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1 AN ACT concerning financial regulation.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 1. Short title. This Act may be cited as the High
5 Risk Home Loan Act.
6 Section 5. Purpose and construction. The purpose of
7 this Act is to protect borrowers who enter into high risk
8 home loans from abuse that occurs in the credit marketplace
9 when creditors and brokers are not sufficiently regulated in
10 Illinois. This Act is to be construed as a borrower
11 protection statute for all purposes. This Act shall be
12 liberally construed to effectuate its purpose.
13 Section 10. Definitions. As used in this Act:
14 "Approved credit counselor" means a credit counselor
15 approved by the Director of Financial Institutions.
16 "Borrower" means a natural person who seeks or obtains a
17 high risk home loan.
18 "Commissioner" means the Commissioner of the Office of
19 Banks and Real Estate.
20 "Department" means the Department of Financial
22 "Director" means the Director of Financial Institutions.
23 "Good faith" means honesty in fact in the conduct or
24 transaction concerned.
25 "High risk home loan" means a home equity loan in which
26 (i) at the time of origination, the annual percentage rate
27 exceeds by more than 6 percentage points in the case of a
28 first lien mortgage, or by more than 8 percentage points in
29 the case of a junior mortgage, the yield on U.S. Treasury
30 securities having comparable periods of maturity to the loan
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1 maturity as of the fifteenth day of the month immediately
2 preceding the month in which the application for the loan is
3 received by the lender or (ii) the total points and fees
4 payable by the consumer at or before closing will exceed the
5 greater of 5% of the total loan amount or $800. The $800
6 figure shall be adjusted annually on January 1 by the annual
7 percentage change in the Consumer Price Index for All Urban
8 Consumers for all items published by the United States
9 Department of Labor. "High risk home loan" does not include a
10 loan that is made primarily for a business purpose unrelated
11 to the residential real property securing the loan or to an
12 open-end credit plan subject to 12 CFR 226 (2000, no
13 subsequent amendments or editions are included).
14 "Home equity loan" means any loan secured by the
15 borrower's primary residence where the proceeds are not used
16 as purchase money for the residence.
17 "Lender" means a natural or artificial person who
18 transfers, deals in, offers, or makes a high risk home loan.
19 "Lender" includes, but is not limited to, creditors and
20 brokers who transfer, deal in, offer, or make high risk home
21 loans. "Lender" does not include purchasers, assignees, or
22 subsequent holders of high risk home loans.
23 "Office" means the Office of Banks and Real Estate.
24 "Points and fees" means all items required to be
25 disclosed as points and fees under 12 CFR 226.32 (2000, no
26 subsequent amendments or editions included); the premium of
27 any single premium credit life, credit disability, credit
28 unemployment, or any other life or health insurance that is
29 financed directly or indirectly into the loan; and
30 compensation paid directly or indirectly to a mortgage
31 broker, including a broker that originates a loan in its own
32 name in a table-funded transaction, not otherwise included in
33 12 CFR 226.4.
34 "Reasonable" means fair, proper, just, or prudent under
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1 the circumstances.
2 "Servicer" means any entity chartered under the Illinois
3 Banking Act, the Savings Bank Act, the Illinois Credit Union
4 Act, or the Illinois Savings and Loan Act of 1985 and any
5 person or entity licensed under the Residential Mortgage
6 License Act of 1987, the Consumer Installment Loan Act, or
7 the Sales Finance Agency Act who is responsible for the
8 collection or remittance for, or has the right or obligation
9 to collect or remit for, any lender, note owner, or note
10 holder or for a licensee's own account, of payments,
11 interest, principal, and trust items (such as hazard
12 insurance and taxes on a residential mortgage loan) in
13 accordance with the terms of the residential mortgage loan,
14 including loan payment follow-up, delinquency loan follow-up,
15 loan analysis, and any notifications to the borrower that are
16 necessary to enable the borrower to keep the loan current and
17 in good standing.
18 "Total loan amount" has the same meaning as that term is
19 given in 12 CFR 226.32 and shall be calculated in accordance
20 with the Federal Reserve Board's Official Staff Commentary to
21 that regulation.
22 Section 15. Ability to repay. A creditor or broker shall
23 not transfer, deal in, offer, or make a high risk home loan
24 if the creditor or broker does not believe at the time the
25 loan is consummated that the borrower will be able to make
26 the scheduled payments to repay the obligation based upon a
27 consideration of his or her current and expected income,
28 current obligations, employment status, and other financial
29 resources (other than the borrower's equity in the dwelling
30 that secures repayment of the loan). A borrower shall be
31 presumed to be able to repay the loan if, at the time the
32 loan is consummated, or at the time of the first rate
33 adjustment, in the case of a lower introductory interest
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1 rate, the borrower's scheduled monthly payments on the loan
2 (including principal, interest, taxes, insurance, and
3 assessments), combined with the scheduled payments for all
4 other disclosed debts, do not exceed 50% of the borrower's
5 monthly gross income.
6 Section 20. Verification of ability to repay loan. The
7 lender shall verify the borrower's ability to repay the loan
8 in the case of a high risk home loan. The verification shall
9 require, at a minimum, the following:
10 (1) That the borrower prepare and submit to the
11 lender a personal income and expense statement in a form
12 prescribed by the Commissioner or the Director, who may
13 permit the use of other forms such as the URLA (Fannie
14 Mae Form 1003 (10/92), available from Fannie Mae, 3900
15 Wisconsin Avenue, NW, Washington, D.C. 20016-2892, and
16 Freddie Mac Form 85 (10/92), available from Freddie Mac
17 at 1101 Pennsylvania Avenue, NW, Suite 950, P.O. Box
18 37347, Washington, D.C. 20077-0001, no subsequent
19 amendments or editions) and Transmittal Summary (Fannie
20 Mae Form 1077 (3/97), available from Fannie Mae, 3900
21 Wisconsin Avenue, NW, Washington, D.C. 20016-2892, and
22 Freddie Mac Form 1008 (3/97), available from Freddie Mac
23 at 1101 Pennsylvania Avenue, NW, Suite 950, P.O. Box
24 37347, Washington, D.C. 20077-0001, no subsequent
25 amendments or editions).
26 (2) That the borrower's income is verified by means
27 of tax returns, pay stubs, accounting statements, or
28 other prudent means.
29 (3) That a credit report is obtained regarding the
31 Section 25. Good faith dealings; fraudulent or deceptive
32 practices. A lender must act in good faith in all relations
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1 with a borrower, including but not limited to, transferring,
2 dealing in, offering, or making a high risk home loan.
3 No lender shall employ fraudulent or deceptive acts or
4 practices in the making of a high risk home loan, including
5 deceptive marketing and sales efforts.
6 Section 30. Prepayment penalty. For any loan that is
7 subject to the provisions of this Act and is not subject to
8 the provisions of the Home Ownership and Equity Protection
9 Act of 1994, no lender shall make a high risk home loan that
10 includes a penalty provision for payment made: (i) after the
11 expiration of the 36-month period following the date the loan
12 was made; or (ii) that is more than:
13 (1) 3% of the total loan amount if the prepayment
14 is made within the first 12-month period following the
15 date the loan was made;
16 (2) 2% of the total loan amount if the prepayment
17 is made within the second 12-month period following the
18 date the loan was made; or
19 (3) 1% of the total loan amount if the prepayment
20 is made within the third 12-month period following the
21 date the loan was made.
22 Section 40. Pre-paid insurance products and warranties.
23 No lender shall transfer, deal in, offer, or make a high risk
24 home loan that finances a single premium credit life, credit
25 disability, credit unemployment, or any other life or health
26 insurance, directly or indirectly. Insurance calculated and
27 paid on a monthly basis shall not be considered to be
28 financed by the lender.
29 Section 45. Refinancing prohibited in certain cases. No
30 lender shall refinance any high risk home loan where such
31 refinancing charges additional points and fees within a
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1 12-month period after the original loan agreement was signed,
2 unless the refinancing results in a tangible net benefit to
3 the borrower.
4 Section 55. Financing of points and fees. No lender
5 shall transfer, deal in, offer, or make a high risk home loan
6 that finances points and fees in excess of 6% of the total
7 loan amount.
8 Section 60. Payments to contractors. No lender shall
9 make a payment of any proceeds of a high risk home loan
10 directly to a contractor under a home improvement contract
11 other than:
12 (1) by instrument payable to the borrower or
13 payable jointly to the borrower and contractor; or
14 (2) at the election of the borrower, by a
15 third-party escrow agent in accordance with the terms
16 established in a written agreement that is signed by the
17 borrower, the lender, and the contractor before the date
18 of payment.
19 Section 65. Negative amortization. No lender shall
20 transfer, deal in, offer, or make a high risk home loan,
21 other than a loan secured only by a reverse mortgage, with
22 terms under which the outstanding balance will increase at
23 any time over the course of the loan because the regular
24 periodic payments do not cover the full amount of the
25 interest due, unless the negative amortization is the
26 consequence of a temporary forbearance sought by the
28 Section 70. Negative equity. No lender shall transfer,
29 deal in, offer, or make a high risk home loan where the loan
30 amount exceeds the value of the property securing the loan.
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1 Section 80. Late payment fee. A lender shall not
2 transfer, deal in, offer, or make a high risk home loan that
3 provides for a late payment fee, except under the following
5 (1) the late payment fee shall not be in excess of
6 5% of the amount of the payment past due;
7 (2) the late payment fee shall only be assessed for
8 a payment past due for 15 days or more;
9 (3) the late payment fee shall not be imposed more
10 than once with respect to a single late payment;
11 (4) a late payment fee that the lender has
12 collected shall be reimbursed if the borrower presents
13 proof of having made a timely payment; and
14 (5) a lender shall treat each payment as posted on
15 the same business day as it was received by the lender,
16 servicer, or lender's agent or at the address provided to
17 the borrower by the lender, servicer, or lender's agent
18 for making payments.
19 Section 85. Payment compounding. No lender shall
20 transfer, deal in, offer, or make a high risk home loan that
21 includes terms under which more than 2 periodic payments
22 required under the loan are consolidated and paid in advance
23 from the loan proceeds provided to the borrower.
24 Section 90. Call provision. No lender shall transfer,
25 deal in, offer, or make a high risk home loan that contains a
26 provision that permits the lender, in its sole discretion, to
27 accelerate the indebtedness, provided that this provision
28 does not prohibit acceleration of a loan in good faith due to
29 a borrower's failure to abide by the material terms of the
31 Section 95. Disclosure prior to making a high risk home
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1 loan. A lender shall not transfer, deal in, offer, or make a
2 high risk home loan unless the lender has given the following
3 notice or a substantially similar notice in writing, to the
4 borrower, acknowledged in writing and signed by the borrower
5 not later than the time the notice is required under the
6 notice provision contained in 12 CFR 226.31(c):
7 NOTICE TO BORROWER
8 YOU SHOULD BE AWARE THAT YOU MIGHT BE ABLE TO OBTAIN A LOAN
9 AT A LOWER COST. YOU SHOULD SHOP AROUND AND COMPARE LOAN
10 RATES AND FEES. LOAN RATES AND CLOSING COSTS AND FEES VARY
11 BASED ON MANY FACTORS, INCLUDING YOUR PARTICULAR CREDIT AND
12 FINANCIAL CIRCUMSTANCES, YOUR EMPLOYMENT HISTORY, THE
13 LOAN-TO-VALUE REQUESTED, AND THE TYPE OF PROPERTY THAT WILL
14 SECURE YOUR LOAN. THE LOAN RATE AND FEES COULD ALSO VARY
15 BASED ON WHICH LENDER OR BROKER YOU SELECT. IF YOU ACCEPT THE
16 TERMS OF THIS LOAN, THE LENDER WILL HAVE A MORTGAGE LIEN ON
17 YOUR HOME. YOU COULD LOSE YOUR HOME AND ANY MONEY YOU PUT
18 INTO IT IF YOU DO NOT MEET YOUR PAYMENT OBLIGATIONS UNDER THE
19 LOAN. YOU SHOULD CONSULT AN ATTORNEY-AT-LAW AND AN APPROVED
20 CREDIT COUNSELOR OR OTHER EXPERIENCED FINANCIAL ADVISOR
21 REGARDING THE RATE, FEES, AND PROVISIONS OF THIS LOAN BEFORE
22 YOU PROCEED. A LIST OF APPROVED CREDIT COUNSELORS IS
23 AVAILABLE BY CONTACTING EITHER THE ILLINOIS DEPARTMENT OF
24 FINANCIAL INSTITUTIONS OR THE ILLINOIS OFFICE OF BANKS AND
25 REAL ESTATE. YOU ARE NOT REQUIRED TO COMPLETE THIS LOAN
26 AGREEMENT MERELY BECAUSE YOU HAVE RECEIVED THIS DISCLOSURE OR
27 HAVE SIGNED A LOAN APPLICATION. ALSO, YOUR PAYMENTS ON
28 EXISTING DEBTS CONTRIBUTE TO YOUR CREDIT RATINGS. YOU SHOULD
29 NOT ACCEPT ANY ADVICE TO IGNORE YOUR REGULAR PAYMENTS TO YOUR
30 EXISTING LENDERS.
31 Section 100. Counseling prior to perfecting foreclosure
33 (a) If a high risk home loan becomes delinquent by more
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1 than 30 days, the servicer shall send a notice advising the
2 borrower that he or she may wish to seek approved credit
4 (b) The notice required in subsection (a) shall, at a
5 minimum, include the following language:
6 "YOUR LOAN IS OR WAS MORE THAN 30 DAYS PAST DUE. YOU MAY
7 BE EXPERIENCING FINANCIAL DIFFICULTY. IT MAY BE IN YOUR BEST
8 INTEREST TO SEEK APPROVED CREDIT COUNSELING. A LIST OF
9 APPROVED CREDIT COUNSELORS MAY BE OBTAINED FROM EITHER THE
10 ILLINOIS DEPARTMENT OF FINANCIAL INSTITUTIONS OR THE ILLINOIS
11 OFFICE OF BANKS AND REAL ESTATE."
12 (c) If, within 15 days after mailing the notice provided
13 for under subsection (b), a lender, servicer, or lender's
14 agent is notified in writing by an approved credit counselor
15 and the approved credit counselor advises the lender,
16 servicer, or lender's agent that the borrower is seeking
17 approved credit counseling, then the lender, servicer, or
18 lender's agent shall not institute legal action under Part 15
19 of Article XV of the Code of Civil Procedure for 30 days
20 after the date of that notice. Only one such 30-day period of
21 forbearance is allowed under this Section per subject loan.
22 (d) If, within the 30-day period provided under
23 subsection (c), the lender, servicer, or lender's agent, the
24 approved credit counselor, and the borrower agree to a debt
25 management plan, then the lender, servicer, or lender's agent
26 shall not institute legal action under Part 15 of Article XV
27 of the Code of Civil Procedure for as long as the debt
28 management plan is complied with by the borrower.
29 The agreed debt management plan must be in writing and
30 signed by the lender, servicer, or lender's agent, the
31 approved credit counselor, and the borrower. No modification
32 of an approved debt management plan can be made without the
33 mutual agreement of the lender, servicer, or lender's agent,
34 the approved credit counselor, and the borrower.
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1 Upon written notice to the lender, servicer, or lender's
2 agent, the borrower may change approved credit counselors.
3 (e) If the borrower fails to comply with the agreed debt
4 management plan, then nothing in this Section shall be
5 construed to impair the legal right of the lender, servicer,
6 or lender's agent to enforce the contract.
7 Section 105. Right to cure.
8 (a) Before an action is filed to foreclose or collect
9 money due pursuant to a high risk home loan or before other
10 action is taken to seize or transfer ownership of property
11 subject to a high risk home loan, the lender or lender's
12 assignee of the loan shall deliver to the borrower a notice
13 of the right to cure the default, informing the borrower of
14 all of the following:
15 (1) The nature of the default.
16 (2) The borrower's right to cure the default by
17 paying the sum of money required, provided that a lender
18 or assignee shall accept any partial payment made or
19 tendered in response to the notice. If the amount
20 necessary to cure the default will change within 30 days
21 of the notice due to the application of a daily interest
22 rate or the addition of late fees, as allowed by the Act,
23 the notice shall give sufficient information to enable
24 the borrower to calculate the amount at any point within
25 the 30-day period.
26 (3) The date by which the borrower may cure the
27 default to avoid a court action, acceleration and
28 initiation of foreclosure, or other action to seize the
29 property, which date shall not be less than 30 days after
30 the date the notice is delivered, and the name, address,
31 and telephone number of a person to whom the payment or
32 tender shall be made.
33 (4) That if the borrower does not cure the default
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1 by the date specified, the lender or assignee may file an
2 action for money due or take steps to terminate the
3 borrower's ownership in the property by requiring payment
4 in full of the high risk home loan and commencing a
5 foreclosure proceeding or other action to seize the
7 (5) The name, address, and telephone number of a
8 person whom the borrower may contact if the borrower
9 disagrees with the assertion that a default has occurred
10 or the correctness of the calculation of the amount
11 required to cure the default.
12 (b) If a lender or assignee asserts that grounds for
13 acceleration exist and requires the payment in full of all
14 sums secured by the high risk home loan, the borrower or
15 anyone authorized to act on the borrower's behalf may, at any
16 time before the title is transferred by means of foreclosure,
17 by judicial proceeding and sale, or other means, cure the
18 default, and reinstate the high risk home loan. Cure of the
19 default shall reinstate the borrower to the same position as
20 if the default had not occurred and shall nullify, as of the
21 date of the cure, an acceleration of any obligation under the
22 high risk home loan arising from the default.
23 (c) To cure a default under this Section, a borrower
24 shall not be required to pay any charge, fee, or penalty
25 attributable to the exercise of the right to cure a default,
26 other than the fees specifically allowed by this subsection.
27 The borrower shall not be liable for any attorney fees
28 relating to the default that are incurred by the lender or
29 assignee prior to or during the 30-day period set forth in
30 subsection (a) of this Section, nor for any such fees in
31 excess of $100 that are incurred by the lender or assignee
32 after the expiration of the 30-day period but before the
33 lender or assignee files a foreclosure or other judicial
34 action or takes other action to seize or transfer ownership
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1 of the real estate. After the lender or assignee files a
2 foreclosure or other judicial action or takes other action to
3 seize or transfer ownership of the real estate, the borrower
4 shall only be liable for attorney fees that are reasonable
5 and actually incurred by the lender or assignee, based on a
6 reasonable hourly rate and a reasonable number of hours.
