1Section 20, the non-recourse consumer lawsuit funding company
2shall not impose on a consumer any additional finance charges,
3interest, fees, or charges of any sort for any purpose.
4    (d) Under no circumstances shall the total amount of
5finance charges, interest, fees, or any other charges, when
6taken together, exceed 80% of the proceeds from the legal
7claim.
 
8    Section 2-12. Charges permitted.
9    (a) A licensee may charge an acquisition charge not to
10exceed 8% of the amount funded or $100, whichever is less.
11    (b) A licensee may charge an expedited funds delivery
12option charge not to exceed the actual cost of delivery or $20,
13whichever is less. Expedited funds delivery options,
14including, but not limited to, overnight delivery, electronic
15fund transfers, and Automated Clearing House (ACH)
16transactions may be offered to the consumer as a choice of the
17method of the delivery of funds. The fund delivery charge is
18fully earned at the time that each funding transaction is made
19and shall not be subject to refund. Details and receipts of
20delivery shall be provided in an invoice to the consumer no
21more than 10 business days after the funding date. A no-charge
22delivery option must be offered to the consumer as a choice.
 
23    Section 2-15. Claim priorities. Any lien arising out of the
24underlying consumer's legal claim for subrogation claims,

 

 

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1attorney fees, attorney liens, and litigation costs, health
2care providers, employers in worker's compensation
3proceedings, health insurers, employers with self-funded
4health care plans, Medicare, and Public Aid shall be satisfied
5before and take priority over any claim of the non-recourse
6consumer lawsuit funding company. All other holders of liens,
7security interests, or subrogation claims shall take priority
8over the non-recourse consumer lawsuit funding company to the
9extent allowed by law.
 
10    Section 2-20. Standards and practices. Each non-recourse
11consumer lawsuit funding company shall adhere to the following:
12    (1) The non-recourse consumer lawsuit funding company
13shall not pay or offer to pay any compensation to any attorney,
14law firm, medical provider, chiropractor, physical therapist,
15or any of their employees for referring a consumer to the
16non-recourse consumer lawsuit funding company. The
17non-recourse consumer lawsuit funding company agrees not to
18accept any compensation from any attorney, law firm, medical
19provider, chiropractor, physical therapist, or any of their
20employees, other than the funding amount and any agreed upon
21fees the consumer assigned to the non-recourse consumer lawsuit
22funding company out of the potential proceeds of the legal
23claim. If a lawyer or law firm represents one or more consumers
24with outstanding non-recourse consumer lawsuit fundings from
25the same non-recourse consumer lawsuit funding company, that

 

 

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1non-recourse consumer lawsuit funding company may not provide
2any type of funding to the lawyer or law firm.
3    (2) The non-recourse consumer lawsuit funding company
4shall not advertise false or intentionally misleading
5information regarding its product or services.
6    (3) The non-recourse consumer lawsuit funding company
7shall not knowingly provide funding to a consumer who has
8previously sold and assigned an amount of the potential
9proceeds of his or her legal claim to another non-recourse
10consumer lawsuit funding company without first purchasing that
11non-recourse consumer lawsuit funding company's entire accrued
12balance unless otherwise agreed to in writing by the consumer
13and all non-recourse consumer lawsuit funding companies that
14provided non-recourse consumer lawsuit funding to the
15consumer.
16    (4) The non-recourse consumer lawsuit funding company
17shall not offer single premium credit life, disability, or
18unemployment insurance that will be financed through a
19non-recourse consumer lawsuit funding transaction.
20    (5) For non-English speaking consumers, the principal
21terms of the contract must be translated in writing into the
22consumer's primary language. The consumer must sign the
23translated document containing the principal terms and initial
24each page and the translator must sign an affirmation
25confirming that the principal terms have been presented to the
26consumer in the consumer's primary language and acknowledged by

 

 