7 (d) If a default is cured prior to the initiation of any
8 action to foreclose or to seize the residence, the lender or
9 assignee shall not institute a proceeding or other action for
10 that default. If a default is cured after the initiation of
11 any action, the lender or assignee shall take such steps as
12 are necessary to terminate the action.
13 (e) A lender or a lender's assignee of a high risk home
14 loan that has the legal right to foreclose shall use the
15 judicial foreclosure procedures provided by law. In such a
16 proceeding, the borrower may assert the nonexistence of a
17 default and any other claim or defense to acceleration and
18 foreclosure, including any claim or defense based on a
19 violation of the Act, though no such claim or defense shall
20 be deemed a compulsory counterclaim.
21 Section 110. Mortgage Awareness Program.
22 (a) The Mortgage Awareness Program is a counseling and
23 educational component that must be provided by the Director
24 and the Commissioner.
25 (b) The core curriculum of the Mortgage Awareness
26 Program shall include all of the following:
27 (1) Explanation of the amount financed.
28 (2) Explanation of the finance charge.
29 (3) Explanation of the annual percentage rate.
30 (4) Explanation of the total payments.
31 (5) Explanation of the loan costs, including
32 broker's fees, finance charges, points, and origination
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1 (6) Explanation of the right of rescission.
2 (7) Explanation of foreclosure procedures.
3 (8) Explanation of the significant debt ratios,
4 including total debt to income, loan debt to income, and
5 loan debt to value of residence.
6 (9) Explanation of adjustable rate mortgage.
7 (10) Explanation of balloon payments.
8 (11) Explanation of credit options.
9 (12) Explanation of each item that appears on a
10 good faith estimate.
11 (13) Explanation of pre-payment penalties.
12 (c) Counseling session attendees must complete a
13 personal income and expense statement, as well as a balance
14 sheet, on forms provided by the Commissioner or the Director.
15 (d) Prior to signing a certificate of completion,
16 approved credit counselors shall privately discuss with each
17 attendee that attendee's income and expense statement and
18 balance sheet, as well as the terms of any loan the attendee
19 currently has or may be contemplating, and provide a third
20 party review to establish the affordability of the loan.
21 (e) Counseling session attendees must be given a
22 brochure that contains information covered by the Mortgage
23 Awareness Program.
24 (f) Any lender, prior to making a high risk home loan,
25 shall inform the borrower in writing of the right to
26 participate in the Mortgage Awareness Program.
27 (g) No lender shall offer less favorable loan terms to a
28 borrower due to a borrower's participation in the Mortgage
29 Awareness Program.
30 (h) Except as prohibited elsewhere in this Section, the
31 borrower may waive participation in the program, provided
32 that the waiver occurs no less than 2 business days after the
33 day that the borrower receives the notice required by
34 subsection (f) of this Section and that the waiver is in
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1 writing in a form approved by the Commissioner and the
3 Section 115. Report of default and foreclosure rates on
4 conventional loans.
5 (a) On or before October 1 and April 1 of each year,
6 each servicer of Illinois residential mortgage loans shall
7 report to the Commissioner or the Director the default and
8 foreclosure data of conventional loans for the 6-month
9 periods ending June 30 and December 31, respectively.
10 (b) Each servicer shall report the following
12 (1) The average quarterly dollar amount of
13 conventional one to 4 family mortgage loans secured by
14 Illinois real estate.
15 (2) The average quarterly number of conventional
16 one to 4 family mortgage loans secured by Illinois real
18 (3) The average quarterly dollar amount of
19 conventional one to 4 family mortgage loans secured by
20 Illinois real estate that are in default over 90 days.
21 (4) The average quarterly number of conventional
22 one to 4 family mortgage loans secured by Illinois real
23 estate that are in default over 90 days.
24 (5) The dollar amount of foreclosures on one to 4
25 family conventional loans completed during the reporting
27 (6) The number of foreclosures on one to 4 family
28 conventional loans completed during the reporting period.
29 (7) Whether any of the loans where a foreclosure
30 was completed were originated less than 18 months before
31 the completed foreclosure.
32 (8) Whether any of the loans where a foreclosure
33 was completed had a note rate greater than 10% for first
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1 lien mortgage loans or greater than 12% in the case of a
2 junior lien.
3 (c) An officer of the servicer shall sign the form.
4 Section 120. Review and analysis.
5 (a) The Commissioner or Director shall review and
6 analyze the default and foreclosure rate data reports
7 submitted under Section 115.
8 (b) The reports and their analyses may be used for the
9 following purposes:
10 (1) In setting the scope of a regularly scheduled
12 (2) In setting the scope of a special examination.
13 (3) In comparing the reported information of a
15 (c) The Commissioner or the Director may correspond with
16 a servicer to seek clarification of information contained in
17 its report and to gather additional data concerning loans in
18 default or loans in foreclosure.
19 Section 125. Third party review of high risk home loans.
20 (a) In the case of any high risk home loan, the borrower
21 shall be afforded the opportunity to seek independent review
22 by the Office or the Department of the loan terms, in order
23 to determine affordability of the loan, when and if the
24 General Assembly appropriates adequate funding to the Office
25 or the Department specifically for this Section.
26 (b) The Office or the Department shall inform the
27 borrower of the amount the borrower has available for a
28 monthly mortgage payment based upon the borrower's budget.
29 (c) The Office or the Department shall review loan
30 information pertaining to balloon payments and adjustable
31 interest rates and other items disclosed by the loan
32 documents affecting amount of payment and shall inform the
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1 borrower of such items.
2 (d) If, based upon the review, the borrower determines
3 that the loan is not in his or her best economic interest,
4 the reviewer shall so notify the lender. This determination
5 shall enable the borrower to withdraw from the contemplated
6 loan with no financial penalty.
7 Section 130. Circumstances voiding mandatory arbitration
8 provisions. Without regard to whether a borrower is acting
9 individually or on behalf of others similarly situated, a
10 mandatory arbitration provision of a high risk home loan
11 agreement that is oppressive, unfair, unconscionable, or
12 substantially in derogation of the rights of the borrower is
14 Section 135. Remedies, enforcement, and limitations of
16 (a) The remedies provided in this Act are cumulative and
17 apply to persons or entities subject to this Act.
18 (b) Any knowing violation of this Act constitutes a
19 violation of the Consumer Fraud and Deceptive Business
20 Practices Act.
21 (c) If any provision of an agreement for a high risk
22 home loan violates this Act, then that provision is
23 unenforceable against the borrower.
24 (d)(1) Any natural or artificial person who purchases or
25 otherwise is assigned or subsequently holds a high risk home
26 loan shall be subject to all affirmative claims and defenses
27 with respect to the loan that the borrower could assert
28 against the lender or broker of the loan, provided that this
29 item (d)(1) shall not apply if the purchaser, assignee or
30 holder demonstrates by a preponderance of the evidence that
32 (A) has in place, at the time of the purchase,
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1 assignment or transfer of the loans, policies that
2 expressly prohibit its purchase, acceptance of assignment
3 or holding of any high risk home loans;
4 (B) requires by contract that a seller, assignor or
5 transferor of high risk home loans to the purchaser,
6 assignee or transferee represents and warrants to the
7 purchaser, assignee or transferee that either (i) the
8 seller, assignor or transferor will not sell, assign or
9 transfer any high risk home loans to the purchaser,
10 assignee or transferee, or (ii) the seller, assignor or
11 transferor is a beneficiary of a representation and
12 warranty from a previous seller, assignor or transferor
13 to that effect; and
14 (C) exercises reasonable due diligence at the time
15 of the purchase, assignment or transfer of high risk home
16 loans, or within a reasonable period of time after the
17 purchase, assignment or transfer of such home loans,
18 which is intended by the purchaser, assignee or
19 transferee to prevent the purchaser, assignee or
20 transferee from purchasing or taking assignment or
21 otherwise holding any high risk home loans, provided that
22 this reasonable due diligence requirement may be met by
23 sampling and need not require loan-by-loan review.
24 (2) Limited to the amount required to reduce or
25 extinguish the borrower's liability under the high cost home
26 loan plus the amount required to recover costs, including
27 reasonable attorney fees, a borrower acting only in an
28 individual capacity may assert claims that the borrower could
29 assert against a lender of the home loan against a subsequent
30 holder or assignee of the home loan as follows:
31 (A) within 5 years of the closing date of a high
32 risk home loan, a violation of this Act in connection
33 with the loan as an original action; and
34 (B) at any time during the term of a high risk home
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1 loan, after an action to collect on the home loan or to
2 foreclose on the collateral securing the home loan has
3 been initiated, or the debt arising from the home loan
4 has been accelerated, or the home loan has become 60 days
5 in default, any defense, claim, counterclaim or action to
6 enjoin foreclosure or preserve or obtain possession of
7 the home that secures the loan.
8 (e) In addition to the limitation of liability afforded
9 to subsequent purchasers, assignees, or holders under
10 subsection (d) of this Section, a lender and a subsequent
11 purchaser, assignee, or holder of the high risk home loan is
12 not liable for a violation of this Act if:
13 (1) within 30 days of the loan closing and prior to
14 receiving any notice from the borrower of the violation,
15 the lender has made appropriate restitution to the
16 borrower and appropriate adjustments are made to the
17 loan; or
18 (2) the violation was not intentional and resulted
19 from a bona fide error in fact, notwithstanding the
20 maintenance of procedures reasonably adopted to avoid
21 such errors, and within 60 days of the discovery of the
22 violation and prior to receiving any notice from the
23 borrower of the violation, the borrower is notified of
24 the violation, appropriate restitution is made to the
25 borrower, and appropriate adjustments are made to the
27 Section 145. Subterfuge prohibited. No lender, with the
28 intent to avoid the application or provisions of this Act,
29 shall (i) divide a loan transaction into separate parts or
30 (ii) perform any other subterfuge.
31 Section 150. Preemption of administrative rules. Any
32 relevant administrative rule promulgated before the effective
SB1784 Enrolled -19- LRB093 10148 BDD 11571 b
1 date of this Act by the Department or the Office is
3 Section 153. Reporting of violations. The Office and the
4 Department must report to the Attorney General all violations
5 of this Act of which they become aware.
6 Section 155. Rulemaking. The Office and the Department
7 may adopt reasonable rules to implement and administer this
9 Section 160. Judicial review. All final administrative
10 decisions under this Act are subject to judicial review
11 pursuant to the provisions of the Administrative Review Law
12 and any rules adopted pursuant thereto.
13 Section 165. Waiver prohibited. There shall be no waiver
14 of any provision of this Act, except as explicitly provided
15 in subsection (h) of Section 110.
16 Section 170. Superiority of Act. To the extent this Act
17 conflicts with any other Illinois State financial regulation
18 laws, except the Interest Act, this Act is superior and
19 supersedes those laws for the purposes of regulating high
20 risk home loans in Illinois.
21 Section 175. Severability. The provisions of this Act
22 are severable under Section 1.31 of the Statute on Statutes.
23 Section 800. The Deposit of State Moneys Act is amended
24 by changing Sections 11 and 11.1 as follows:
25 (15 ILCS 520/11) (from Ch. 130, par. 30)
26 Sec. 11. Protection of public deposits; eligible
SB1784 Enrolled -20- LRB093 10148 BDD 11571 b
2 (a) For deposits not insured by an agency of the federal
3 government, the State Treasurer, in his or her discretion,
4 may accept as collateral any of the following classes of
5 securities, provided there has been no default in the payment
6 of principal or interest thereon:
7 (1) Bonds, notes, or other securities constituting
8 direct and general obligations of the United States, the
9 bonds, notes, or other securities constituting the direct
10 and general obligation of any agency or instrumentality
11 of the United States, the interest and principal of which
12 is unconditionally guaranteed by the United States, and
13 bonds, notes, or other securities or evidence of
14 indebtedness constituting the obligation of a U.S. agency
15 or instrumentality.
16 (2) Direct and general obligation bonds of the
17 State of Illinois or of any other state of the United
19 (3) Revenue bonds of this State or any authority,
20 board, commission, or similar agency thereof.
21 (4) Direct and general obligation bonds of any
22 city, town, county, school district, or other taxing body
23 of any state, the debt service of which is payable from
24 general ad valorem taxes.
25 (5) Revenue bonds of any city, town, county, or
26 school district of the State of Illinois.
27 (6) Obligations issued, assumed, or guaranteed by
28 the International Finance Corporation, the principal of
29 which is not amortized during the life of the obligation,
30 but no such obligation shall be accepted at more than 90%
31 of its market value.
32 (7) Illinois Affordable Housing Program Trust Fund
33 Bonds or Notes as defined in and issued pursuant to the
34 Illinois Housing Development Act.
SB1784 Enrolled -21- LRB093 10148 BDD 11571 b
1 (8) In an amount equal to at least market value of
2 that amount of funds deposited exceeding the insurance
3 limitation provided by the Federal Deposit Insurance
4 Corporation or the National Credit Union Administration
5 or other approved share insurer: (i) securities, (ii)
6 mortgages, (iii) letters of credit issued by a Federal
7 Home Loan Bank, or (iv) loans covered by a State Guaranty
8 under the Illinois Farm Development Act.
9 (b) The State Treasurer may establish a system to
10 aggregate permissible securities received as collateral from
11 financial institutions in a collateral pool to secure State
12 deposits of the institutions that have pledged securities to
13 the pool.
14 (c) The Treasurer may at any time declare any particular
15 security ineligible to qualify as collateral when, in the
16 Treasurer's judgment, it is deemed desirable to do so.
17 (d) Notwithstanding any other provision of this Section,
18 as security the State Treasurer may, in his discretion,
19 accept a bond, executed by a company authorized to transact
20 the kinds of business described in clause (g) of Section 4 of
21 the Illinois Insurance Code, in an amount not less than the
22 amount of the deposits required by this Section to be
23 secured, payable to the State Treasurer for the benefit of
24 the People of the State of Illinois, in a form that is
25 acceptable to the State Treasurer.
26 (Source: P.A. 87-510; 87-575; 87-895; 88-93.)
27 (15 ILCS 520/11.1) (from Ch. 130, par. 30.1)
28 Sec. 11.1. The State Treasurer may, in his or her
29 discretion, accept as security for State deposits insured
30 certificates of deposit or share certificates issued to the
31 depository institution pledging them as security and may
32 require security in the amount of 125% of the value of the
33 State deposit. Such certificate of deposit or share
SB1784 Enrolled -22- LRB093 10148 BDD 11571 b
1 certificate shall:
2 (1) be fully insured by the Federal Deposit Insurance
3 Corporation, the Federal Savings and Loan Insurance
4 Corporation or the National Credit Union Share Insurance Fund
5 or issued by a depository institution which is rated within
6 the 3 highest classifications established by at least one of
7 the 2 standard rating services;
8 (2) be issued by a financial institution having assets
9 of $15,000,000
$30,000,000 or more; and
10 (3) be issued by either a savings and loan association
11 having a capital to asset ratio of at least 2%, by a bank
12 having a capital to asset ratio of at least 6% or by a credit
13 union having a capital to asset ratio of at least 4%.
14 The depository institution shall effect the assignment of
15 the certificate of deposit or share certificate to the State
16 Treasurer and shall agree, that in the event the issuer of
17 the certificate fails to maintain the capital to asset ratio
18 required by this Section, such certificate of deposit or
19 share certificate shall be replaced by additional suitable
21 (Source: P.A. 85-803.)
22 Section 805. The Public Funds Deposit Act is amended by
23 changing Section 1 as follows:
24 (30 ILCS 225/1) (from Ch. 102, par. 34)
25 Sec. 1. Deposits. Any treasurer or other custodian of
26 public funds may deposit such funds in a savings and loan
27 association, savings bank, or State or national bank in this
28 State. When such deposits become collected funds and are not
29 needed for immediate disbursement, they shall be invested
30 within 2 working days at prevailing rates or better. The
31 treasurer or other custodian of public funds may require such
32 bank, savings bank, or savings and loan association to
SB1784 Enrolled -23- LRB093 10148 BDD 11571 b
1 deposit with him or her securities guaranteed by agencies and
2 instrumentalities of the federal government equal in market
3 value to the amount by which the funds deposited exceed the
4 federally insured amount. Any treasurer or other custodian of
5 public funds may accept as security for public funds
6 deposited in such bank, savings bank, or savings and loan
7 association any securities or other eligible collateral
8 authorized by Sections 11 and 11.1 of the Deposit of State
9 Moneys Act (15 ILCS 520/11 and 11.1) or Section 6 of the
10 Public Funds Investment Act (30 ILCS 235/6). Such treasurer
11 or other custodian is authorized to enter into an agreement
12 with any such bank, savings bank, or savings and loan
13 association, with any federally insured financial institution
14 or trust company, or with any agency of the U.S. government
15 relating to the deposit of such securities. Any such
16 treasurer or other custodian shall be discharged from
17 responsibility for any funds for which securities are so
18 deposited with him or her, and the funds for which securities
19 are so deposited shall not be subject to any otherwise
20 applicable limitation as to amount.
21 No bank, savings bank, or savings and loan association
22 shall receive public funds as permitted by this Section,
23 unless it has complied with the requirements established
24 pursuant to Section 6 of the Public Funds Investment Act.
25 (Source: P.A. 91-211, eff. 7-20-99.)
26 Section 810. The State Officers and Employees Money
27 Disposition Act is amended by changing Section 2c as follows:
28 (30 ILCS 230/2c) (from Ch. 127, par. 173a)
29 Sec. 2c. Every such officer, board, commission,
30 commissioner, department, institution, arm or agency is
31 authorized to demand and receive a bond and securities in
32 amount and kind satisfactory to him from any bank or savings
SB1784 Enrolled -24- LRB093 10148 BDD 11571 b
1 and loan association in which moneys held by such officer,
2 board, commission, commissioner, department, institution, arm
3 or agency for or on behalf of the State of Illinois, may be
4 on deposit, such securities to be held by the officer, board,
5 commission, commissioner, department, institution, arm or
6 agency for the period that such moneys are so on deposit and
7 then returned together with interest, dividends and other
8 accruals to the bank or savings and loan association. The
9 bond or undertaking and such securities shall be conditioned
10 for the return of the moneys deposited in conformity with the
11 terms of the deposit.
12 Whenever funds deposited with a bank or savings and loan
13 association exceed the amount of federal deposit insurance
14 coverage, a bond, or pledged securities, or other eligible
15 collateral shall be obtained. Only the types of securities or
16 other eligible collateral which the State Treasurer may, in
17 his or her discretion, accept for amounts not insured by the
18 Federal Deposit Insurance Corporation or the Federal Savings
19 and Loan Insurance Corporation under Section 11 of "An Act in
20 relation to State moneys", approved June 28, 1919, as
21 amended, may be accepted as pledged securities. The market
22 value of the bond or pledged securities shall at all times be
23 equal to or greater than the uninsured portion of the deposit
24 unless the funds deposited are collateralized pursuant to a
25 system established by the State Treasurer to aggregate
26 permissible securities received as collateral from financial
27 institutions in a collateral pool to secure State deposits of
28 the institution that have pledged securities to the pool.
29 All securities deposited by a bank or savings and loan
30 association under the provisions of this Section shall remain
31 the property of the depositary and may be stamped by the
32 depositary so as to indicate that such securities are
33 deposited as collateral. Should the bank or savings and loan
34 association fail or refuse to pay over the moneys, or any
SB1784 Enrolled -25- LRB093 10148 BDD 11571 b
1 part thereof, deposited with it, the officer, board,
2 commission, commissioner, department, institution, arm or
3 agency may sell such securities upon giving 5 days notice to
4 the depositary of his intention to so sell such securities.
5 Such sale shall transfer absolute ownership of the securities
6 so sold to the vendee thereof. The surplus, if any, over the
7 amount due to the State and the expenses of the sale shall be
8 paid to the bank or savings and loan association. Actions may
9 be brought in the name of the People of the State of Illinois
10 to enforce the claims of the State with respect to any
11 securities deposited by a bank or savings and loan
13 No bank or savings and loan association shall receive
14 public funds as permitted by this Section, unless it has
15 complied with the requirements established pursuant to
16 Section 6 of "An Act relating to certain investments of
17 public funds by public agencies", approved July 23, 1943, as
18 now or hereafter amended.
19 (Source: P.A. 85-257.)
20 Section 815. The Public Funds Investment Act is amended
21 by changing Section 6 as follows:
22 (30 ILCS 235/6) (from Ch. 85, par. 906)
23 Sec. 6. Report of financial institutions.
24 (a) No bank shall receive any public funds unless it has
25 furnished the corporate authorities of a public agency
26 submitting a deposit with copies of the last two sworn
27 statements of resources and liabilities which the bank is
28 required to furnish to the Commissioner of Banks and Real
29 Estate or to the Comptroller of the Currency. Each bank
30 designated as a depository for public funds shall, while
31 acting as such depository, furnish the corporate authorities
32 of a public agency with a copy of all statements of resources
SB1784 Enrolled -26- LRB093 10148 BDD 11571 b
1 and liabilities which it is required to furnish to the
2 Commissioner of Banks and Real Estate or to the Comptroller
3 of the Currency; provided, that if such funds or moneys are
4 deposited in a bank, the amount of all such deposits not
5 collateralized or insured by an agency of the federal
6 government shall not exceed 75% of the capital stock and
7 surplus of such bank, and the corporate authorities of a
8 public agency submitting a deposit shall not be discharged
9 from responsibility for any funds or moneys deposited in any
10 bank in excess of such limitation.
11 (b) No savings bank or savings and loan association
12 shall receive public funds unless it has furnished the
13 corporate authorities of a public agency submitting a deposit
14 with copies of the last 2 sworn statements of resources and
15 liabilities which the savings bank or savings and loan
16 association is required to furnish to the Commissioner of
17 Banks and Real Estate or the Federal Deposit Insurance
18 Corporation. Each savings bank or savings and loan
19 association designated as a depository for public funds
20 shall, while acting as such depository, furnish the corporate
21 authorities of a public agency with a copy of all statements
22 of resources and liabilities which it is required to furnish
23 to the Commissioner of Banks and Real Estate or the Federal
24 Deposit Insurance Corporation; provided, that if such funds
25 or moneys are deposited in a savings bank or savings and loan
26 association, the amount of all such deposits not
27 collateralized or insured by an agency of the federal
28 government shall not exceed 75% of the net worth of such
29 savings bank or savings and loan association as defined by
30 the Federal Deposit Insurance Corporation, and the corporate
31 authorities of a public agency submitting a deposit shall not
32 be discharged from responsibility for any funds or moneys
33 deposited in any savings bank or savings and loan association
34 in excess of such limitation.
SB1784 Enrolled -27- LRB093 10148 BDD 11571 b
1 (c) No credit union shall receive public funds unless it
2 has furnished the corporate authorities of a public agency
3 submitting a share deposit with copies of the last two
4 reports of examination prepared by or submitted to the
5 Illinois Department of Financial Institutions or the National
6 Credit Union Administration. Each credit union designated as
7 a depository for public funds shall, while acting as such
8 depository, furnish the corporate authorities of a public
9 agency with a copy of all reports of examination prepared by
10 or furnished to the Illinois Department of Financial
11 Institutions or the National Credit Union Administration;
12 provided that if such funds or moneys are invested in a
13 credit union account, the amount of all such investments not
14 collateralized or insured by an agency of the federal
15 government or other approved share insurer shall not exceed
16 50% of the unimpaired capital and surplus of such credit
17 union, which shall include shares, reserves and undivided
18 earnings and the corporate authorities of a public agency
19 making an investment shall not be discharged from
20 responsibility for any funds or moneys invested in a credit
21 union in excess of such limitation.
22 (d) Whenever a public agency deposits any public funds
23 in a financial institution, the public agency may enter into
24 an agreement with the financial institution requiring any
25 funds not insured by the Federal Deposit Insurance
26 Corporation or the National Credit Union Administration or
27 other approved share insurer to be collateralized by any of
28 the following classes of securities, provided there has been
29 no default in the payment of principal or interest thereon:
30 (1) Bonds, notes, or other securities constituting
31 direct and general obligations of the United States, the
32 bonds, notes, or other securities constituting the direct
33 and general obligation of any agency or instrumentality
34 of the United States, the interest and principal of which
SB1784 Enrolled -28- LRB093 10148 BDD 11571 b
1 is unconditionally guaranteed by the United States, and
2 bonds, notes, or other securities or evidence of
3 indebtedness constituting the obligation of a U.S. agency
4 or instrumentality.
5 (2) Direct and general obligation bonds of the
6 State of Illinois or of any other state of the United
8 (3) Revenue bonds of this State or any authority,
9 board, commission, or similar agency thereof.
10 (4) Direct and general obligation bonds of any
11 city, town, county, school district, or other taxing body
12 of any state, the debt service of which is payable from
13 general ad valorem taxes.
14 (5) Revenue bonds of any city, town, county, or
15 school district of the State of Illinois.
16 (6) Obligations issued, assumed, or guaranteed by
17 the International Finance Corporation, the principal of
18 which is not amortized during the life of the obligation,
19 but no such obligation shall be accepted at more than 90%
20 of its market value.
21 (7) Illinois Affordable Housing Program Trust Fund
22 Bonds or Notes as defined in and issued pursuant to the
23 Illinois Housing Development Act.
24 (8) In an amount equal to at least market value of
25 that amount of funds deposited exceeding the insurance
26 limitation provided by the Federal Deposit Insurance
27 Corporation or the National Credit Union Administration
28 or other approved share insurer: (i) securities, (ii)
29 mortgages, (iii) letters of credit issued by a Federal
30 Home Loan Bank, or (iv) loans covered by a State Guaranty
31 under the Illinois Farm Development Act.
32 (9) Certificates of deposit or share certificates
33 issued to the depository institution pledging them as
34 security. The public agency may require security in the
SB1784 Enrolled -29- LRB093 10148 BDD 11571 b
1 amount of 125% of the value of the public agency deposit.
2 Such certificate of deposit or share certificate shall:
3 (i) be fully insured by the Federal Deposit
4 Insurance Corporation, the Federal Savings and Loan
5 Insurance Corporation, or the National Credit Union
6 Share Insurance Fund or issued by a depository
7 institution which is rated within the 3 highest
8 classifications established by at least one of the 2
9 standard rating services;
10 (ii) be issued by a financial institution
11 having assets of $15,000,000 or more; and
12 (iii) be issued by either a savings and loan
13 association having a capital to asset ratio of at
14 least 2%, by a bank having a capital to asset ratio
15 of at least 6% or by a credit union having a capital
16 to asset ratio of at least 4%.
17 The depository institution shall effect the assignment of
18 the certificate of deposit or share certificate to the public
19 agency and shall agree that, in the event the issuer of the
20 certificate fails to maintain the capital to asset ratio
21 required by this Section, such certificate of deposit or
22 share certificate shall be replaced by additional suitable
24 (e) The public agency may accept a system established by
25 the State Treasurer to aggregate permissible securities
26 received as collateral from financial institutions in a
27 collateral pool to secure public deposits of the institutions
28 that have pledged securities to the pool.
29 (f) The public agency may at any time declare any
30 particular security ineligible to qualify as collateral when,
31 in the public agency's judgment, it is deemed desirable to do
33 (g) Notwithstanding any other provision of this Section,
34 as security a public agency may, at its discretion, accept a
SB1784 Enrolled -30- LRB093 10148 BDD 11571 b
1 bond, executed by a company authorized to transact the kinds
2 of business described in clause (g) of Section 4 of the
3 Illinois Insurance Code, in an amount not less than the
4 amount of the deposits required by this Section to be
5 secured, payable to the public agency for the benefit of the
6 People of the unit of government, in a form that is
7 acceptable to the public agency securities, mortgages,
8 letters of credit issued by a Federal Home Loan Bank, or
9 loans covered by a State Guaranty under the Illinois Farm
10 Development Act in an amount equal to at least market value
11 of that amount of funds deposited exceeding the insurance
12 limitation provided by the Federal Deposit Insurance
13 Corporation or the National Credit Union Administration or
14 other approved share insurer.
15 (h) (e) Paragraphs (a), (b), (c), and (d), (e), (f), and
16 (g) of this Section do not apply to the University of
17 Illinois, Southern Illinois University, Chicago State
18 University, Eastern Illinois University, Governors State
19 University, Illinois State University, Northeastern Illinois
20 University, Northern Illinois University, Western Illinois
21 University, the Cooperative Computer Center and public
22 community colleges.
23 (Source: P.A. 91-324, eff. 1-1-00; 91-773, eff. 6-9-00.)
24 Section 820. The Illinois Banking Act is amended by
25 changing Sections 2, 5, and 17 and by adding Section 13.6 as
27 (205 ILCS 5/2) (from Ch. 17, par. 302)
28 Sec. 2. General definitions. In this Act, unless the
29 context otherwise requires, the following words and phrases
30 shall have the following meanings:
31 "Accommodation party" shall have the meaning ascribed to
32 that term in Section 3-419 of the Uniform Commercial Code.
SB1784 Enrolled -31- LRB093 10148 BDD 11571 b
1 "Action" in the sense of a judicial proceeding includes
2 recoupments, counterclaims, set-off, and any other proceeding
3 in which rights are determined.
4 "Affiliate facility" of a bank means a main banking
5 premises or branch of another commonly owned bank. The main
6 banking premises or any branch of a bank may be an "affiliate
7 facility" with respect to one or more other commonly owned
9 "Appropriate federal banking agency" means the Federal
10 Deposit Insurance Corporation, the Federal Reserve Bank of
11 Chicago, or the Federal Reserve Bank of St. Louis, as
12 determined by federal law.
13 "Bank" means any person doing a banking business whether
14 subject to the laws of this or any other jurisdiction.
15 A "banking house", "branch", "branch bank" or "branch
16 office" shall mean any place of business of a bank at which
17 deposits are received, checks paid, or loans made, but shall
18 not include any place at which only records thereof are made,
19 posted, or kept. A place of business at which deposits are
20 received, checks paid, or loans made shall not be deemed to
21 be a branch, branch bank, or branch office if the place of
22 business is adjacent to and connected with the main banking
23 premises, or if it is separated from the main banking
24 premises by not more than an alley; provided always that (i)
25 if the place of business is separated by an alley from the
26 main banking premises there is a connection between the two
27 by public or private way or by subterranean or overhead
28 passage, and (ii) if the place of business is in a building
29 not wholly occupied by the bank, the place of business shall
30 not be within any office or room in which any other business
31 or service of any kind or nature other than the business of
32 the bank is conducted or carried on. A place of business at
33 which deposits are received, checks paid, or loans made shall
34 not be deemed to be a branch, branch bank, or branch office
SB1784 Enrolled -32- LRB093 10148 BDD 11571 b
1 (i) of any bank if the place is a terminal established and
2 maintained in accordance with paragraph (17) of Section 5 of
3 this Act, or (ii) of a commonly owned bank by virtue of
4 transactions conducted at that place on behalf of the other
5 commonly owned bank under paragraph (23) of Section 5 of this
6 Act if the place is an affiliate facility with respect to the
7 other bank.
8 "Branch of an out-of-state bank" means a branch
9 established or maintained in Illinois by an out-of-state bank
10 as a result of a merger between an Illinois bank and the
11 out-of-state bank that occurs on or after May 31, 1997, or
12 any branch established by the out-of-state bank following the
14 "Bylaws" means the bylaws of a bank that are adopted by
15 the bank's board of directors or shareholders for the
16 regulation and management of the bank's affairs. If the bank
17 operates as a limited liability company, however, "bylaws"
18 means the operating agreement of the bank.
19 "Call report fee" means the fee to be paid to the
20 Commissioner by each State bank pursuant to paragraph (a) of
21 subsection (3) of Section 48 of this Act.
22 "Capital" includes the aggregate of outstanding capital
23 stock and preferred stock.
24 "Cash flow reserve account" means the account within the
25 books and records of the Commissioner of Banks and Real
26 Estate used to record funds designated to maintain a
27 reasonable Bank and Trust Company Fund operating balance to
28 meet agency obligations on a timely basis.
29 "Charter" includes the original charter and all
30 amendments thereto and articles of merger or consolidation.
31 "Commissioner" means the Commissioner of Banks and Real
32 Estate or a person authorized by the Commissioner, the Office
33 of Banks and Real Estate Act, or this Act to act in the
34 Commissioner's stead.
SB1784 Enrolled -33- LRB093 10148 BDD 11571 b
1 "Commonly owned banks" means 2 or more banks that each
2 qualify as a bank subsidiary of the same bank holding company
3 pursuant to Section 18 of the Federal Deposit Insurance Act;
4 "commonly owned bank" refers to one of a group of commonly
5 owned banks but only with respect to one or more of the other
6 banks in the same group.
7 "Community" means a city, village, or incorporated town
8 and also includes the area served by the banking offices of a
9 bank, but need not be limited or expanded to conform to the
10 geographic boundaries of units of local government.
11 "Company" means a corporation, limited liability company,
12 partnership, business trust, association, or similar
13 organization and, unless specifically excluded, includes a
14 "State bank" and a "bank".
15 "Consolidating bank" means a party to a consolidation.
16 "Consolidation" takes place when 2 or more banks, or a
17 trust company and a bank, are extinguished and by the same
18 process a new bank is created, taking over the assets and
19 assuming the liabilities of the banks or trust company
20 passing out of existence.
21 "Continuing bank" means a merging bank, the charter of
22 which becomes the charter of the resulting bank.
23 "Converting bank" means a State bank converting to become
24 a national bank, or a national bank converting to become a
25 State bank.
26 "Converting trust company" means a trust company
27 converting to become a State bank.
28 "Court" means a court of competent jurisdiction.
29 "Director" means a member of the board of directors of a
30 bank. In the case of a manager-managed limited liability
31 company, however, "director" means a manager of the bank and,
32 in the case of a member-managed limited liability company,
33 "director" means a member of the bank. The term "director"
34 does not include an advisory director, honorary director,
SB1784 Enrolled -34- LRB093 10148 BDD 11571 b
1 director emeritus, or similar person, unless the person is
2 otherwise performing functions similar to those of a member
3 of the board of directors.
4 "Eligible depository institution" means an insured
5 savings association that is in default, an insured savings
6 association that is in danger of default, a State or national
7 bank that is in default or a State or national bank that is
8 in danger of default, as those terms are defined in this
9 Section, or a new bank as that term defined in Section 11(m)
10 of the Federal Deposit Insurance Act or a bridge bank as that
11 term is defined in Section 11(n) of the Federal Deposit
12 Insurance Act or a new federal savings association authorized
13 under Section 11(d)(2)(f) of the Federal Deposit Insurance
15 "Fiduciary" means trustee, agent, executor,
16 administrator, committee, guardian for a minor or for a
17 person under legal disability, receiver, trustee in
18 bankruptcy, assignee for creditors, or any holder of similar
19 position of trust.
20 "Financial institution" means a bank, savings and loan
21 association, credit union, or any licensee under the Consumer
22 Installment Loan Act or the Sales Finance Agency Act and, for
23 purposes of Section 48.3, any proprietary network, funds
24 transfer corporation, or other entity providing electronic
25 funds transfer services, or any corporate fiduciary, its
26 subsidiaries, affiliates, parent company, or contractual
27 service provider that is examined by the Commissioner.
28 "Foundation" means the Illinois Bank Examiners' Education
30 "General obligation" means a bond, note, debenture,
31 security, or other instrument evidencing an obligation of the
32 government entity that is the issuer that is supported by the
33 full available resources of the issuer, the principal and
34 interest of which is payable in whole or in part by taxation.
SB1784 Enrolled -35- LRB093 10148 BDD 11571 b
1 "Guarantee" means an undertaking or promise to answer for
2 payment of another's debt or performance of another's duty,
3 liability, or obligation whether "payment guaranteed" or
4 "collection guaranteed".
5 "In danger of default" means a State or national bank, a
6 federally chartered insured savings association or an
7 Illinois state chartered insured savings association with
8 respect to which the Commissioner or the appropriate federal
9 banking agency has advised the Federal Deposit Insurance
10 Corporation that:
11 (1) in the opinion of the Commissioner or the
12 appropriate federal banking agency,
13 (A) the State or national bank or insured
14 savings association is not likely to be able to meet
15 the demands of the State or national bank's or
16 savings association's obligations in the normal
17 course of business; and
18 (B) there is no reasonable prospect that the
19 State or national bank or insured savings
20 association will be able to meet those demands or
21 pay those obligations without federal assistance; or
22 (2) in the opinion of the Commissioner or the
23 appropriate federal banking agency,
24 (A) the State or national bank or insured
25 savings association has incurred or is likely to
26 incur losses that will deplete all or substantially
27 all of its capital; and
28 (B) there is no reasonable prospect that the
29 capital of the State or national bank or insured
30 savings association will be replenished without
31 federal assistance.