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1the consumer. Principal terms shall include all items that must
2be disclosed by Section 2-5.
3    (6) The non-recourse consumer lawsuit funding company
4shall not knowingly enter into a non-recourse consumer lawsuit
5funding contract with a consumer where the consumer's legal
6claim is a pending class action lawsuit at the time of the
7funding. The non-recourse consumer lawsuit funding company may
8not discuss a consumer's choice to join a class action lawsuit
9other than to confirm that a consumer has or has not chosen to
10join a class action lawsuit. Should any legal claim in which a
11plaintiff has received non-recourse consumer lawsuit funding
12become a class action matter, no further funding shall be
13permitted. The non-recourse consumer lawsuit funding company
14is prohibited from advancing, loaning, assigning, or otherwise
15providing funds, directly or indirectly, to any attorney, law
16firm, or related entity for the purposes of researching,
17investigating, developing, prosecuting, or otherwise
18representing parties in class action mass tort litigation.
19    (7) The return of the funding amount to the non-recourse
20consumer lawsuit funding company, plus any agreed upon fees,
21shall be rendered only out of the funds, if any, of the
22realized settlement, judgment, award, or verdict the consumer
23may receive from the legal claim. Under no circumstances shall
24the non-recourse consumer lawsuit funding company have
25recourse for the funding amount beyond 80% of the consumer's
26proceeds from the legal claim.

 

 

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1    (8) The non-recourse consumer lawsuit funding company
2shall have no authority to advise the consumer on any legal
3matters or to make any decisions with respect to the conduct of
4the litigation of the legal claim or any settlement or
5resolution thereof. The right to make those decisions remains
6solely with the consumer and the consumer's attorney
7representing the consumer in the legal claim. The non-recourse
8consumer lawsuit funding company shall have no right to pursue
9the legal claim on the consumer's behalf.
10    (9) The non-recourse consumer lawsuit funding company
11shall only accept an assignment of a contingent right to
12receive a portion of the potential proceeds, rather than an
13assignment of the legal claim. The contracted return of the
14funding amount, plus any agreed upon fees assigned to the
15non-recourse consumer lawsuit funding company, shall not be
16determined as a percentage of the total recovery from the legal
17claim, but shall be set as a contractually determined amount
18based upon intervals of time from the funding date through the
19resolution date.
20    (10) Notwithstanding subsection (8) of this Section, the
21non-recourse consumer lawsuit funding company shall allow the
22consumer to make payments on a funding at any time without
23additional cost or penalty.
24    (11) Contact between the non-recourse consumer lawsuit
25funding company and the consumer shall be subject to the
26following limitations:

 

 

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1        (A) Neither a non-recourse consumer lawsuit funding
2    company, nor any person acting on behalf of a non-recourse
3    consumer lawsuit funding company, shall contact a consumer
4    prior to the consumer obtaining legal representation and
5    initiating a legal claim.
6        (B) Neither a non-recourse consumer lawsuit funding
7    company, nor any person acting on behalf of a non-recourse
8    consumer lawsuit funding company, shall contact the
9    consumer after the funding date in order to influence any
10    decisions with respect to the conduct of the legal claim or
11    any settlement or resolution thereof. Notwithstanding the
12    foregoing, the non-recourse consumer lawsuit funding
13    company may contact the consumer to obtain the status of
14    the legal claim and updated attorney contact information.
15        (C) After the resolution date, neither a non-recourse
16    consumer lawsuit funding company, nor any person acting on
17    behalf of a non-recourse consumer lawsuit funding company,
18    shall seek to collect additional funds or threaten civil
19    action for any deficiency.
 
20    Section 2-25. Information; reporting and examination.
21    (a) A licensee shall keep and use books, accounts, and
22records that will enable the Secretary to determine if the
23licensee is complying with the provisions of this Act and
24maintain any other records as required by the Secretary.
25    (b) A licensee shall collect and maintain information

 

 

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1annually for a report that shall disclose in detail and under
2appropriate headings:
3        (1) the total number of non-recourse consumer lawsuit
4    fundings made during the previous calendar year;
5        (2) the total number of non-recourse consumer lawsuit
6    fundings outstanding as of December 31st of the preceding
7    calendar year;
8        (3) the minimum, maximum, and average amount of
9    non-recourse consumer lawsuit fundings made during the
10    preceding calendar year;
11        (4) the average annual percentage rate of the
12    non-recourse consumer lawsuit fundings made during the
13    preceding year; and
14        (5) the total number of non-recourse consumer lawsuit
15    funding transactions in which the non-recourse consumer
16    lawsuit funding company received the return of the funding
17    amount, plus any agreed upon fees; the total number of
18    non-recourse consumer lawsuit funding transactions for
19    which the non-recourse consumer lawsuit funding company
20    received no return of the funding amount or any fees; and
21    the total number of non-recourse consumer lawsuit funding
22    transactions in which the non-recourse consumer lawsuit
23    funding company received an amount less than the contracted
24    amount.
25    The report shall be verified by the oath or affirmation of
26the Chief Executive Officer, Chief Financial Officer, or other