32 "In default" means, with respect to a State or national
33 bank or an insured savings association, any adjudication or
34 other official determination by any court of competent
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1 jurisdiction, the Commissioner, the appropriate federal
2 banking agency, or other public authority pursuant to which a
3 conservator, receiver, or other legal custodian is appointed
4 for a State or national bank or an insured savings
6 "Insured savings association" means any federal savings
7 association chartered under Section 5 of the federal Home
8 Owners' Loan Act and any State savings association chartered
9 under the Illinois Savings and Loan Act of 1985 or a
10 predecessor Illinois statute, the deposits of which are
11 insured by the Federal Deposit Insurance Corporation. The
12 term also includes a savings bank organized or operating
13 under the Savings Bank Act.
14 "Insured savings association in recovery" means an
15 insured savings association that is not an eligible
16 depository institution and that does not meet the minimum
17 capital requirements applicable with respect to the insured
18 savings association.
19 "Issuer" means for purposes of Section 33 every person
20 who shall have issued or proposed to issue any security;
21 except that (1) with respect to certificates of deposit,
22 voting trust certificates, collateral-trust certificates, and
23 certificates of interest or shares in an unincorporated
24 investment trust not having a board of directors (or persons
25 performing similar functions), "issuer" means the person or
26 persons performing the acts and assuming the duties of
27 depositor or manager pursuant to the provisions of the trust,
28 agreement, or instrument under which the securities are
29 issued; (2) with respect to trusts other than those specified
30 in clause (1) above, where the trustee is a corporation
31 authorized to accept and execute trusts, "issuer" means the
32 entrusters, depositors, or creators of the trust and any
33 manager or committee charged with the general direction of
34 the affairs of the trust pursuant to the provisions of the
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1 agreement or instrument creating the trust; and (3) with
2 respect to equipment trust certificates or like securities,
3 "issuer" means the person to whom the equipment or property
4 is or is to be leased or conditionally sold.
5 "Letter of credit" and "customer" shall have the meanings
6 ascribed to those terms in Section 5-102 of the Uniform
7 Commercial Code.
8 "Main banking premises" means the location that is
9 designated in a bank's charter as its main office.
10 "Maker or obligor" means for purposes of Section 33 the
11 issuer of a security, the promisor in a debenture or other
12 debt security, or the mortgagor or grantor of a trust deed or
13 similar conveyance of a security interest in real or personal
15 "Merged bank" means a merging bank that is not the
16 continuing, resulting, or surviving bank in a consolidation
17 or merger.
18 "Merger" includes consolidation.
19 "Merging bank" means a party to a bank merger.
20 "Merging trust company" means a trust company party to a
21 merger with a State bank.
22 "Mid-tier bank holding company" means a corporation that
23 (a) owns 100% of the issued and outstanding shares of each
24 class of stock of a State bank, (b) has no other
25 subsidiaries, and (c) 100% of the issued and outstanding
26 shares of the corporation are owned by a parent bank holding
28 "Municipality" means any municipality, political
29 subdivision, school district, taxing district, or agency.
30 "National bank" means a national banking association
31 located in this State and after May 31, 1997, means a
32 national banking association without regard to its location.
33 "Out-of-state bank" means a bank chartered under the laws
34 of a state other than Illinois, a territory of the United
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1 States, or the District of Columbia.
2 "Parent bank holding company" means a corporation that is
3 a bank holding company as that term is defined in the
4 Illinois Bank Holding Company Act of 1957 and owns 100% of
5 the issued and outstanding shares of a mid-tier bank holding
7 "Person" means an individual, corporation, limited
8 liability company, partnership, joint venture, trust, estate,
9 or unincorporated association.
10 "Public agency" means the State of Illinois, the various
11 counties, townships, cities, towns, villages, school
12 districts, educational service regions, special road
13 districts, public water supply districts, fire protection
14 districts, drainage districts, levee districts, sewer
15 districts, housing authorities, the Illinois Bank Examiners'
16 Education Foundation, the Chicago Park District, and all
17 other political corporations or subdivisions of the State of
18 Illinois, whether now or hereafter created, whether herein
19 specifically mentioned or not, and shall also include any
20 other state or any political corporation or subdivision of
21 another state.
22 "Public funds" or "public money" means current operating
23 funds, special funds, interest and sinking funds, and funds
24 of any kind or character belonging to, in the custody of, or
25 subject to the control or regulation of the United States or
26 a public agency. "Public funds" or "public money" shall
27 include funds held by any of the officers, agents, or
28 employees of the United States or of a public agency in the
29 course of their official duties and, with respect to public
30 money of the United States, shall include Postal Savings
32 "Published" means, unless the context requires otherwise,
33 the publishing of the notice or instrument referred to in
34 some newspaper of general circulation in the community in
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1 which the bank is located at least once each week for 3
2 successive weeks. Publishing shall be accomplished by, and
3 at the expense of, the bank required to publish. Where
4 publishing is required, the bank shall submit to the
5 Commissioner that evidence of the publication as the
6 Commissioner shall deem appropriate.
7 "Qualified financial contract" means any security
8 contract, commodity contract, forward contract, including
9 spot and forward foreign exchange contracts, repurchase
10 agreement, swap agreement, and any similar agreement, any
11 option to enter into any such agreement, including any
12 combination of the foregoing, and any master agreement for
13 such agreements. A master agreement, together with all
14 supplements thereto, shall be treated as one qualified
15 financial contract. The contract, option, agreement, or
16 combination of contracts, options, or agreements shall be
17 reflected upon the books, accounts, or records of the bank,
18 or a party to the contract shall provide documentary evidence
19 of such agreement.
20 "Recorded" means the filing or recording of the notice or
21 instrument referred to in the office of the Recorder of the
22 county wherein the bank is located.
23 "Resulting bank" means the bank resulting from a merger
24 or conversion.
25 "Securities" means stocks, bonds, debentures, notes, or
26 other similar obligations.
27 "Stand-by letter of credit" means a letter of credit
28 under which drafts are payable upon the condition the
29 customer has defaulted in performance of a duty, liability,
30 or obligation.
31 "State bank" means any banking corporation that has a
32 banking charter issued by the Commissioner under this Act.
33 "State Banking Board" means the State Banking Board of
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1 "Subsidiary" with respect to a specified company means a
2 company that is controlled by the specified company. For
3 purposes of paragraphs (8) and (12) of Section 5 of this Act,
4 "control" means the exercise of operational or managerial
5 control of a corporation by the bank, either alone or
6 together with other affiliates of the bank.
7 "Surplus" means the aggregate of (i) amounts paid in
8 excess of the par value of capital stock and preferred stock;
9 (ii) amounts contributed other than for capital stock and
10 preferred stock and allocated to the surplus account; and
11 (iii) amounts transferred from undivided profits.
12 "Tier 1 Capital" and "Tier 2 Capital" have the meanings
13 assigned to those terms in regulations promulgated for the
14 appropriate federal banking agency of a state bank, as those
15 regulations are now or hereafter amended.
16 "Trust company" means a limited liability company or
17 corporation incorporated in this State for the purpose of
18 accepting and executing trusts.
19 "Undivided profits" means undistributed earnings less
20 discretionary transfers to surplus.
21 "Unimpaired capital and unimpaired surplus", for the
22 purposes of paragraph (21) of Section 5 and Sections 32, 33,
23 34, 35.1, 35.2, and 47 of this Act means the sum of the state
24 bank's Tier 1 Capital and Tier 2 Capital plus such other
25 shareholder equity as may be included by regulation of the
26 Commissioner. Unimpaired capital and unimpaired surplus
27 shall be calculated on the basis of the date of the last
28 quarterly call report filed with the Commissioner preceding
29 the date of the transaction for which the calculation is
30 made, provided that: (i) when a material event occurs after
31 the date of the last quarterly call report filed with the
32 Commissioner that reduces or increases the bank's unimpaired
33 capital and unimpaired surplus by 10% or more, then the
34 unimpaired capital and unimpaired surplus shall be calculated
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1 from the date of the material event for a transaction
2 conducted after the date of the material event; and (ii) if
3 the Commissioner determines for safety and soundness reasons
4 that a state bank should calculate unimpaired capital and
5 unimpaired surplus more frequently than provided by this
6 paragraph, the Commissioner may by written notice direct the
7 bank to calculate unimpaired capital and unimpaired surplus
8 at a more frequent interval. In the case of a state bank
9 newly chartered under Section 13 or a state bank resulting
10 from a merger, consolidation, or conversion under Sections 21
11 through 26 for which no preceding quarterly call report has
12 been filed with the Commissioner, unimpaired capital and
13 unimpaired surplus shall be calculated for the first calendar
14 quarter on the basis of the effective date of the charter,
15 merger, consolidation, or conversion.
16 (Source: P.A. 92-483, eff. 8-23-01.)
17 (205 ILCS 5/5) (from Ch. 17, par. 311)
18 Sec. 5. General corporate powers. A bank organized
19 under this Act or subject hereto shall be a body corporate
20 and politic and shall, without specific mention thereof in
21 the charter, have all the powers conferred by this Act and
22 the following additional general corporate powers:
23 (1) To sue and be sued, complain, and defend in its
24 corporate name.
25 (2) To have a corporate seal, which may be altered at
26 pleasure, and to use the same by causing it or a facsimile
27 thereof to be impressed or affixed or in any manner
28 reproduced, provided that the affixing of a corporate seal to
29 an instrument shall not give the instrument additional force
30 or effect, or change the construction thereof, and the use of
31 a corporate seal is not mandatory.
32 (3) To make, alter, amend, and repeal bylaws, not
33 inconsistent with its charter or with law, for the
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1 administration of the affairs of the bank. If this Act does
2 not provide specific guidance in matters of corporate
3 governance, the provisions of the Business Corporation Act of
4 1983 may be used if so provided in the bylaws, and if the
5 bank is a limited liability company, the provisions of the
6 Limited Liability Company Act shall be used.
7 (4) To elect or appoint and remove officers and agents
8 of the bank and define their duties and fix their
10 (5) To adopt and operate reasonable bonus plans,
11 profit-sharing plans, stock-bonus plans, stock-option plans,
12 pension plans and similar incentive plans for its directors,
13 officers and employees.
14 (5.1) To manage, operate and administer a fund for the
15 investment of funds by a public agency or agencies, including
16 any unit of local government or school district, or any
17 person. The fund for a public agency shall invest in the
18 same type of investments and be subject to the same
19 limitations provided for the investment of public funds. The
20 fund for public agencies shall maintain a separate ledger
21 showing the amount of investment for each public agency in
22 the fund. "Public funds" and "public agency" as used in this
23 Section shall have the meanings ascribed to them in Section 1
24 of the Public Funds Investment Act.
25 (6) To make reasonable donations for the public welfare
26 or for charitable, scientific, religious or educational
28 (7) To borrow or incur an obligation; and to pledge its
30 (a) to secure its borrowings, its lease of personal
31 or real property or its other nondeposit obligations;
32 (b) to enable it to act as agent for the sale of
33 obligations of the United States;
34 (c) to secure deposits of public money of the
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1 United States, whenever required by the laws of the
2 United States, including without being limited to,
3 revenues and funds the deposit of which is subject to the
4 control or regulation of the United States or any of its
5 officers, agents, or employees and Postal Savings funds;
6 (d) to secure deposits of public money of any state
7 or of any political corporation or subdivision thereof
8 including, without being limited to, revenues and funds
9 the deposit of which is subject to the control or
10 regulation of any state or of any political corporation
11 or subdivisions thereof or of any of their officers,
12 agents, or employees;
13 (e) to secure deposits of money whenever required
14 by the National Bankruptcy Act;
15 (f) (blank); and
16 (g) to secure trust funds commingled with the
17 bank's funds, whether deposited by the bank or an
18 affiliate of the bank, pursuant to Section 2-8 of the
19 Corporate Fiduciary Act.
20 (8) To own, possess, and carry as assets all or part of
21 the real estate necessary in or with which to do its banking
22 business, either directly or indirectly through the ownership
23 of all or part of the capital stock, shares or interests in
24 any corporation, association, trust engaged in holding any
25 part or parts or all of the bank premises, engaged in such
26 business and in conducting a safe deposit business in the
27 premises or part of them, or engaged in any activity that the
28 bank is permitted to conduct in a subsidiary pursuant to
29 paragraph (12) of this Section 5.
30 (9) To own, possess, and carry as assets other real
31 estate to which it may obtain title in the collection of its
32 debts or that was formerly used as a part of the bank
33 premises, but title to any real estate except as herein
34 permitted shall not be retained by the bank, either directly
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1 or by or through a subsidiary, as permitted by subsection
2 (12) of this Section for a total period of more than 10 years
3 after acquiring title, either directly or indirectly.
4 (10) To do any act, including the acquisition of stock,
5 necessary to obtain insurance of its deposits, or part
6 thereof, and any act necessary to obtain a guaranty, in whole
7 or in part, of any of its loans or investments by the United
8 States or any agency thereof, and any act necessary to sell
9 or otherwise dispose of any of its loans or investments to
10 the United States or any agency thereof, and to acquire and
11 hold membership in the Federal Reserve System.
12 (11) Notwithstanding any other provisions of this Act or
13 any other law, to do any act and to own, possess, and carry
14 as assets property of the character, including stock, that is
15 at the time authorized or permitted to national banks by an
16 Act of Congress, but subject always to the same limitations
17 and restrictions as are applicable to national banks by the
18 pertinent federal law and subject to applicable provisions of
19 the Financial Institutions Insurance Sales Law.
20 (12) To own, possess, and carry as assets stock of one
21 or more corporations that is, or are, engaged in one or more
22 of the following businesses:
23 (a) holding title to and administering assets
24 acquired as a result of the collection or liquidating of
25 loans, investments, or discounts; or
26 (b) holding title to and administering personal
27 property acquired by the bank, directly or indirectly
28 through a subsidiary, for the purpose of leasing to
29 others, provided the lease or leases and the investment
30 of the bank, directly or through a subsidiary, in that
31 personal property otherwise comply with Section 35.1 of
32 this Act; or
33 (c) carrying on or administering any of the
34 activities excepting the receipt of deposits or the
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1 payment of checks or other orders for the payment of
2 money in which a bank may engage in carrying on its
3 general banking business; provided, however, that nothing
4 contained in this paragraph (c) shall be deemed to permit
5 a bank organized under this Act or subject hereto to do,
6 either directly or indirectly through any subsidiary, any
7 act, including the making of any loan or investment, or
8 to own, possess, or carry as assets any property that if
9 done by or owned, possessed, or carried by the State bank
10 would be in violation of or prohibited by any provision
11 of this Act.
12 The provisions of this subsection (12) shall not apply to
13 and shall not be deemed to limit the powers of a State bank
14 with respect to the ownership, possession, and carrying of
15 stock that a State bank is permitted to own, possess, or
16 carry under this Act.
17 Any bank intending to establish a subsidiary under this
18 subsection (12) shall give written notice to the Commissioner
19 60 days prior to the subsidiary's commencing of business or,
20 as the case may be, prior to acquiring stock in a corporation
21 that has already commenced business. After receiving the
22 notice, the Commissioner may waive or reduce the balance of
23 the 60 day notice period. The Commissioner may specify the
24 form of the notice and may promulgate rules and regulations
25 to administer this subsection (12).
26 (13) To accept for payment at a future date not
27 exceeding one year from the date of acceptance, drafts drawn
28 upon it by its customers; and to issue, advise, or confirm
29 letters of credit authorizing the holders thereof to draw
30 drafts upon it or its correspondents.
31 (14) To own and lease personal property acquired by the
32 bank at the request of a prospective lessee and upon the
33 agreement of that person to lease the personal property
34 provided that the lease, the agreement with respect thereto,
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1 and the amount of the investment of the bank in the property
2 comply with Section 35.1 of this Act.
3 (15) (a) To establish and maintain, in addition to the
4 main banking premises, branches offering any banking
5 services permitted at the main banking premises of a
6 State bank.
7 (b) To establish and maintain, after May 31, 1997,
8 branches in another state that may conduct any activity
9 in that state that is authorized or permitted for any
10 bank that has a banking charter issued by that state,
11 subject to the same limitations and restrictions that are
12 applicable to banks chartered by that state.
13 (16) (Blank).
14 (17) To establish and maintain terminals, as authorized
15 by the Electronic Fund Transfer Act.
16 (18) To establish and maintain temporary service booths
17 at any International Fair held in this State which is
18 approved by the United States Department of Commerce, for the
19 duration of the international fair for the sole purpose of
20 providing a convenient place for foreign trade customers at
21 the fair to exchange their home countries' currency into
22 United States currency or the converse. This power shall not
23 be construed as establishing a new place or change of
24 location for the bank providing the service booth.
25 (19) To indemnify its officers, directors, employees,
26 and agents, as authorized for corporations under Section 8.75
27 of the Business Corporation Act of 1983.
28 (20) To own, possess, and carry as assets stock of, or
29 be or become a member of, any corporation, mutual company,
30 association, trust, or other entity formed exclusively for
31 the purpose of providing directors' and officers' liability
32 and bankers' blanket bond insurance or reinsurance to and for
33 the benefit of the stockholders, members, or beneficiaries,
34 or their assets or businesses, or their officers, directors,
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1 employees, or agents, and not to or for the benefit of any
2 other person or entity or the public generally.
3 (21) To make debt or equity investments in corporations
4 or projects, whether for profit or not for profit, designed
5 to promote the development of the community and its welfare,
6 provided that the aggregate investment in all of these
7 corporations and in all of these projects does not exceed 10%
8 of the unimpaired capital and unimpaired surplus of the bank
9 and provided that this limitation shall not apply to
10 creditworthy loans by the bank to those corporations or
11 projects. Upon written application to the Commissioner, a
12 bank may make an investment that would, when aggregated with
13 all other such investments, exceed 10% of the unimpaired
14 capital and unimpaired surplus of the bank. The Commissioner
15 may approve the investment if he is of the opinion and finds
16 that the proposed investment will not have a material adverse
17 effect on the safety and soundness of the bank.
18 (22) To own, possess, and carry as assets the stock of a
19 corporation engaged in the ownership or operation of a travel
20 agency or to operate a travel agency as a part of its
22 (23) With respect to affiliate facilities:
23 (a) to conduct at affiliate facilities for and on
24 behalf of another commonly owned bank, if so authorized
25 by the other bank, all transactions that the other bank
26 is authorized or permitted to perform; and
27 (b) to authorize a commonly owned bank to conduct
28 for and on behalf of it any of the transactions it is
29 authorized or permitted to perform at one or more
30 affiliate facilities.
31 Any bank intending to conduct or to authorize a commonly
32 owned bank to conduct at an affiliate facility any of the
33 transactions specified in this paragraph (23) shall give
34 written notice to the Commissioner at least 30 days before
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1 any such transaction is conducted at the affiliate facility.
2 (24) To act as the agent for any fire, life, or other
3 insurance company authorized by the State of Illinois, by
4 soliciting and selling insurance and collecting premiums on
5 policies issued by such company; and to receive for services
6 so rendered such fees or commissions as may be agreed upon
7 between the bank and the insurance company for which it may
8 act as agent; provided, however, that no such bank shall in
9 any case assume or guarantee the payment of any premium on
10 insurance policies issued through its agency by its
11 principal; and provided further, that the bank shall not
12 guarantee the truth of any statement made by an assured in
13 filing his application for insurance.
14 (25) Notwithstanding any other provisions of this Act or
15 any other law, to offer any product or service that is at the
16 time authorized or permitted to any insured savings
17 association or out-of-state bank by applicable law, provided
18 that powers conferred only by this subsection (25):
19 (a) shall always be subject to the same limitations
20 and restrictions that are applicable to the insured
21 savings association or out-of-state bank for the product
22 or service by such applicable law;
23 (b) shall be subject to applicable provisions of
24 the Financial Institutions Insurance Sales Law;
25 (c) shall not include the right to own or conduct a
26 real estate brokerage business for which a license would
27 be required under the laws of this State; and
28 (d) shall not be construed to include the
29 establishment or maintenance of a branch, nor shall they
30 be construed to limit the establishment or maintenance of
31 a branch pursuant to subsection (11).
32 Not less than 30 days before engaging in any activity
33 under the authority of this subsection, a bank shall provide
34 written notice to the Commissioner of its intent to engage in
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1 the activity. The notice shall indicate the specific federal
2 or state law, rule, regulation, or interpretation the bank
3 intends to use as authority to engage in the activity.
4 (Source: P.A. 91-330, eff. 7-29-99; 91-849, eff. 6-22-00;
5 92-483, eff. 8-23-01; 92-811, eff. 8-21-02.)
6 (205 ILCS 5/13.6 new)
7 Sec. 13.6. Banks as limited liability companies.
8 (a) A bank may be organized as a limited liability
9 company, may convert to a limited liability company, or may
10 merge with and into a limited liability company under the
11 applicable laws of this State and of the United States,
12 including any rules promulgated thereunder. A bank organized
13 as a limited liability company shall be subject to the
14 provisions of the Limited Liability Company Act in addition
15 to this Act, provided that if a provision of the Limited
16 Liability Company Act conflicts with a provision of this Act
17 or with any rule of the Commissioner, the provision of this
18 Act or the rule of the Commissioner shall apply.
19 (b) Any filing required to be made under the Limited
20 Liability Company Act shall be made exclusively with the
21 Commissioner, and the Commissioner shall possess the
22 exclusive authority to regulate the bank as provided in this
24 (c) Any organization as, conversion to, and merger with
25 or into a limited liability company shall be subject to the
26 prior approval of the Commissioner.
27 (d) A bank that is a limited liability company shall be
28 subject to all of the provisions of this Act in the same
29 manner as a bank that is organized in stock form.
30 (e) The Commissioner may promulgate rules to ensure that
31 a bank that is a limited liability company (i) is operating
32 in a safe and sound manner and (ii) is subject to the
33 Commissioner's authority in the same manner as a bank that is
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1 organized in stock form.
2 (205 ILCS 5/17) (from Ch. 17, par. 324)
3 Sec. 17. Changes in charter.
4 (a) By compliance with the provisions of this Act a
5 State bank may:
6 (1) (blank);
7 (2) increase, decrease or change its capital stock,
8 whether issued or unissued, provided that in no case
9 shall the capital be diminished to the prejudice of its
11 (3) provide for authorized but unissued capital
12 stock reserved for issuance for one or more of the
13 purposes provided for in subsection (5) of Section 14
15 (4) authorize preferred stock, or increase,
16 decrease or change the preferences, qualifications,
17 limitations, restrictions or special or relative rights
18 of its preferred stock, whether issued or unissued, or
19 delegate authority to its board of directors as provided
20 in subsection (d), provided that in no case shall the
21 capital be diminished to the prejudice of its creditors;
22 (5) increase, decrease or change the par value of
23 its shares of its capital stock or preferred stock,
24 whether issued or unissued, or delegate authority to its
25 board of directors as provided in subsection (d);
26 (6) (blank);
27 (7) eliminate cumulative voting rights under all or
28 specified circumstances, or eliminate voting rights
29 entirely, as to any class or classes or series of stock
30 of the bank pursuant to paragraph (3) of Section 15,
31 provided that one class of shares or series thereof shall
32 always have voting in respect to all matters in the bank,
33 and provided further that the proposal to eliminate such
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1 voting rights receives the approval of the holders of 70%
2 of the outstanding shares of stock entitled to vote as
3 provided in paragraph (7) of subsection (b) of this
4 Section 17;
5 (8) increase, decrease, or change its capital stock
6 or preferred stock, whether issued or unissued, for the
7 purpose of eliminating fractional shares or avoiding the
8 issuance of fractional shares, provided that in no case
9 shall the capital be diminished to the prejudice of its
10 creditors; or
11 (9) make such other change in its charter as may be
12 authorized in this Act.
13 (b) To effect a change or changes in a State bank's
14 charter as provided for in this Section 17:
15 (1) The board of directors shall adopt a resolution
16 setting forth the proposed amendment and directing that
17 it be submitted to a vote at a meeting of stockholders,
18 which may be either an annual or special meeting.
19 (2) If the meeting is a special meeting, written or
20 printed notice setting forth the proposed amendment or
21 summary thereof shall be given to each stockholder of
22 record entitled to vote at such meeting at least 30 days
23 before such meeting and in the manner provided in this
24 Act for the giving of notice of meetings of stockholders.
25 (3) At such special meeting, a vote of the
26 stockholders entitled to vote shall be taken on the
27 proposed amendment. Except as provided in paragraph (7)
28 of this subsection (b), the proposed amendment shall be
29 adopted upon receiving the affirmative vote of the
30 holders of at least two-thirds of the outstanding shares
31 of stock entitled to vote at such meeting, unless holders
32 of preferred stock are entitled to vote as a class in
33 respect thereof, in which event the proposed amendment
34 shall be adopted upon receiving the affirmative vote of
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1 the holders of at least two-thirds of the outstanding
2 shares of each class of shares entitled to vote as a
3 class in respect thereof and of the total outstanding
4 shares entitled to vote at such meeting. Any number of
5 amendments may be submitted to the stockholders and voted
6 upon by them at one meeting. A certificate of the
7 amendment, or amendments, verified by the president, or a
8 vice-president, or the cashier, shall be filed
9 immediately in the office of the Commissioner.
10 (4) At any annual meeting without a resolution of
11 the board of directors and without a notice and prior
12 publication, as hereinabove provided, a proposition for a
13 change in the bank's charter as provided for in this
14 Section 17 may be submitted to a vote of the stockholders
15 entitled to vote at the annual meeting, except that no
16 proposition for authorized but unissued capital stock
17 reserved for issuance for one or more of the purposes
18 provided for in subsection (5) of Section 14 hereof shall
19 be submitted without complying with the provisions of
20 said subsection. The proposed amendment shall be adopted
21 upon receiving the affirmative vote of the holders of at
22 least two-thirds of the outstanding shares of stock
23 entitled to vote at such meeting, unless holders of
24 preferred stock are entitled to vote as a class in
25 respect thereof, in which event the proposed amendment
26 shall be adopted upon receiving the affirmative vote of
27 the holders of at least two-thirds of the outstanding
28 shares of each class of shares entitled to vote as a
29 class in respect thereof and the total outstanding shares
30 entitled to vote at such meeting. A certificate of the
31 amendment, or amendments, verified by the president, or a
32 vice-president or cashier, shall be filed immediately in
33 the office of the Commissioner.
34 (5) If an amendment or amendments shall be approved
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1 in writing by the Commissioner, the amendment or
2 amendments so adopted and so approved shall be
3 accomplished in accordance with the vote of the
4 stockholders. The Commissioner may impose such terms and
5 conditions on the approval of the amendment or amendments
6 as he deems necessary or appropriate. The Commissioner
7 shall revoke such approval in the event such amendment or
8 amendments are not effected within one year from the date
9 of the issuance of the Commissioner's certificate and
10 written approval except for transactions permitted under
11 subsection (5) of Section 14 of this Act.
12 (6) No amendment or amendments shall affect suits
13 in which the bank is a party, nor affect causes of
14 action, nor affect rights of persons in any particular,
15 nor shall actions brought against such bank by its former
16 name be abated by a change of name.
17 (7) A proposal to amend the charter to eliminate
18 cumulative voting rights under all or specified
19 circumstances, or to eliminate voting rights entirely, as
20 to any class or classes or series or stock of a bank,
21 pursuant to paragraph (3) of Section 15 and paragraph (7)
22 of subsection (a) of this Section 17, shall be adopted
23 only upon such proposal receiving the approval of the
24 holders of 70% of the outstanding shares of stock
25 entitled to vote at the meeting where the proposal is
26 presented for approval, unless holders of preferred stock
27 are entitled to vote as a class in respect thereof, in
28 which event the proposed amendment shall be adopted upon
29 receiving the approval of the holders of 70% of the
30 outstanding shares of each class of shares entitled to
31 vote as a class in respect thereof and of the total
32 outstanding shares entitled to vote at the meeting where
33 the proposal is presented for approval. The proposal to
34 amend the charter pursuant to this paragraph (7) may be
SB1784 Enrolled -54- LRB093 10148 BDD 11571 b
1 voted upon at the annual meeting or a special meeting.
2 (8) Written or printed notice of a stockholders'
3 meeting to vote on a proposal to increase, decrease or
4 change the capital stock or preferred stock pursuant to
5 paragraph (8) of subsection (a) of this Section 17 and to
6 eliminate fractional shares or avoid the issuance of
7 fractional shares shall be given to each stockholder of
8 record entitled to vote at the meeting at least 30 days
9 before the meeting and in the manner provided in this Act
10 for the giving of notice of meetings of stockholders, and
11 shall include all of the following information:
12 (A) A statement of the purpose of the proposed
13 reverse stock split.
14 (B) A statement of the amount of consideration
15 being offered for the bank's stock.
16 (C) A statement that the bank considers the
17 transaction fair to the stockholders, and a
18 statement of the material facts upon which this
19 belief is based.
20 (D) A statement that the bank has secured an
21 opinion from a third party with respect to the
22 fairness, from a financial point of view, of the
23 consideration to be paid, the identity and
24 qualifications of the third party, how the third
25 party was selected, and any material relationship
26 between the third party and the bank.
27 (E) A summary of the opinion including the
28 basis for and the methods of arriving at the
29 findings and any limitation imposed by the bank in
30 arriving at fair value and a statement making the
31 opinion available for reviewing or copying by any
33 (F) A statement that objecting stockholders
34 will be entitled to the fair value of those shares
SB1784 Enrolled -55- LRB093 10148 BDD 11571 b
1 that are voted against the charter amendment, if a
2 proper demand is made on the bank and the
3 requirements are satisfied as specified in this
5 If a stockholder shall file with the bank, prior to or at the
6 meeting of stockholders at which the proposed charter
7 amendment is submitted to a vote, a written objection to the
8 proposed charter amendment and shall not vote in favor
9 thereof, and if the stockholder, within 20 days after
10 receiving written notice of the date the charter amendment
11 was accomplished pursuant to paragraph (5) of subsection (a)
12 of this Section 17, shall make written demand on the bank for
13 payment of the fair value of the stockholder's shares as of
14 the day prior to the date on which the vote was taken
15 approving the charter amendment, the bank shall pay to the
16 stockholder, upon surrender of the certificate or
17 certificates representing the stock, the fair value thereof.
18 The demand shall state the number of shares owned by the
19 objecting stockholder. The bank shall provide written notice
20 of the date on which the charter amendment was accomplished
21 to all stockholders who have filed written objections in
22 order that the objecting stockholders may know when they must
23 file written demand if they choose to do so. Any stockholder
24 failing to make demand within the 20-day period shall be
25 conclusively presumed to have consented to the charter
26 amendment and shall be bound by the terms thereof. If within
27 30 days after the date on which a charter amendment was
28 accomplished the value of the shares is agreed upon between
29 the objecting stockholders and the bank, payment therefor
30 shall be made within 90 days after the date on which the
31 charter amendment was accomplished, upon the surrender of the
32 stockholder's certificate or certificates representing the
33 shares. Upon payment of the agreed value the objecting
34 stockholder shall cease to have any interest in the shares or
SB1784 Enrolled -56- LRB093 10148 BDD 11571 b
1 in the bank. If within such period of 30 days the
2 stockholder and the bank do not so agree, then the objecting
3 stockholder may, within 60 days after the expiration of the
4 30-day period, file a complaint in the circuit court asking
5 for a finding and determination of the fair value of the
6 shares, and shall be entitled to judgment against the bank
7 for the amount of the fair value as of the day prior to the
8 date on which the vote was taken approving the charter
9 amendment with interest thereon to the date of the judgment.
10 The practice, procedure and judgment shall be governed by the
11 Civil Practice Law. The judgment shall be payable only upon
12 and simultaneously with the surrender to the bank of the
13 certificate or certificates representing the shares. Upon
14 payment of the judgment, the objecting stockholder shall
15 cease to have any interest in the shares or the bank. The
16 shares may be held and disposed of by the bank. Unless the
17 objecting stockholder shall file such complaint within the
18 time herein limited, the stockholder and all persons claiming
19 under the stockholder shall be conclusively presumed to have
20 approved and ratified the charter amendment, and shall be
21 bound by the terms thereof. The right of an objecting
22 stockholder to be paid the fair value of the stockholder's
23 shares of stock as herein provided shall cease if and when
24 the bank shall abandon the charter amendment.
25 (c) The purchase and holding and later resale of
26 treasury stock of a state bank pursuant to the provisions of
27 subsection (6) of Section 14 may be accomplished without a
28 change in its charter reflecting any decrease or increase in
29 capital stock.
30 (d) A State bank may amend its charter for the purpose
31 of authorizing its board of directors to issue preferred
32 stock; to increase, decrease, or change the par value of
33 shares of its preferred stock, whether issued or unissued; or
34 to increase, decrease, or change the preferences,
SB1784 Enrolled -57- LRB093 10148 BDD 11571 b
1 qualifications, limitations, restrictions, or special or
2 relative rights of its preferred stock, whether issued or
3 unissued; provided that in no case shall the capital be
4 diminished to the prejudice of the bank's creditors. An
5 amendment to the bank's charter granting such authority shall
6 establish ranges, limits, or restrictions that must be
7 observed when the board exercises the discretion authorized
8 by the amendment.
9 Once such an amendment is adopted and approved as
10 provided in this subsection, and without further action by
11 the bank's stockholders, the board may exercise its delegated
12 authority by adopting a resolution specifying the actions
13 that it is taking with respect to the preferred stock. The
14 board may fully exercise its delegated authority through one
15 resolution or it may exercise its delegated authority through
16 a series of resolutions, provided that the board's actions
17 remain at all times within the ranges, limitations, and
18 restrictions specified in the amendment to the bank's
20 A resolution adopted by the board under this authority
21 shall be submitted to the Commissioner for approval. The
22 Commissioner shall approve the resolution, or state any
23 objections to the resolution, within 30 days after the
24 receipt of the resolution adopted by the board. If no
25 objections are specified by the Commissioner within that time
26 frame, the resolution will be deemed to be approved by the
27 Commissioner. Once approved, the resolution shall be
28 incorporated as an addendum to the bank's charter and the
29 board may proceed to effect the changes set forth in the
31 (Source: P.A. 91-322, eff. 1-1-00; 92-483, eff. 8-23-01.)
32 Section 825. The Savings Bank Act is amended by changing
33 Sections 1007.55 and 1008 and by adding Section 1007.125 as
SB1784 Enrolled -58- LRB093 10148 BDD 11571 b
2 (205 ILCS 205/1007.55) (from Ch. 17, par. 7301-7.55)
3 Sec. 1007.55. "Director" means any director, trustee, or
4 other person performing similar functions with respect to any
5 organization whether incorporated or unincorporated. In the
6 case of a manager-managed limited liability company, however,
7 "director" means a manager of the savings bank, and in the
8 case of a member-managed limited liability company,
9 "director" means a member of the savings bank. The term
10 "director" does not include an advisory director, honorary
11 director, director emeritus, or similar person, unless the
12 person is otherwise performing functions similar to those of
13 a director.
14 (205 ILCS 205/1007.125 new)
15 Sec. 1007.125. "Bylaws" means the bylaws of a savings
16 bank that are adopted by the savings bank's board of
17 directors or shareholders for the regulation and management
18 of the savings bank's affairs. If the savings bank operates
19 as a limited liability company, however, "bylaws" means the
20 operating agreement of the savings bank.
21 (Source: P.A. 86-1213.)
22 (205 ILCS 205/1008) (from Ch. 17, par. 7301-8)
23 Sec. 1008. General corporate powers.
24 (a) A savings bank operating under this Act shall be a
25 body corporate and politic and shall have all of the powers
26 conferred by this Act including, but not limited to, the
27 following powers:
28 (1) To sue and be sued, complain, and defend in its
29 corporate name and to have a common seal, which it may
30 alter or renew at pleasure.
31 (2) To obtain and maintain insurance by a deposit
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1 insurance corporation as defined in this Act.
2 (3) To act as a fiscal agent for the United States,
3 the State of Illinois or any department, branch, arm, or
4 agency of the State or any unit of local government or
5 school district in the State, when duly designated for
6 that purpose, and as agent to perform reasonable
7 functions as may be required of it.
8 (4) To become a member of or deal with any
9 corporation or agency of the United States or the State
10 of Illinois, to the extent that the agency assists in
11 furthering or facilitating its purposes or powers and to
12 that end to purchase stock or securities thereof or
13 deposit money therewith, and to comply with any other
14 conditions of membership or credit.
15 (5) To make donations in reasonable amounts for the
16 public welfare or for charitable, scientific, religious,
17 or educational purposes.
18 (6) To adopt and operate reasonable insurance,
19 bonus, profit sharing, and retirement plans for officers
20 and employees and for directors including, but not
21 limited to, advisory, honorary, and emeritus directors,
22 who are not officers or employees.
23 (7) To reject any application for membership; to
24 retire deposit accounts by enforced retirement as
25 provided in this Act and the bylaws; and to limit the
26 issuance of, or payments on, deposit accounts, subject,
27 however, to contractual obligations.
28 (8) To purchase stock in service corporations and
29 to invest in any form of indebtedness of any service
30 corporation as defined in this Act, subject to
31 regulations of the Commissioner.