 

 

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1duly authorized representative of the licensee. The report must
2be filed with the Secretary no later than March 1 of the year
3following the year for which the report discloses the
4information specified in this subsection (b). The Secretary may
5impose a fine of $50 per day upon the licensee for each day
6beyond the filing deadline that the report is not filed.
7    For the purposes of this Section, the annual percentage
8rate shall be calculated in accordance with the federal Truth
9in Lending Act.
10    (c) The Department shall have the authority to conduct
11examinations at any time of the books, records, and
12non-recourse consumer lawsuit funding documents of a licensee
13or other company or person doing business without the required
14license. Any licensee being examined must provide to the
15Department convenient and free access at all reasonable hours
16at its office or location to all books, records, non-recourse
17consumer lawsuit funding documents. The officers, directors,
18and agents of the non-recourse consumer lawsuit funding company
19must facilitate the examination and aid in the examination so
20far as it is in their power to do so. The Secretary shall, by
21rule, set the fee to be charged for each examination day,
22including travel expenses for out-of-state licensed locations.
23The fee shall reasonably reflect actual costs.
 
24    Section 2-30. Applicability. The contingent right to
25receive a portion of the potential proceeds of a legal claim is

 

 

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1assignable and valid for the purposes of obtaining funding from
2a licensee under this Section.
 
3    Section 2-35. Limitation to this Act. Except as provided
4under subsection (b) of Section 3-1 of this Act, non-recourse
5consumer lawsuit funding shall not be offered under any other
6Act, including, but not limited to, the Consumer Installment
7Loan Act.
 
8
ARTICLE 3. Licensure.

 
9    Section 3-1. Licensure requirement.
10    (a) Except as provided in subsection (b), on and after the
11effective date of this Act, a non-recourse consumer lawsuit
12funding company as defined by Section 1-5 must be licensed by
13the Department as provided in this Article.
14    (b) A non-recourse consumer lawsuit funding company
15licensed on the effective date of this Act under the Consumer
16Installment Loan Act need not comply with subsection (a) until
17the Department takes action on the non-recourse consumer
18lawsuit funding company's application for a non-recourse
19consumer lawsuit funding license. The application must be
20submitted to the Department within 3 months after the effective
21date of this Act. If the application is not submitted within 3
22months after the effective date of this Act, the non-recourse
23consumer lawsuit funding company is subject to subsection (a).
 

 

 

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1    Section 3-5. Licensure.
2    (a) An application for a license shall be in writing and in
3a form prescribed by the Secretary. Applicants must also submit
4a non-refundable application fee of $2,500, due at the time of
5the application. The Secretary may not issue a non-recourse
6consumer lawsuit funding license unless and until the following
7findings are made:
8        (1) that the financial responsibility, experience,
9    character, and general fitness of the applicant are such as
10    to command the confidence of the public and to warrant the
11    belief that the business will be operated lawfully and
12    fairly and within the provisions and purpose of this Act;
13        (2) that the applicant has submitted such other
14    information as the Secretary may deem necessary; and
15        (3) that the applicant is a current licensee under the
16    Consumer Installment Loan Act.
17    (b) A license shall be issued for no longer than one year
18and no renewal of a license may be provided if a licensee has
19substantially violated this Act and has not cured the violation
20to the satisfaction of the Department.
21    (c) A licensee shall appoint, in writing, the Secretary as
22attorney-in-fact upon whom all lawful process against the
23licensee may be served with the same legal force and validity
24as if served on the licensee. A copy of the written
25appointment, duly certified, shall be filed in the office of

 

 