32 (9) To purchase stock of a corporation whose
33 principal purpose is to operate a safe deposit company or
34 escrow service company.
SB1784 Enrolled -60- LRB093 10148 BDD 11571 b
1 (10) To exercise all the powers necessary to
2 qualify as a trustee or custodian under federal or State
3 law, provided that the authority to accept and execute
4 trusts is subject to the provisions of the Corporate
5 Fiduciary Act and to the supervision of those activities
6 by the Commissioner.
7 (11) (Blank).
8 (12) To establish, maintain, and operate terminals
9 as authorized by the Electronic Fund Transfer Act.
10 (13) To pledge its assets:
11 (A) to enable it to act as agent for the sale
12 of obligations of the United States;
13 (B) to secure deposits;
14 (C) to secure deposits of money whenever
15 required by the National Bankruptcy Act;
16 (D) (blank); and
17 (E) to secure trust funds commingled with the
18 savings bank's funds, whether deposited by the
19 savings bank or an affiliate of the savings bank, as
20 required under Section 2-8 of the Corporate
21 Fiduciary Act.
22 (14) To accept for payment at a future date not to
23 exceed one year from the date of acceptance, drafts drawn
24 upon it by its customers; and to issue, advise, or
25 confirm letters of credit authorizing holders thereof to
26 draw drafts upon it or its correspondents.
27 (15) Subject to the regulations of the
28 Commissioner, to own and lease personal property acquired
29 by the savings bank at the request of a prospective
30 lessee and, upon the agreement of that person, to lease
31 the personal property.
32 (16) To establish temporary service booths at any
33 International Fair in this State that is approved by the
34 United States Department of Commerce for the duration of
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1 the international fair for the purpose of providing a
2 convenient place for foreign trade customers to exchange
3 their home countries' currency into United States
4 currency or the converse. To provide temporary periodic
5 service to persons residing in a bona fide nursing home,
6 senior citizens' retirement home, or long-term care
7 facility. These powers shall not be construed as
8 establishing a new place or change of location for the
9 savings bank providing the service booth.
10 (17) To indemnify its officers, directors,
11 employees, and agents, as authorized for corporations
12 under Section 8.75 of the Business Corporations Act of
14 (18) To provide data processing services to others
15 on a for-profit basis.
16 (19) To utilize any electronic technology to
17 provide customers with home banking services.
18 (20) Subject to the regulations of the
19 Commissioner, to enter into an agreement to act as a
21 (21) Subject to the regulations of the
22 Commissioner, to issue credit cards, extend credit
23 therewith, and otherwise engage in or participate in
24 credit card operations.
25 (22) To purchase for its own account shares of
26 stock of a bankers' bank, described in Section 13(b)(1)
27 of the Illinois Banking Act, on the same terms and
28 conditions as a bank may purchase such shares. In no
29 event shall the total amount of such stock held by a
30 savings bank in such bankers' bank exceed 10% of its
31 capital and surplus (including undivided profits) and in
32 no event shall a savings bank acquire more than 5% of any
33 class of voting securities of such bankers' bank.
34 (23) With respect to affiliate facilities:
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1 (A) to conduct at affiliate facilities any of
2 the following transactions for and on behalf of any
3 affiliated depository institution, if so authorized
4 by the affiliate or affiliates: receiving deposits;
5 renewing deposits; cashing and issuing checks,
6 drafts, money orders, travelers checks, or similar
7 instruments; changing money; receiving payments on
8 existing indebtedness; and conducting ministerial
9 functions with respect to loan applications,
10 servicing loans, and providing loan account
11 information; and
12 (B) to authorize an affiliated depository
13 institution to conduct for and on behalf of it, any
14 of the transactions listed in this subsection at one
15 or more affiliate facilities.
16 A savings bank intending to conduct or to authorize
17 an affiliated depository institution to conduct at an
18 affiliate facility any of the transactions specified in
19 this subsection shall give written notice to the
20 Commissioner at least 30 days before any such transaction
21 is conducted at an affiliate facility. All conduct under
22 this subsection shall be on terms consistent with safe
23 and sound banking practices and applicable law.
24 (24) Subject to Article XLIV of the Illinois
25 Insurance Code, to act as the agent for any fire, life,
26 or other insurance company authorized by the State of
27 Illinois, by soliciting and selling insurance and
28 collecting premiums on policies issued by such company;
29 and may receive for services so rendered such fees or
30 commissions as may be agreed upon between the said
31 savings bank and the insurance company for which it may
32 act as agent; provided, however, that no such savings
33 bank shall in any case assume or guarantee the payment of
34 any premium on insurance policies issued through its
SB1784 Enrolled -63- LRB093 10148 BDD 11571 b
1 agency by its principal; and provided further, that the
2 savings bank shall not guarantee the truth of any
3 statement made by an assured in filing his application
4 for insurance.
5 (25) To become a member of the Federal Home Loan
6 Bank and to have the powers granted to a savings
7 association organized under the Illinois Savings and Loan
8 Act of 1985 or the laws of the United States, subject to
9 regulations of the Commissioner.
10 (26) To offer any product or service that is at the
11 time authorized or permitted to a bank by applicable law,
12 but subject always to the same limitations and
13 restrictions that are applicable to the bank for the
14 product or service by such applicable law and subject to
15 the applicable provisions of the Financial Institutions
16 Insurance Sales Law and rules of the Commissioner.
17 (b) If this Act or the regulations adopted under this
18 Act fail to provide specific guidance in matters of corporate
19 governance, the provisions of the Business Corporation Act of
20 1983 may be used, or if the savings bank is a limited
21 liability company, the provisions of the Limited Liability
22 Company shall be used.
23 (c) A savings bank may be organized as a limited
24 liability company, may convert to a limited liability
25 company, or may merge with and into a limited liability
26 company, under the applicable laws of this State and of the
27 United States, including any rules promulgated thereunder. A
28 savings bank organized as a limited liability company shall
29 be subject to the provisions of the Limited Liability Company
30 Act in addition to this Act, provided that if a provision of
31 the Limited Liability Company Act conflicts with a provision
32 of this Act or with any rule of the Commissioner, the
33 provision of this Act or the rule of the Commissioner shall
SB1784 Enrolled -64- LRB093 10148 BDD 11571 b
1 Any filing required to be made under the Limited
2 Liability Company Act shall be made exclusively with the
3 Commissioner, and the Commissioner shall possess the
4 exclusive authority to regulate the savings bank as provided
5 in this Act.
6 Any organization as, conversion to, and merger with or
7 into a limited liability company shall be subject to the
8 prior approval of the Commissioner.
9 A savings bank that is a limited liability company shall
10 be subject to all of the provisions of this Act in the same
11 manner as a savings bank that is organized in stock form.
12 The Commissioner may promulgate rules to ensure that a
13 savings bank that is a limited liability company (i) is
14 operating in a safe and sound manner and (ii) is subject to
15 the Commissioner's authority in the same manner as a savings
16 bank that is organized in stock form.
17 (Source: P.A. 91-97, eff. 7-9-99; 91-357, eff. 7-29-99;
18 92-483, eff. 8-23-01.)
19 Section 830. The Residential Mortgage License Act of
20 1987 is amended by changing Sections 1-4, 2-4, 2-6, 3-2, 3-5,
21 and 4-5 and by adding Sections 4-8.1, 4-8.2, and Article 7 as
23 (205 ILCS 635/1-4) (from Ch. 17, par. 2321-4)
24 Sec. 1-4. Definitions.
25 (a) "Residential real property" or "residential real
26 estate" shall mean real property located in this State
27 improved by a one-to-four family dwelling used or occupied,
28 wholly or partly, as the home or residence of one or more
29 persons and may refer, subject to regulations of the
30 Commissioner, to unimproved real property upon which those
31 kinds dwellings are to be constructed.
32 (b) "Making a residential mortgage loan" or "funding a
SB1784 Enrolled -65- LRB093 10148 BDD 11571 b
1 residential mortgage loan" shall mean for compensation or
2 gain, either directly or indirectly, advancing funds or
3 making a commitment to advance funds to a loan applicant for
4 a residential mortgage loan.
5 (c) "Soliciting, processing, placing, or negotiating a
6 residential mortgage loan" shall mean for compensation or
7 gain, either directly or indirectly, accepting or offering to
8 accept an application for a residential mortgage loan,
9 assisting or offering to assist in the processing of an
10 application for a residential mortgage loan on behalf of a
11 borrower, or negotiating or offering to negotiate the terms
12 or conditions of a residential mortgage loan with a lender on
13 behalf of a borrower including, but not limited to, the
14 submission of credit packages for the approval of lenders,
15 the preparation of residential mortgage loan closing
16 documents, including a closing in the name of a broker.
17 (d) "Exempt person or entity" shall mean the following:
18 (1) (i) Any banking organization or foreign banking
19 corporation licensed by the Illinois Commissioner of
20 Banks and Real Estate or the United States Comptroller of
21 the Currency to transact business in this State; (ii) any
22 national bank, federally chartered savings and loan
23 association, federal savings bank, federal credit union;
24 (iii) any pension trust, bank trust, or bank trust
25 company; (iv) any savings and loan association, savings
26 bank, or credit union organized under the laws of this or
27 any other state; (v) any Illinois Consumer Installment
28 Loan Act licensee; (vi) any insurance company authorized
29 to transact business in this State; (vii) any entity
30 engaged solely in commercial mortgage lending; (viii) any
31 service corporation of a savings and loan association or
32 savings bank organized under the laws of this State or
33 the service corporation of a federally chartered savings
34 and loan association or savings bank having its principal
SB1784 Enrolled -66- LRB093 10148 BDD 11571 b
1 place of business in this State, other than a service
2 corporation licensed or entitled to reciprocity under the
3 Real Estate License Act of 2000; or (ix) any first tier
4 subsidiary of a bank, the charter of which is issued
5 under the Illinois Banking Act by the Illinois
6 Commissioner of Banks and Real Estate, or the first tier
7 subsidiary of a bank chartered by the United States
8 Comptroller of the Currency and that has its principal
9 place of business in this State, provided that the first
10 tier subsidiary is regularly examined by the Illinois
11 Commissioner of Banks and Real Estate or the Comptroller
12 of the Currency, or a consumer compliance examination is
13 regularly conducted by the Federal Reserve Board.
14 (1.5) Any employee of a person or entity mentioned
15 in item (1) of this subsection.
16 (2) Any person or entity that either (i) has a
17 physical presence in Illinois or (ii) does not originate
18 mortgage loans in the ordinary course of business making
19 or acquiring residential mortgage loans with his or her
20 or its own funds for his or her or its own investment
21 without intent to make, acquire, or resell more than 10
22 residential mortgage loans in any one calendar year.
23 (3) Any person employed by a licensee to assist in
24 the performance of the activities regulated by this Act
25 who is compensated in any manner by only one licensee.
26 (4) Any person licensed pursuant to the Real Estate
27 License Act of 2000, who engages only in the taking of
28 applications and credit and appraisal information to
29 forward to a licensee or an exempt entity under this Act
30 and who is compensated by either a licensee or an exempt
31 entity under this Act, but is not compensated by either
32 the buyer (applicant) or the seller.
33 (5) Any individual, corporation, partnership, or
34 other entity that originates, services, or brokers
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1 residential mortgage loans, as these activities are
2 defined in this Act, and who or which receives no
3 compensation for those activities, subject to the
4 Commissioner's regulations with regard to the nature and
5 amount of compensation.
6 (6) A person who prepares supporting documentation
7 for a residential mortgage loan application taken by a
8 licensee and performs ministerial functions pursuant to
9 specific instructions of the licensee who neither
10 requires nor permits the preparer to exercise his or her
11 discretion or judgment; provided that this activity is
12 engaged in pursuant to a binding, written agreement
13 between the licensee and the preparer that:
14 (A) holds the licensee fully accountable for
15 the preparer's action; and
16 (B) otherwise meets the requirements of this
17 Section and this Act, does not undermine the
18 purposes of this Act, and is approved by the
20 (e) "Licensee" or "residential mortgage licensee" shall
21 mean a person, partnership, association, corporation, or any
22 other entity who or which is licensed pursuant to this Act to
23 engage in the activities regulated by this Act.
24 (f) "Mortgage loan" "residential mortgage loan" or "home
25 mortgage loan" shall mean a loan to or for the benefit of any
26 natural person made primarily for personal, family, or
27 household use, primarily secured by either a mortgage on
28 residential real property or certificates of stock or other
29 evidence of ownership interests in and proprietary leases
30 from, corporations, partnerships, or limited liability
31 companies formed for the purpose of cooperative ownership of
32 residential real property, all located in Illinois.
33 (g) "Lender" shall mean any person, partnership,
34 association, corporation, or any other entity who either
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1 lends or invests money in residential mortgage loans.
2 (h) "Ultimate equitable owner" shall mean a person who,
3 directly or indirectly, owns or controls an ownership
4 interest in a corporation, foreign corporation, alien
5 business organization, trust, or any other form of business
6 organization regardless of whether the person owns or
7 controls the ownership interest through one or more persons
8 or one or more proxies, powers of attorney, nominees,
9 corporations, associations, partnerships, trusts, joint stock
10 companies, or other entities or devices, or any combination
12 (i) "Residential mortgage financing transaction" shall
13 mean the negotiation, acquisition, sale, or arrangement for
14 or the offer to negotiate, acquire, sell, or arrange for, a
15 residential mortgage loan or residential mortgage loan
17 (j) "Personal residence address" shall mean a street
18 address and shall not include a post office box number.
19 (k) "Residential mortgage loan commitment" shall mean a
20 contract for residential mortgage loan financing.
21 (l) "Party to a residential mortgage financing
22 transaction" shall mean a borrower, lender, or loan broker in
23 a residential mortgage financing transaction.
24 (m) "Payments" shall mean payment of all or any of the
25 following: principal, interest and escrow reserves for taxes,
26 insurance and other related reserves, and reimbursement for
27 lender advances.
28 (n) "Commissioner" shall mean the Commissioner of Banks
29 and Real Estate or a person authorized by the Commissioner,
30 the Office of Banks and Real Estate Act, or this Act to act
31 in the Commissioner's stead.
32 (o) "Loan brokering", "brokering", or "brokerage
33 service" shall mean the act of helping to obtain from another
34 entity, for a borrower, a loan secured by residential real
SB1784 Enrolled -69- LRB093 10148 BDD 11571 b
1 estate situated in Illinois or assisting a borrower in
2 obtaining a loan secured by residential real estate situated
3 in Illinois in return for consideration to be paid by either
4 the borrower or the lender including, but not limited to,
5 contracting for the delivery of residential mortgage loans to
6 a third party lender and soliciting, processing, placing, or
7 negotiating residential mortgage loans.
8 (p) "Loan broker" or "broker" shall mean a person,
9 partnership, association, corporation, or limited liability
10 company, other than those persons, partnerships,
11 associations, corporations, or limited liability companies
12 exempted from licensing pursuant to Section 1-4, subsection
13 (d), of this Act, who performs the activities described in
14 subsections (c) and (o) of this Section.
15 (q) "Servicing" shall mean the collection or remittance
16 for or the right or obligation to collect or remit for any
17 lender, noteowner, noteholder, or for a licensee's own
18 account, of payments, interests, principal, and trust items
19 such as hazard insurance and taxes on a residential mortgage
20 loan in accordance with the terms of the residential mortgage
21 loan; and includes loan payment follow-up, delinquency loan
22 follow-up, loan analysis and any notifications to the
23 borrower that are necessary to enable the borrower to keep
24 the loan current and in good standing.
25 (r) "Full service office" shall mean office and staff in
26 Illinois reasonably adequate to handle efficiently
27 communications, questions, and other matters relating to any
28 application for, or an existing home mortgage secured by
29 residential real estate situated in Illinois with respect to
30 which the licensee is brokering, funding originating,
31 purchasing, or servicing. The management and operation of
32 each full service office must include observance of good
33 business practices such as adequate, organized, and accurate
34 books and records; ample phone lines, hours of business,
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1 staff training and supervision, and provision for a mechanism
2 to resolve consumer inquiries, complaints, and problems. The
3 Commissioner shall issue regulations with regard to these
4 requirements and shall include an evaluation of compliance
5 with this Section in his or her periodic examination of each
7 (s) "Purchasing" shall mean the purchase of conventional
8 or government-insured mortgage loans secured by residential
9 real estate situated in Illinois from either the lender or
10 from the secondary market.
11 (t) "Borrower" shall mean the person or persons who seek
12 the services of a loan broker, originator, or lender.
13 (u) "Originating" shall mean the issuing of commitments
14 for and funding of residential mortgage loans.
15 (v) "Loan brokerage agreement" shall mean a written
16 agreement in which a broker or loan broker agrees to do
17 either of the following:
18 (1) obtain a residential mortgage loan for the
19 borrower or assist the borrower in obtaining a
20 residential mortgage loan; or
21 (2) consider making a residential mortgage loan to
22 the borrower.
23 (w) "Advertisement" shall mean the attempt by
24 publication, dissemination, or circulation to induce,
25 directly or indirectly, any person to enter into a
26 residential mortgage loan agreement or residential mortgage
27 loan brokerage agreement relative to a mortgage secured by
28 residential real estate situated in Illinois.
29 (x) "Residential Mortgage Board" shall mean the
30 Residential Mortgage Board created in Section 1-5 of this
32 (y) "Government-insured mortgage loan" shall mean any
33 mortgage loan made on the security of residential real estate
34 insured by the Department of Housing and Urban Development or
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1 Farmers Home Loan Administration, or guaranteed by the
2 Veterans Administration.
3 (z) "Annual audit" shall mean a certified audit of the
4 licensee's books and records and systems of internal control
5 performed by a certified public accountant in accordance with
6 generally accepted accounting principles and generally
7 accepted auditing standards.
8 (aa) "Financial institution" shall mean a savings and
9 loan association, savings bank, credit union, or a bank
10 organized under the laws of Illinois or a savings and loan
11 association, savings bank, credit union or a bank organized
12 under the laws of the United States and headquartered in
14 (bb) "Escrow agent" shall mean a third party, individual
15 or entity charged with the fiduciary obligation for holding
16 escrow funds on a residential mortgage loan pending final
17 payout of those funds in accordance with the terms of the
18 residential mortgage loan.
19 (cc) "Net worth" shall have the meaning ascribed thereto
20 in Section 3-5 of this Act.