SB1397- 20 -LRB099 10114 MGM 30337 b

1the Secretary, and a copy thereof certified by the Secretary
2shall be sufficient evidence to subject a licensee to
3jurisdiction in a court of law. This appointment shall remain
4in effect while any liability remains outstanding in this State
5against the licensee. When summons is served upon the Secretary
6as attorney-in-fact for a licensee, the Secretary shall
7immediately notify the licensee by registered mail, enclosing
8the summons and specifying the day of service.
9    (d) A licensee must pay an annual fee of $1,000. In
10addition to the annual license fee, the reasonable expense of
11any examination or hearing by the Secretary under any
12provisions of this Act shall be borne by the licensee. If a
13licensee fails to submit an application for renewal by December
1431st of the then current year, its license shall automatically
15expire; however, the Secretary, in his or her discretion, may
16reinstate an expired license upon:
17        (1) payment of the annual fee within 30 days of the
18    date of expiration; and
19        (2) proof of good cause for failure to renew.
20        (3) that the applicant is a current licensee under the
21    Consumer Installment Loan Act.
22    (e) No licensee shall conduct the business of providing
23non-recourse consumer lawsuit funding under this Act within any
24office, suite, room, or place of business in which any other
25business is solicited or engaged unless the other business is
26licensed by the Department and, in the opinion of the

 

 

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1Secretary, the other business would not be contrary to the best
2interests of consumers and is authorized by the Secretary in
3writing.
4    (f) The Secretary shall maintain a list of licensees that
5shall be available to interested consumers and lenders and the
6public. The Secretary shall maintain a toll-free number whereby
7consumers may obtain information about licensees. The
8Secretary shall also establish a complaint process under which
9an aggrieved consumer may file a complaint against a licensee
10or non-licensee who violates any provision of this Act.
 
11    Section 3-10. Closing of business; surrender of license. At
12least 10 days before a licensee ceases operations, closes the
13business, or files for bankruptcy, the licensee shall:
14    (1) Notify the Department of its intended action in
15writing.
16    (2) With the exception of filing for bankruptcy, surrender
17its license to the Secretary for cancellation. The surrender of
18the license shall not affect the licensee's civil or criminal
19liability for acts committed before or after the surrender or
20entitle the licensee to a return of any part of the annual
21license fee.
22    (3) Notify the Department of the location where the books,
23accounts, contracts, and records will be maintained.
24    The accounts, books, records, and contracts shall be
25maintained and serviced by the licensee, by another licensee

 

 

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1under this Act, or by the Department.
 
2
ARTICLE 4. Administrative Provisions

 
3    Section 4-5. Prohibited acts. A licensee or unlicensed
4person or entity entering into non-recourse consumer lawsuit
5funding may not commit, or have committed, on behalf of the
6licensee or unlicensed person or entity, any of the following
7acts:
8    (1) Threatening to use or using the criminal process in
9this or any other state to collect the assignment.
10    (2) Using any device or agreement that would have the
11effect of charging or collecting more fees or charges than
12allowed in this Act, including, but not limited to, entering
13into a different type of transaction with the consumer.
14    (3) Engaging in unfair, deceptive, or fraudulent practices
15related to the non-recourse consumer lawsuit funding.
16    (4) Threatening to take any action against a consumer that
17is prohibited by this Act or making any misleading or deceptive
18statements regarding the non-recourse consumer lawsuit
19funding.
20    (5) Making a misrepresentation of a material fact by an
21applicant for licensure in obtaining or attempting to obtain a
22license.
23    (6) Including any of the following provisions in
24non-recourse consumer lawsuit funding contracts:

 

 

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1        (A) a confession of judgment clause;
2        (B) a mandatory arbitration clause that is oppressive,
3    unfair, unconscionable, or substantially in derogation of
4    the rights of consumers; or
5        (C) a provision that the consumer agrees not to assert
6    any claim or defense arising out of the contract.
7    (7) Taking any power of attorney.
 
8    Section 4-10. Enforcement and remedies.
9    (a) The remedies provided in this Act are cumulative and
10apply to persons or entities subject to this Act.
11    (b) Any material violation of this Act, including the
12commission of an act prohibited under Section 4-5, constitutes
13a violation of the Consumer Fraud and Deceptive Business
14Practices Act.
15    (c) If any provision of the written agreement described in
16Section 2-5 violates this Act, then that provision is
17unenforceable against the consumer.
18    (d) Subject to the Illinois Administrative Procedure Act
19and any other applicable Department statutes and rules, the
20Secretary may hold hearings, make findings of fact, conclusions
21of law, issue cease and desist orders, have the power to issue
22fines of up to $10,000 per violation, refer the matter to the
23appropriate law enforcement agency for prosecution under this
24Act, and suspend or revoke a license granted under this Act.
25All proceedings shall be open to the public.