21 (dd) "Affiliate" shall mean:
22 (1) any entity that directly controls or is
23 controlled by the licensee and any other company that is
24 directly affecting activities regulated by this Act that
25 is controlled by the company that controls the licensee;
26 (2) any entity:
27 (A) that is controlled, directly or
28 indirectly, by a trust or otherwise, by or for the
29 benefit of shareholders who beneficially or
30 otherwise control, directly or indirectly, by trust
31 or otherwise, the licensee or any company that
32 controls the licensee; or
33 (B) a majority of the directors or trustees of
34 which constitute a majority of the persons holding
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1 any such office with the licensee or any company
2 that controls the licensee;
3 (3) any company, including a real estate investment
4 trust, that is sponsored and advised on a contractual
5 basis by the licensee or any subsidiary or affiliate of
6 the licensee.
7 The Commissioner may define by rule and regulation any
8 terms used in this Act for the efficient and clear
9 administration of this Act.
10 (ee) "First tier subsidiary" shall be defined by
11 regulation incorporating the comparable definitions used by
12 the Office of the Comptroller of the Currency and the
13 Illinois Commissioner of Banks and Real Estate.
14 (ff) "Gross delinquency rate" means the quotient
15 determined by dividing (1) the sum of (i) the number of
16 government-insured residential mortgage loans funded or
17 purchased by a licensee in the preceding calendar year that
18 are delinquent and (ii) the number of conventional
19 residential mortgage loans funded or purchased by the
20 licensee in the preceding calendar year that are delinquent
21 by (2) the sum of (i) the number of government-insured
22 residential mortgage loans funded or purchased by the
23 licensee in the preceding calendar year and (ii) the number
24 of conventional residential mortgage loans funded or
25 purchased by the licensee in the preceding calendar year.
26 (gg) "Delinquency rate factor" means the factor set by
27 rule of the Commissioner that is multiplied by the average
28 gross delinquency rate of licensees, determined annually for
29 the immediately preceding calendar year, for the purpose of
30 determining which licensees shall be examined by the
31 Commissioner pursuant to subsection (b) of Section 4-8 of
32 this Act.
33 (hh) "Loan originator" means any natural person who, for
34 compensation or in the expectation of compensation, either
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1 directly or indirectly makes, offers to make, solicits,
2 places, or negotiates a residential mortgage loan.
3 (Source: P.A. 90-772, eff. 1-1-99; 91-245, eff. 12-31-99.)
4 (205 ILCS 635/2-4) (from Ch. 17, par. 2322-4)
5 Sec. 2-4. Averments of Licensee. Each application for
6 license or for the renewal of a license shall be accompanied
7 by the following averments stating that the applicant:
8 (a) Will maintain at least one full service office
9 within the State of Illinois pursuant to Section 3-4 of this
11 (b) Will maintain staff reasonably adequate to meet the
12 requirements of Section 3-4 of this Act;
13 (c) Will keep and maintain for 36 months the same
14 written records as required by the federal Equal Credit
15 Opportunity Act, and any other information required by
16 regulations of the Commissioner regarding any home mortgage
17 in the course of the conduct of its residential mortgage
19 (d) Will file with the Commissioner, when due, any
20 report or reports which it is required to file under any of
21 the provisions of this Act;
22 (e) Will not engage, whether as principal or agent, in
23 the practice of rejecting residential mortgage applications
24 without reasonable cause, or varying terms or application
25 procedures without reasonable cause, for home mortgages on
26 real estate within any specific geographic area from the
27 terms or procedures generally provided by the licensee within
28 other geographic areas of the State;
29 (f) Will not engage in fraudulent home mortgage
30 underwriting practices;
31 (g) Will not make payment, whether directly or
32 indirectly, of any kind to any in house or fee appraiser of
33 any government or private money lending agency with which an
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1 application for a home mortgage has been filed for the
2 purpose of influencing the independent judgment of the
3 appraiser with respect to the value of any real estate which
4 is to be covered by such home mortgage;
5 (h) Has filed tax returns (State and Federal) for the
6 past 3 years or filed with the Commissioner an accountant's
7 or attorney's statement as to why no return was filed;
8 (i) Will not engage in any discrimination or redlining
9 activities prohibited by Section 3-8 of this Act;
10 (j) Will not knowingly make any false promises likely to
11 influence or persuade, or pursue a course of
12 misrepresentation and false promises through agents,
13 solicitors, advertising or otherwise;
14 (k) Will not knowingly misrepresent, circumvent or
15 conceal, through whatever subterfuge or device, any of the
16 material particulars or the nature thereof, regarding a
17 transaction to which it is a party to the injury of another
18 party thereto;
19 (l) Will disburse funds in accordance with its
21 (m) Has not committed a crime against the law of this
22 State, any other state or of the United States, involving
23 moral turpitude, fraudulent or dishonest dealing, and that no
24 final judgment has been entered against it in a civil action
25 upon grounds of fraud, misrepresentation or deceit which has
26 not been previously reported to the Commissioner;
27 (n) Will account or deliver to any person any personal
28 property such as money, fund, deposit, check, draft,
29 mortgage, other document or thing of value, which has come
30 into its possession, and which is not its property, or which
31 it is not in law or equity entitled to retain under the
32 circumstances, at the time which has been agreed upon or is
33 required by law, or, in the absence of a fixed time, upon
34 demand of the person entitled to such accounting and
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2 (o) Has not engaged in any conduct which would be cause
3 for denial of a license;
4 (p) Has not become insolvent;
5 (q) Has not submitted an application for a license under
6 this Act which contains a material misstatement;
7 (r) Has not demonstrated by course of conduct,
8 negligence or incompetence in performing any act for which it
9 is required to hold a license under this Act;
10 (s) Will advise the Commissioner in writing of any
11 changes to the information submitted on the most recent
12 application for license within 30 days of said change. The
13 written notice must be signed in the same form as the
14 application for license being amended;
15 (t) Will comply with the provisions of this Act, or with
16 any lawful order, rule or regulation made or issued under the
17 provisions of this Act;
18 (u) Will submit to periodic examination by the
19 Commissioner as required by this Act;
20 (v) Will advise the Commissioner in writing of judgments
21 entered against, and bankruptcy petitions by, the license
22 applicant within 5 days of occurrence;
23 (w) Will advise the Commissioner in writing within 30
24 days when the license applicant requests a licensee under
25 this Act to repurchase a loan, and the circumstances
26 therefor; and
27 (x) Will advise the Commissioner in writing within 30
28 days when the license applicant is requested by another
29 entity to repurchase a loan, and the circumstances therefor.
30 (y) Will at all times act in a manner consistent with
31 subsections (a) and (b) of Section 1-2 of this Act.
32 (x) Will not knowingly hire or employ a loan originator
33 who is not registered with the Commissioner as required under
34 Section 7-1 of this Act.
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1 A licensee who fails to fulfill obligations of an
2 averment, to comply with averments made, or otherwise
3 violates any of the averments made under this Section shall
4 be subject to the penalties in Section 4-5 of this Act.
5 (Source: P.A. 90-301, eff. 8-1-97.)
6 (205 ILCS 635/2-6) (from Ch. 17, par. 2322-6)
7 Sec. 2-6. License issuance and renewal; fee.
8 (a) Beginning May 1, 1992, licenses issued before
9 January 1, 1988, shall be renewed every 2 years on May 1.
10 Beginning May 1, 1992, licenses issued on or after January 1,
11 1988, shall be renewed every 2 years on the anniversary of
12 the date of the issuance of the original license. Licenses
13 issued for first time applicants on or after May 1, 1992,
14 shall be renewed on the first anniversary of their issuance
15 and every 2 years thereafter. Properly completed renewal
16 application forms and filing fees must be received by the
17 Commissioner 60 45 days prior to the renewal date.
18 (b) It shall be the responsibility of each licensee to
19 accomplish renewal of its license; failure of the licensee to
20 receive renewal forms absent a request sent by certified mail
21 for such forms will not waive said responsibility. Failure by
22 a licensee to submit a properly completed renewal application
23 form and fees in a timely fashion, absent a written extension
24 from the Commissioner, will result in the assessment of
25 additional fees, as follows:
26 (1) A fee of $500 will be assessed to the licensee
27 30 days after the proper renewal date and $1,000 each
28 month thereafter, until the license is either renewed or
29 expires pursuant to Section 2-6, subsections (c) and (d),
30 of this Act.
31 (2) Such fee will be assessed without prior notice
32 to the licensee, but will be assessed only in cases
33 wherein the Commissioner has in his or her possession
SB1784 Enrolled -77- LRB093 10148 BDD 11571 b
1 documentation of the licensee's continuing activity for
2 which the unrenewed license was issued.
3 (c) A license which is not renewed by the date required
4 in this Section shall automatically become inactive. No
5 activity regulated by this Act shall be conducted by the
6 licensee when a license becomes inactive. An inactive
7 license may be reactivated by filing a completed reactivation
8 application with the Commissioner, payment of the renewal
9 fee, and payment of a reactivation fee equal to the renewal
11 (d) A license which is not renewed within one year of
12 becoming inactive shall expire.
13 (e) A licensee ceasing an activity or activities
14 regulated by this Act and desiring to no longer be licensed
15 shall so inform the Commissioner in writing and, at the same
16 time, convey the license and all other symbols or indicia of
17 licensure. The licensee shall include a plan for the
18 withdrawal from regulated business, including a timetable for
19 the disposition of the business. Upon receipt of such
20 written notice, the Commissioner shall issue a certified
21 statement canceling the license.
22 (Source: P.A. 90-301, eff. 8-1-97.)
23 (205 ILCS 635/3-2) (from Ch. 17, par. 2323-2)
24 Sec. 3-2. Annual audit.
25 (a) At the licensee's fiscal year-end, but in no case
26 more than 12 months after the last audit conducted pursuant
27 to this Section, except as otherwise provided in this
28 Section, it shall be mandatory for each residential mortgage
29 licensee to cause its books and accounts to be audited by a
30 certified public accountant not connected with such licensee.
31 The books and records of all licensees under this Act shall
32 be maintained on an accrual basis. The audit must be
33 sufficiently comprehensive in scope to permit the expression
SB1784 Enrolled -78- LRB093 10148 BDD 11571 b
1 of an opinion on the financial statements, which must be
2 prepared in accordance with generally accepted accounting
3 principles, and must be performed in accordance with
4 generally accepted auditing standards. Notwithstanding the
5 requirements of this subsection, a licensee that is a first
6 tier subsidiary may submit audited consolidated financial
7 statements of its parent as long as the consolidated
8 statements are supported by consolidating statements. The
9 licensee's chief financial officer shall attest to the
10 licensee's financial statements disclosed in the
11 consolidating statements.
12 (b) As used herein, the term "expression of opinion"
13 includes either (1) an unqualified opinion, (2) a qualified
14 opinion, (3) a disclaimer of opinion, or (4) an adverse
16 (c) If a qualified or adverse opinion is expressed or if
17 an opinion is disclaimed, the reasons therefore must be fully
18 explained. An opinion, qualified as to a scope limitation,
19 shall not be acceptable.
20 (d) The most recent audit report shall be filed with the
21 Commissioner within 90 days after the end of the licensee's
22 fiscal year at the time of the annual license renewal
23 payment. The report filed with the Commissioner shall be
24 certified by the certified public accountant conducting the
25 audit. The Commissioner may promulgate rules regarding late
26 audit reports.
27 (e) If any licensee required to make an audit shall fail
28 to cause an audit to be made, the Commissioner shall cause
29 the same to be made by a certified public accountant at the
30 licensee's expense. The Commissioner shall select such
31 certified public accountant by advertising for bids or by
32 such other fair and impartial means as he or she establishes
33 by regulation.
34 (f) In lieu of the audit required by this Section, the
SB1784 Enrolled -79- LRB093 10148 BDD 11571 b
1 Commissioner may accept any audit made in conformance with
2 the audit requirements of the U.S. Department of Housing and
3 Urban Development.
4 (g) With respect to licensees who solely broker
5 residential mortgage loans as defined in subsection (o) of
6 Section 1-4, instead of the audit required by this Section,
7 the Commissioner may accept compilation financial statements
8 prepared at least every 12 months, and the compilation
9 financial statement must be prepared by an independent
10 certified public accountant licensed under the Illinois
11 Public Accounting Act with full disclosure in accordance with
12 generally accepted accounting principals and must shall be
13 submitted within 90 days after the end of the licensee's
14 fiscal year at the time of the annual license renewal
15 payment. If a licensee under this Section fails to file a
16 compilation as required, the Commissioner shall cause an
17 audit of the licensee's books and accounts to be made by a
18 certified public accountant at the licensee's expense. The
19 Commissioner shall select the certified public accountant by
20 advertising for bids or by such other fair and impartial
21 means as he or she establishes by rule. A licensee who files
22 false or misleading compilation financial statements is
23 guilty of a business offense and shall be fined not less than
25 (h) The workpapers of the certified public accountants
26 employed by each licensee for purposes of this Section are to
27 be made available to the Commissioner or the Commissioner's
28 designee upon request and may be reproduced by the
29 Commissioner or the Commissioner's designee to enable to the
30 Commissioner to carry out the purposes of this Act.
31 (i) Notwithstanding any other provision of this Section,
32 if a licensee relying on subsection (g) of this Section
33 causes its books to be audited at any other time or causes
34 its financial statements to be reviewed, a complete copy of
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1 the audited or reviewed financial statements shall be
2 delivered to the Commissioner at the time of the annual
3 license renewal payment following receipt by the licensee of
4 the audited or reviewed financial statements. All workpapers
5 shall be made available to the Commissioner upon request.
6 The financial statements and workpapers may be reproduced by
7 the Commissioner or the Commissioner's designee to carry out
8 the purposes of this Act.
9 (Source: P.A. 89-74, eff. 6-30-95; 89-355, eff. 8-17-95;
10 90-772, eff. 1-1-99.)
11 (205 ILCS 635/3-5) (from Ch. 17, par. 2323-5)
12 Sec. 3-5. Net worth requirement. A licensee that holds a
13 license on the effective date of this amendatory Act of the
14 93rd General Assembly Every licensee shall have and maintain
15 a net worth of not less than $100,000; however, no later than
16 2 years after the effective date of this amendatory Act of
17 the 93rd General Assembly, the licensee must maintain a net
18 worth of not less than $150,000. A licensee that first
19 obtains a license after the effective date of this amendatory
20 Act of the 93rd General Assembly must have and maintain a net
21 worth of not less than $150,000. Notwithstanding other
22 requirements of this Section, the net worth requirement for a
23 residential mortgage licensee licensees whose only licensable
24 activity is that of brokering residential mortgage loans and
25 that holds a license on the effective date of this amendatory
26 Act of the 93rd General Assembly shall be $35,000; however,
27 no later than 2 years after the effective date of this
28 amendatory Act of the 93rd General Assembly, the licensee
29 must maintain a net worth of not less than $50,000. Such a
30 licensee that first obtains a license after the effective
31 date of this amendatory Act of the 93rd General Assembly must
32 have and maintain a net worth of not less than $50,000. Net
33 worth shall be evidenced by a balance sheet prepared by a
SB1784 Enrolled -81- LRB093 10148 BDD 11571 b
1 certified public accountant in accordance with generally
2 accepted accounting principles and generally accepted
3 auditing standards or by the compilation financial statements
4 authorized under subsection (g) of Section 3-2. The
5 Commissioner may promulgate rules with respect to net worth
6 definitions and requirements for residential mortgage
7 licensees as necessary to accomplish the purposes of this
8 Act. In lieu of the net worth requirement established by
9 this Section, the Commissioner may accept evidence of
10 conformance by the licensee with the net worth requirements
11 of the United States Department of Housing and Urban
13 (Source: P.A. 89-355, eff. 8-17-95; 89-508, eff. 7-3-96.)
14 (205 ILCS 635/4-5) (from Ch. 17, par. 2324-5)
15 Sec. 4-5. Suspension, revocation of licenses; fines.
16 (a) Upon written notice to a licensee, the Commissioner
17 may suspend or revoke any license issued pursuant to this Act
18 if he or she shall make a finding of one or more of the
19 following in the notice that:
20 (1) Through separate acts or an act or a course of
21 conduct, the licensee has violated any provisions of this
22 Act, any rule or regulation promulgated by the
23 Commissioner or of any other law, rule or regulation of
24 this State or the United States.
25 (2) Any fact or condition exists which, if it had
26 existed at the time of the original application for such
27 license would have warranted the Commissioner in refusing
28 originally to issue such license.
29 (3) If a licensee is other than an individual, any
30 ultimate equitable owner, officer, director, or member of
31 the licensed partnership, association, corporation, or
32 other entity has so acted or failed to act as would be
33 cause for suspending or revoking a license to that party
SB1784 Enrolled -82- LRB093 10148 BDD 11571 b
1 as an individual.
2 (b) No license shall be suspended or revoked, except as
3 provided in this Section, nor shall any licensee be fined
4 without notice of his or her right to a hearing as provided
5 in Section 4-12 of this Act.
6 (c) The Commissioner, on good cause shown that an
7 emergency exists, may suspend any license for a period not
8 exceeding 180 days, pending investigation. Upon a showing
9 that a licensee has failed to meet the experience or
10 educational requirements of Section 2-2 or the requirements
11 of subsection (g) of Section 3-2, the Commissioner shall
12 suspend, prior to hearing as provided in Section 4-12, the
13 license until those requirements have been met.
14 (d) The provisions of subsection (e) of Section 2-6 of
15 this Act shall not affect a licensee's civil or criminal
16 liability for acts committed prior to surrender of a license.
17 (e) No revocation, suspension or surrender of any
18 license shall impair or affect the obligation of any
19 pre-existing lawful contract between the licensee and any
21 (f) Every license issued under this Act shall remain in
22 force and effect until the same shall have expired without
23 renewal, have been surrendered, revoked or suspended in
24 accordance with the provisions of this Act, but the
25 Commissioner shall have authority to reinstate a suspended
26 license or to issue a new license to a licensee whose license
27 shall have been revoked if no fact or condition then exists
28 which would have warranted the Commissioner in refusing
29 originally to issue such license under this Act.
30 (g) Whenever the Commissioner shall revoke or suspend a
31 license issued pursuant to this Act or fine a licensee under
32 this Act, he or she shall forthwith execute in duplicate a
33 written order to that effect. The Commissioner shall publish
34 notice of such order in the Illinois Register and a newspaper
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1 of general circulation in the county in which the license is
2 located and shall forthwith serve a copy of such order upon
3 the licensee. Any such order may be reviewed in the manner
4 provided by Section 4-12 of this Act.