 

 

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1    (e) The Secretary may issue a cease and desist order to any
2licensee or other person doing business without the required
3license, when in the opinion of the Secretary the licensee or
4other person is violating or is about to violate any provisions
5of this Act or any rule or requirement imposed in writing by
6the Department as a condition of granting any authorization
7permitted by this Act. In addition to any other action
8authorized by this Act, if the Secretary determines that a
9non-recourse consumer lawsuit funding company is engaged in or
10is believed to be engaged in activities that may constitute a
11violation of this Act and the Secretary is able to show that an
12emergency exists, the Secretary may suspend the non-recourse
13consumer lawsuit funding company's license for a period not
14exceeding 180 calendar days. The cease and desist order and
15emergency suspension permitted by this subsection (e) may be
16issued prior to a hearing.
17    The Secretary shall serve notice of his or her action,
18including, but not limited to, a statement of the reasons for
19the action, either personally or by certified mail, return
20receipt requested. Service by certified mail shall be deemed
21completed when the notice is deposited in the U.S. Mail.
22    Within 10 business days after service of the cease and
23desist order, the licensee or other person may request a
24hearing in writing. The Secretary shall schedule a hearing
25within 30 days after the request for a hearing unless otherwise
26agreed to by the parties. The Secretary shall have the

 

 

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1authority to adopt rules for the administration of this
2Section.
3    If it is determined that the Secretary had the authority to
4issue the cease and desist order, he or she may issue such
5orders as may be reasonably necessary to correct, eliminate, or
6remedy the conduct.
7    The powers vested in the Secretary by the subsection (e)
8are additional to any and all other powers and remedies vested
9in the Secretary by law, and nothing in this subsection (e)
10shall be construed as requiring that the Secretary shall employ
11the power conferred in this subsection instead of or as a
12condition precedent to the exercise of any other power or
13remedy vested in the Secretary.
14    (f) The Secretary may, after 10 business days notice by
15registered mail to the licensee at the address set forth in the
16license stating the contemplated action an in general the
17grounds therefore, fine the licensee an amount not exceeding
18$10,000 per violation, or revoke or suspend any license issued
19by the Department if found that:
20        (1) the licensee has failed to comply with any
21    provision of this Act or any order, decision, finding,
22    rule, regulation, or direction of the Secretary lawfully
23    made under the authority of this Act; or
24        (2) any fact or condition exists that, if it had
25    existed at the time of the original application for the
26    license, clearly would have warranted the Secretary in

 

 

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1    refusing to issue the license.
2        No revocation, suspension, or surrender of any license
3    shall impair or affect the obligation of any pre-existing
4    lawful contract between the non-recourse consumer lawsuit
5    funding company and a consumer.
6        The Secretary may issue a new license to a licensee
7    whose license has been revoked when facts or conditions
8    that clearly would have warranted the Secretary in refusing
9    originally to issue the license no longer exist.
10        In every case in which a license or renewal of a
11    license is denied, the Secretary shall serve the licensee
12    with notice of his or her action, including a statement of
13    the reasons for his or her actions, either personally, or
14    by certified mail, return receipt requested. Service by
15    certified mail shall be deemed completed when the notice is
16    deposited in the U.S. Mail.
17        An order assessing a fine, an order revoking or
18    suspending a license, or an order denying or refusing to
19    renew a license shall take effect upon service of the order
20    unless the licensee requests a hearing, in writing, within
21    10 days after the date of service. In the event a hearing
22    is requested, the order shall be stayed until final
23    administrative order is entered.
24        If the licensee requests a hearing, the Secretary shall
25    schedule a hearing within 30 days after the request for a
26    hearing unless otherwise agreed to by the parties.

 

 

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1        The hearing shall be held at a time and place
2    designated by the Secretary. The Secretary, and any
3    administrative law judge designated by him or her, shall
4    have the power to administer oaths and affirmations,
5    subpoena witnesses and compel their attendance, take
6    evidence, and require the production of books, papers,
7    correspondence, and other records or information that he or
8    she considers relevant or material to the inquiry.
9        The costs of administrative hearings conducted under
10    this Section shall be paid by the licensee.
11    (g) All moneys received by the Department under this Act
12shall be deposited in the Financial Institutions Fund.
 
13    Section 4-15. Bonding.
14    (a) A person or entity engaged in non-recourse consumer
15lawsuit funding under this Act shall post a bond to the
16Department in the amount of $50,000 per license or irrevocable
17letter of credit issued and confirmed by a financial
18institution authorized by law to transact business in the State
19of Illinois.
20    (b) A bond posted under subsection (a) must continue in
21effect for the period of licensure and for 3 additional years
22if the bond is still available. The bond must be available to
23pay damages and penalties to be a consumer harmed by a
24violation of this Act.
25    (c) From time to time the Secretary may require a licensee

 

 

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1to file a bond in an additional sum if the Secretary determines
2it to be necessary. In no case shall the bond be more than the
3outstanding liabilities of the licensee.
 
4    Section 4-20. Reporting of violations. The Department
5shall report to the Attorney General all material violations of
6this Act of which it becomes aware.
 
7    Section 4-25. Rulemaking.
8    (a) The Department may make and enforce such reasonable
9rules, regulations, directions, orders, decisions, and
10findings as the execution and enforcement of the provisions of
11this Act require, and as are not inconsistent therewith. All
12rules, regulations, and directions of a general character shall
13be made available to all licensees in an electronic format.
14    (b) The Department may adopt rules in connection with the
15activities of licensees that are necessary and appropriate for
16the protection of the consumers in this State. These rules
17shall be consistent with this Act.
 
18    Section 4-28. Confidentiality. All information collected
19by the Department under an examination or investigation of a
20non-recourse consumer lawsuit funding company, including, but
21not limited to, information collected to investigate any
22complaint against a non-recourse consumer lawsuit funding
23company filed with the Department, shall be maintained for the

 

 

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1confidential use of the Department and shall not be disclosed.
2The Department may not disclose such information to anyone
3other than the licensee, law enforcement officials, or other
4regulatory agencies that have an appropriate regulatory
5interest as determined by the Secretary, or to a party
6presenting a lawful subpoena to the Department. Information and
7documents disclosed to a federal, State, county, or local law
8enforcement agency shall not be disclosed by the agency for any
9purpose to any other agency or person. An order issued by the
10Department against a non-recourse consumer lawsuit funding
11company shall be a public record and any documents produced in
12discovery, filed with the administrative law judge, or
13introduced at hearing shall be a public record, except as
14otherwise prohibited by law.
 
15    Section 4-30. Judicial review. All final administrative
16decisions of the Department under this Act are subject to
17judicial review under the provisions of the Administrative
18Review Law and any rules adopted pursuant thereto.
 
19    Section 4-35. Waivers. There shall be no waiver of any
20provision of this Act.
 
21    Section 4-45. Severability. The provisions of this Act are
22severable under Section 1.31 of the Statute of Statutes.
 

 

 

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1    Section 4-48. Consumer protection study. The Department
2shall conduct a study to be reported to the Governor and the
3leaders of the General Assembly no later than February 1, 2016,
4addressing the adequacy of the consumer protections contained
5in this Act. The study shall include, but not be limited to:
6(1) an analysis of the average percentage of a consumer's
7settlement that is used to return the funding amount in each
8transaction; (2) a survey of consumer complaints filed against
9non-recourse consumer lawsuit funding companies; (3) a
10description of the benefits and shortcomings of non-recourse
11consumer lawsuit funding to consumers; and (4) any reforms that
12the Secretary recommends to better regulate non-recourse
13consumer lawsuit funding companies.
 
14
ARTICLE 90. Amendatory Provisions

 
15    Section 90-1. The Regulatory Sunset Act is amended by
16changing Section 4.26 as follows:
 
17    (5 ILCS 80/4.26)
18    Sec. 4.26. Acts repealed on January 1, 2016 and May 31,
192016.
20    (a) The following Acts are repealed on January 1, 2016:
21    The Illinois Athletic Trainers Practice Act.
22    The Illinois Roofing Industry Licensing Act.
23    The Illinois Dental Practice Act.

 

 

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1    The Collection Agency Act.
2    The Barber, Cosmetology, Esthetics, Hair Braiding, and
3Nail Technology Act of 1985.
4    The Respiratory Care Practice Act.
5    The Hearing Instrument Consumer Protection Act.
6    The Illinois Physical Therapy Act.
7    The Professional Geologist Licensing Act.
8    (b) The following Act is repealed on May 31, 2016:
9    The Non-Recourse Consumer Lawsuit Funding Act.
10(Source: P.A. 95-331, eff. 8-21-07; 95-876, eff. 8-21-08;
1196-1246, eff. 1-1-11.)
 