5 (h) When the Commissioner finds any person in violation
6 of the grounds set forth in subsection (i), he or she may
7 enter an order imposing one or more of the following
9 (1) Revocation of license;
10 (2) Suspension of a license subject to
11 reinstatement upon satisfying all reasonable conditions
12 the Commissioner may specify;
13 (3) Placement of the licensee or applicant on
14 probation for a period of time and subject to all
15 reasonable conditions as the Commissioner may specify;
16 (4) Issuance of a reprimand;
17 (5) Imposition of a fine not to exceed $25,000
18 $10,000 for each count of separate offense; and
19 (6) Denial of a license.
20 (i) The following acts shall constitute grounds for
21 which the disciplinary actions specified in subsection (h)
22 above may be taken:
23 (1) Being convicted or found guilty, regardless of
24 pendency of an appeal, of a crime in any jurisdiction
25 which involves fraud, dishonest dealing, or any other act
26 of moral turpitude;
27 (2) Fraud, misrepresentation, deceit or negligence
28 in any mortgage financing transaction;
29 (3) A material or intentional misstatement of fact
30 on an initial or renewal application;
31 (4) Failure to follow the Commissioner's
32 regulations with respect to placement of funds in escrow
34 (5) Insolvency or filing under any provision of the
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1 Bankruptcy Code as a debtor;
2 (6) Failure to account or deliver to any person any
3 property such as any money, fund, deposit, check, draft,
4 mortgage, or other document or thing of value, which has
5 come into his or her hands and which is not his or her
6 property or which he or she is not in law or equity
7 entitled to retain, under the circumstances and at the
8 time which has been agreed upon or is required by law or,
9 in the absence of a fixed time, upon demand of the person
10 entitled to such accounting and delivery;
11 (7) Failure to disburse funds in accordance with
13 (8) Any misuse, misapplication, or misappropriation
14 of trust funds or escrow funds;
15 (9) Having a license, or the equivalent, to
16 practice any profession or occupation revoked, suspended,
17 or otherwise acted against, including the denial of
18 licensure by a licensing authority of this State or
19 another state, territory or country for fraud, dishonest
20 dealing or any other act of moral turpitude;
21 (10) Failure to issue a satisfaction of mortgage
22 when the residential mortgage has been executed and
23 proceeds were not disbursed to the benefit of the
24 mortgagor and when the mortgagor has fully paid
25 licensee's costs and commission;
26 (11) Failure to comply with any order of the
27 Commissioner or rule made or issued under the provisions
28 of this Act;
29 (12) Engaging in activities regulated by this Act
30 without a current, active license unless specifically
31 exempted by this Act;
32 (13) Failure to pay in a timely manner any fee,
33 charge or fine under this Act;
34 (14) Failure to maintain, preserve, and keep
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1 available for examination, all books, accounts or other
2 documents required by the provisions of this Act and the
3 rules of the Commissioner;
4 (15) Refusal to permit an investigation or
5 examination of the licensee's or its affiliates' books
6 and records or refusal to comply with the Commissioner's
7 subpoena or subpoena duces tecum;
8 (16) A pattern of substantially underestimating the
9 maximum closing costs;
10 (17) Failure to comply with or violation of any
11 provision of this Act.
12 (j) A licensee shall be subject to the disciplinary
13 actions specified in this Act for violations of subsection
14 (i) by any officer, director, shareholder, joint venture,
15 partner, ultimate equitable owner, or employee of the
17 (k) Such licensee shall be subject to suspension or
18 revocation for employee actions only if there is a pattern of
19 repeated violations by employees or the licensee has
20 knowledge of the violations.
21 (l) Procedure for surrender of license:
22 (1) The Commissioner may, after 10 days notice by
23 certified mail to the licensee at the address set forth
24 on the license, stating the contemplated action and in
25 general the grounds therefor and the date, time and place
26 of a hearing thereon, and after providing the licensee
27 with a reasonable opportunity to be heard prior to such
28 action, fine such licensee an amount not exceeding
29 $10,000 per violation, or revoke or suspend any license
30 issued hereunder if he or she finds that:
31 (i) The licensee has failed to comply with any
32 provision of this Act or any order, decision,
33 finding, rule, regulation or direction of the
34 Commissioner lawfully made pursuant to the authority
SB1784 Enrolled -86- LRB093 10148 BDD 11571 b
1 of this Act; or
2 (ii) Any fact or condition exists which, if it
3 had existed at the time of the original application
4 for the license, clearly would have warranted the
5 Commissioner in refusing to issue the license.
6 (2) Any licensee may surrender a license by
7 delivering to the Commissioner written notice that he or
8 she thereby surrenders such license, but surrender shall
9 not affect the licensee's civil or criminal liability for
10 acts committed prior to surrender or entitle the licensee
11 to a return of any part of the license fee.
12 (Source: P.A. 89-355, eff. 8-17-95.)
13 (205 ILCS 635/4-8.1 new)
14 Sec. 4-8.1. Confidential information. In hearings
15 conducted under this Act, information presented into evidence
16 that was acquired by the licensee when serving any individual
17 in connection with a residential mortgage, including all
18 financial information of the individual, shall be deemed
19 strictly confidential and shall be made available only as
20 part of the record of a hearing under this Act or otherwise
21 (i) when the record is required, in its entirety, for
22 purposes of judicial review or (ii) upon the express written
23 consent of the individual served, or in the case of his or
24 her death or disability, the consent of his or her personal
26 (205 ILCS 635/4-8.2 new)
27 Sec. 4-8.2. Reports of violations. Any person licensed
28 under this Act or any other person may report to the
29 Commissioner any information to show that a person subject to
30 this Act is or may be in violation of this Act.
31 (205 ILCS 635/Art. VII heading new)
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1 ARTICLE VII. REGISTRATION OF LOAN ORIGINATORS
2 (205 ILCS 635/7-1 new)
3 Sec. 7-1. Registration required; rules and regulations.
4 Beginning 6 months after the effective date of this
5 amendatory Act of the 93rd General Assembly, it is unlawful
6 for any natural person to act or assume to act as a loan
7 originator, as defined in subsection (hh) of Section 1-4,
8 without being registered with the Commissioner unless the
9 natural person is exempt under items (1) and (1.5) of
10 subsection (d) of Section 1-4 of this Act. The Commissioner
11 shall promulgate rules prescribing the criteria for the
12 registration and regulation of loan originators, including
13 but not limited to, qualifications, fees, examination,
14 education, supervision, and enforcement.
15 Section 835. The Limited Liability Company Act is
16 amended by changing Sections 1-25, 5-5, 5-55, 37-5, and 37-35
17 as follows:
18 (805 ILCS 180/1-25)
19 Sec. 1-25. Nature of business. A limited liability
20 company may be formed for any lawful purpose or business
22 (1) (Blank) banking, exclusive of fiduciaries
23 organized for the purpose of accepting and executing
25 (2) insurance unless, for the purpose of carrying
26 on business as a member of a group including incorporated
27 and individual unincorporated underwriters, the Director
28 of Insurance finds that the group meets the requirements
29 of subsection (3) of Section 86 of the Illinois Insurance
30 Code and the limited liability company, if insolvent, is
31 subject to liquidation by the Director of Insurance under
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1 Article XIII of the Illinois Insurance Code;
2 (3) the practice of dentistry unless all the
3 members and managers are licensed as dentists under the
4 Illinois Dental Practice Act; or
5 (4) the practice of medicine unless all the
6 managers, if any, are licensed to practice medicine under
7 the Medical Practice Act of 1987 and any of the following
8 conditions apply:
9 (A) the member or members are licensed to
10 practice medicine under the Medical Practice Act of
11 1987; or
12 (B) the member or members are a registered
13 medical corporation or corporations organized
14 pursuant to the Medical Corporation Act; or
15 (C) the member or members are a professional
16 corporation organized pursuant to the Professional
17 Service Corporation Act of physicians licensed to
18 practice medicine in all its branches; or
19 (D) the member or members are a medical
20 limited liability company or companies.
21 (Source: P.A. 91-593, eff. 8-14-99; 92-144, eff. 7-24-01.)
22 (805 ILCS 180/5-5)
23 Sec. 5-5. Articles of organization.
24 (a) The articles of organization shall set forth all of
25 the following:
26 (1) The name of the limited liability company and
27 the address of its principal place of business which may,
28 but need not be a place of business in this State.
29 (2) The purposes for which the limited liability
30 company is organized, which may be stated to be, or to
31 include, the transaction of any or all lawful businesses
32 for which limited liability companies may be organized
33 under this Act.
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1 (3) The name of its registered agent and the
2 address of its registered office.
3 (4) If the limited liability company is to be
4 managed by a manager or managers, the names and business
5 addresses of the initial manager or managers.
6 (5) If management of the limited liability company
7 is to be vested in the members under Section 15-1, then
8 the names and addresses of the initial member or members.
9 (6) The latest date, if any, upon which the limited
10 liability company is to dissolve and other events of
11 dissolution, if any, that may be agreed upon by the
12 members under Section 35-1 hereof.
13 (7) The name and address of each organizer.
14 (8) Any other provision, not inconsistent with law,
15 that the members elect to set out in the articles of
16 organization for the regulation of the internal affairs
17 of the limited liability company, including any
18 provisions that, under this Act, are required or
19 permitted to be set out in the operating agreement of the
20 limited liability company.
21 (b) A limited liability company is organized at the time
22 articles of organization are filed by the Secretary of State
23 or at any later time, not more than 60 days after the filing
24 of the articles of organization, specified in the articles of
26 (c) Articles of organization for the organization of a
27 limited liability company for the purpose of accepting and
28 executing trusts shall not be filed by the Secretary of State
29 until there is delivered to him or her a statement executed
30 by the Commissioner of the Office of Banks and Real Estate
31 that the organizers of the limited liability company have
32 made arrangements with the Commissioner of the Office of
33 Banks and Real Estate to comply with the Corporate Fiduciary
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1 (d) Articles of organization for the organization of a
2 limited liability company as a bank or a savings bank must be
3 filed with the Commissioner of Banks and Real Estate or, if
4 the bank or savings bank will be organized under federal law,
5 with the appropriate federal banking regulator.
6 (Source: P.A. 90-424, eff. 1-1-98.)
7 (805 ILCS 180/5-55)
8 Sec. 5-55. Filing in Office of Secretary of State.
9 (a) Whenever any provision of this Act requires a
10 limited liability company to file any document with the
11 Office of the Secretary of State, the requirement means that:
12 (1) the original document, executed as described in
13 Section 5-45, and, if required by this Act to be filed in
14 duplicate, one copy (which may be a signed carbon or
15 photocopy) shall be delivered to the Office of the
16 Secretary of State;
17 (2) all fees and charges authorized by law to be
18 collected by the Secretary of State in connection with
19 the filing of the document shall be tendered to the
20 Secretary of State; and
21 (3) unless the Secretary of State finds that the
22 document does not conform to law, he or she shall, when
23 all fees have been paid:
24 (A) endorse on the original and on the copy
25 the word "Filed" and the month, day, and year of the
26 filing thereof;
27 (B) file in his or her office the original of
28 the document; and
29 (C) return the copy to the person who filed it
30 or to that person's representative.
31 (b) If another Section of this Act specifically
32 prescribes a manner of filing or signing a specified document
33 that differs from the corresponding provisions of this
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1 Section, then the provisions of the other Section shall
3 (c) Whenever any provision of this Act requires a limited
4 liability company that is a bank or a savings bank to file
5 any document, that requirement means that the filing shall be
6 made exclusively with the Commissioner of Banks and Real
7 Estate or, if the bank or savings bank is organized under
8 federal law, with the appropriate federal banking regulator
9 at such times and in such manner as required by the
10 Commissioner or federal regulator.
11 (Source: P.A. 92-33, eff. 7-1-01.)
12 (805 ILCS 180/37-5)
13 Sec. 37-5. Definitions. In this Article:
14 "Corporation" means (i) a corporation under the Business
15 Corporation Act of 1983, a predecessor law, or comparable law
16 of another jurisdiction or (ii) a bank or savings bank.
17 "General partner" means a partner in a partnership and a
18 general partner in a limited partnership.
19 "Limited partner" means a limited partner in a limited
21 "Limited partnership" means a limited partnership created
22 under the Revised Uniform Limited Partnership Act, a
23 predecessor law, or comparable law of another jurisdiction.
24 "Partner" includes a general partner and a limited
26 "Partnership" means a general partnership under the
27 Uniform Partnership Act, a predecessor law, or comparable law
28 of another jurisdiction.
29 "Partnership agreement" means an agreement among the
30 partners concerning the partnership or limited partnership.
31 "Shareholder" means a shareholder in a corporation.
32 (Source: P.A. 90-424, eff. 1-1-98.)
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1 (805 ILCS 180/37-35)
2 Sec. 37-35. Article not exclusive. This Article does not
3 preclude an entity from being converted or merged under other
4 law. A bank or savings bank that converts to or merges with
5 and into a limited liability company shall be subject to the
6 provisions of this Article or to other applicable law to the
7 extent that those provisions do not conflict with the State
8 or federal law pursuant to which the conversion or merger of
9 the bank or savings bank is authorized.
10 (Source: P.A. 90-424, eff. 1-1-98.)
11 Section 840. The Illinois Fairness in Lending Act is
12 amended by changing Sections 2, 3, and 5 as follows:
13 (815 ILCS 120/2) (from Ch. 17, par. 852)
14 Sec. 2. As used in this Act:
15 (a) "Financial Institution" means any bank, credit
16 union, insurance company, mortgage banking company, savings
17 bank, or savings and loan association, or other residential
18 mortgage lender which operates or has a place of business in
19 this State.
20 (b) "Person" means any natural person.
21 (c) "Varying the terms of a loan" includes, but is not
22 limited to the following practices:
23 (1) Requiring a greater than average down payment than
24 is usual for the particular type of a loan involved.
25 (2) Requiring a shorter period of amortization than is
26 usual for the particular type of loan involved.
27 (3) Charging a higher interest rate than is usual for
28 the particular type of loan involved.
29 (4) An underappraisal of real estate or other item of
30 property offered as security.
31 (d) "Equity stripping" means to assist a person in
32 obtaining a loan secured by the person's principal residence
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1 for the primary purpose of receiving fees related to the
2 financing when (i) the loan decreased the person's equity in
3 the principal residence and (ii) at the time the loan is
4 made, the financial institution does not reasonably believe
5 that the person will be able to make the scheduled payments
6 to repay the loan. "Equity stripping" does not include
7 reverse mortgages as defined in Section 5a of the Illinois
8 Banking Act, Section 1-6a of the Illinois Savings and Loan
9 Act of 1985, or subsection (3) of Section 46 of the Illinois
10 Credit Union Act.
11 (e) "Loan flipping" means to assist a person in
12 refinancing a loan secured by the person's principal
13 residence for the primary purpose of receiving fees related
14 to the refinancing when (i) the refinancing of the loan
15 results in no tangible benefit to the person and (ii) at the
16 time the loan is made, the financial institution does not
17 reasonably believe that the refinancing of the loan will
18 result in a tangible benefit to the person.
19 (f) "Principal residence" means a person's primary
20 residence that is a dwelling consisting of 4 or fewer family
21 units or that is in a dwelling consisting of condominium or
22 cooperative units.
23 (Source: P.A. 81-1391.)
24 (815 ILCS 120/3) (from Ch. 17, par. 853)
25 Sec. 3. No financial institution, in connection with or
26 in contemplation of any loan to any person, may:
27 (a) Deny or vary the terms of a loan on the basis that a
28 specific parcel of real estate offered as security is located
29 in a specific geographical area.
30 (b) Deny or vary the terms of a loan without having
31 considered all of the regular and dependable income of each
32 person who would be liable for repayment of the loan.
33 (c) Deny or vary the terms of a loan on the sole basis
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1 of the childbearing capacity of an applicant or an
2 applicant's spouse.
3 (d) Utilize lending standards that have no economic
4 basis and which are discriminatory in effect.
5 (e) Engage in equity stripping or loan flipping.
6 (Source: P.A. 81-1391.)
7 (815 ILCS 120/5) (from Ch. 17, par. 855)
8 Sec. 5. (a) Subject to the limitation imposed by
9 subsection (b), any person who has been aggrieved as a result
10 of a violation of this Act may bring an individual action in
11 the circuit court of the county in which the particular
12 financial institution involved is located or doing business.
13 Upon a finding that a financial institution has committed
14 a violation of this Act, the court may award actual damages,
15 and may in its discretion award court costs.
16 (b) If the same events or circumstances would constitute
17 the basis for an action under this Act or an action under any
18 other Act, the aggrieved person may elect between the
19 remedies proposed by the two Acts but may not bring actions,
20 either administrative or judicial, under more than one of the
21 two Acts in relation to those same events or circumstances.
22 (c) An action to enjoin any person subject to this Act
23 from engaging in activity in violation of this Act may be
24 maintained in the name of the people of the State of Illinois
25 by the Attorney General or by the State's Attorney of the
26 county in which the action is brought. This remedy shall be
27 in addition to other remedies provided for any violation of
28 this Act.
29 (Source: P.A. 81-1391.)
30 Section 845. The Consumer Fraud and Deceptive Business
31 Practices Act is amended by changing Section 2Z as follows:
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1 (815 ILCS 505/2Z) (from Ch. 121 1/2, par. 262Z)
2 Sec. 2Z. Violations of other Acts. Any person who
3 knowingly violates the Automotive Repair Act, the Home Repair
4 and Remodeling Act, the Dance Studio Act, the Physical
5 Fitness Services Act, the Hearing Instrument Consumer
6 Protection Act, the Illinois Union Label Act, the Job
7 Referral and Job Listing Services Consumer Protection Act,
8 the Travel Promotion Consumer Protection Act, the Credit
9 Services Organizations Act, the Automatic Telephone Dialers
10 Act, the Pay-Per-Call Services Consumer Protection Act, the
11 Telephone Solicitations Act, the Illinois Funeral or Burial
12 Funds Act, the Cemetery Care Act, the Safe and Hygienic Bed
13 Act, the Pre-Need Cemetery Sales Act, the High Risk Home Loan
14 Act, subsection (a) or (b) of Section 3-10 of the Cigarette
15 Tax Act, subsection (a) or (b) of Section 3-10 of the
16 Cigarette Use Tax Act, the Electronic Mail Act, or paragraph
17 (6) of subsection (k) of Section 6-305 of the Illinois
18 Vehicle Code commits an unlawful practice within the meaning
19 of this Act.
20 (Source: P.A. 91-164, eff. 7-16-99; 91-230, eff. 1-1-00;
21 91-233, eff. 1-1-00; 91-810, eff. 6-13-00; 92-426, eff.
23 Section 900. Severability. The provisions of this Act are
24 severable under Section 1.31 of the Statute on Statutes.