12    Section 90-10. The Consumer Fraud and Deceptive Business
13Practices Act is amended by changing Section 2Z as follows:
 
14    (815 ILCS 505/2Z)  (from Ch. 121 1/2, par. 262Z)
15    Sec. 2Z. Violations of other Acts. Any person who knowingly
16violates the Automotive Repair Act, the Automotive Collision
17Repair Act, the Home Repair and Remodeling Act, the Dance
18Studio Act, the Physical Fitness Services Act, the Hearing
19Instrument Consumer Protection Act, the Illinois Union Label
20Act, the Job Referral and Job Listing Services Consumer
21Protection Act, the Travel Promotion Consumer Protection Act,
22the Credit Services Organizations Act, the Automatic Telephone
23Dialers Act, the Pay-Per-Call Services Consumer Protection
24Act, the Telephone Solicitations Act, the Illinois Funeral or

 

 

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1Burial Funds Act, the Cemetery Oversight Act, the Cemetery Care
2Act, the Safe and Hygienic Bed Act, the Pre-Need Cemetery Sales
3Act, the High Risk Home Loan Act, the Payday Loan Reform Act,
4the Mortgage Rescue Fraud Act, subsection (a) or (b) of Section
53-10 of the Cigarette Tax Act, subsection (a) or (b) of Section
63-10 of the Cigarette Use Tax Act, the Electronic Mail Act, the
7Internet Caller Identification Act, paragraph (6) of
8subsection (k) of Section 6-305 of the Illinois Vehicle Code,
9Section 11-1431, 18d-115, 18d-120, 18d-125, 18d-135, 18d-150,
10or 18d-153 of the Illinois Vehicle Code, Article 3 of the
11Residential Real Property Disclosure Act, the Automatic
12Contract Renewal Act, the Non-Recourse Consumer Lawsuit
13Funding Act, or the Personal Information Protection Act commits
14an unlawful practice within the meaning of this Act.
15(Source: P.A. 96-863, eff. 1-19-10; 96-1369, eff. 1-1-11;
1696-1376, eff. 7-29-10; 97-333, eff. 8-12-11.)
 
17    Section 90-15. The Consumer Installment Loan Act is amended
18by changing Section 1 as follows:
 
19    (205 ILCS 670/1)  (from Ch. 17, par. 5401)
20    Sec. 1. License required to engage in business. No person,
21partnership, association, limited liability company, or
22corporation shall engage in the business of making loans of
23money in a principal amount not exceeding $40,000, and charge,
24contract for, or receive on any such loan a greater rate of

 

 

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1interest, discount, or consideration therefor than the lender
2would be permitted by law to charge if he were not a licensee
3hereunder, except as authorized by this Act after first
4obtaining a license from the Director of Financial Institutions
5(hereinafter called the Director). No licensee, or employee or
6affiliate thereof, that is licensed under the Payday Loan
7Reform Act shall obtain a license under this Act except that a
8licensee under the Payday Loan Reform Act may obtain a license
9under this Act for the exclusive purpose and use of making
10title-secured loans, as defined in subsection (a) of Section 15
11of this Act and governed by Title 38, Section 110.300 of the
12Illinois Administrative Code. For the purpose of this Section,
13"affiliate" means any person or entity that directly or
14indirectly controls, is controlled by, or shares control with
15another person or entity. A person or entity has control over
16another if the person or entity has an ownership interest of
1725% or more in the other. No licensee shall engage in the
18business of providing non-recourse consumer lawsuit funding,
19as defined by the Non-Recourse Consumer Lawsuit Funding Act,
20except in compliance with that Act.
21(Source: P.A. 96-936, eff. 3-21-11; 97-420, eff. 1-1-12.)
 
22    Section 99. Effective date. This Act takes effect upon
23becoming law.

 

 

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1 INDEX
2 Statutes amended in order of appearance
3    New Act
4    5 ILCS 80/4.26
5    815 ILCS 505/2Zfrom Ch. 121 1/2, par. 262Z
6    205 ILCS 670/1from Ch. 17, par. 5401