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1 | AN ACT concerning debt settlement.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 5. If and only if House Bill 4781 of the 96th | |||||||||||||||||||||||
5 | General Assembly becomes law, the Debt Settlement Consumer | |||||||||||||||||||||||
6 | Protection Act is amended by changing Sections 20 and 125 and | |||||||||||||||||||||||
7 | adding Section 160 as follows: | |||||||||||||||||||||||
8 | (09600HB4781eng, Sec. 20)
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9 | Sec. 20. Application for license. An application for a | |||||||||||||||||||||||
10 | license to operate as a debt settlement provider in this State | |||||||||||||||||||||||
11 | shall be made to the Secretary and shall be in writing, under | |||||||||||||||||||||||
12 | oath, and in the form prescribed by the Secretary. | |||||||||||||||||||||||
13 | Each applicant, at the time of making such application, | |||||||||||||||||||||||
14 | shall pay to the Secretary the required fee as set by rule.
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15 | Every applicant shall submit to the Secretary, at the time | |||||||||||||||||||||||
16 | of the application for a license, a
bond to be approved by the | |||||||||||||||||||||||
17 | Secretary in which the applicant shall be the obligor and in | |||||||||||||||||||||||
18 | which an insurance company, which is duly authorized by the | |||||||||||||||||||||||
19 | State of Illinois to transact the business of fidelity and | |||||||||||||||||||||||
20 | surety insurance, shall be a surety. The surety bond must: | |||||||||||||||||||||||
21 | (i) be in effect during the period of registration and | |||||||||||||||||||||||
22 | for 2 years after the provider ceases providing | |||||||||||||||||||||||
23 | debt-management services to individuals in this State; |
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1 | (ii) run to this State for the benefit of this State | ||||||
2 | and of individuals who reside in this State when they agree | ||||||
3 | to receive debt-settlement services from the provider, as | ||||||
4 | their interests may appear; and | ||||||
5 | (iii) be in the amount of $50,000 or other larger or | ||||||
6 | smaller amount that the Secretary determines is warranted | ||||||
7 | by the financial condition and business experience of the | ||||||
8 | provider, the history of the provider in performing debt | ||||||
9 | settlement services, the risk to individuals, and any other | ||||||
10 | factor that the Secretary considers appropriate. Secretary | ||||||
11 | in which the applicant shall be the obligor, in the sum of | ||||||
12 | $100,000 or an additional amount as required by the | ||||||
13 | Secretary, and in which an insurance company, which is duly | ||||||
14 | authorized by the State of Illinois to transact the | ||||||
15 | business of fidelity and surety insurance, shall be a | ||||||
16 | surety.
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17 | The bond shall run to the Secretary for the use of the | ||||||
18 | Department or of any person or persons
who may have a cause of | ||||||
19 | action against the obligor in said bond arising out of any | ||||||
20 | violation of this Act or rules by a debt settlement provider. | ||||||
21 | Such bond shall be conditioned that the obligor must faithfully | ||||||
22 | conform to and abide by the provisions of this Act and of all | ||||||
23 | rules, regulations, and directions lawfully made by the | ||||||
24 | Secretary and pay to the Secretary or to any person or persons | ||||||
25 | any and all money that may become due or owing to the State or | ||||||
26 | to such person or persons, from the obligor under and by virtue |
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1 | of the provisions of this Act.
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2 | Instead of the surety bond required under this Section, a | ||||||
3 | provider may deliver to the Secretary, in the amount required | ||||||
4 | under this Section, payable or available to this State and to | ||||||
5 | individuals who reside in this State when they agree to receive | ||||||
6 | debt-settlement services from the provider, as their interests | ||||||
7 | may appear: | ||||||
8 | (1) a certificate of insurance: | ||||||
9 | (A) issued by an insurance company authorized to do | ||||||
10 | business in this State and rated at least A or | ||||||
11 | equivalent by a nationally recognized rating | ||||||
12 | organization approved by the Secretary; and | ||||||
13 | (B) with no deductible, or if the provider supplies | ||||||
14 | a bond in the amount of $5,000, a deductible not | ||||||
15 | exceeding $5,000; or | ||||||
16 | (2) with the approval of the Secretary: | ||||||
17 | (A) an irrevocable letter of credit, issued or | ||||||
18 | confirmed by a bank approved by the Secretary, payable | ||||||
19 | upon presentation of a certificate by the Secretary | ||||||
20 | stating that the provider or its agent has not complied | ||||||
21 | with this Act; or | ||||||
22 | (B) bonds or other obligations of the United States | ||||||
23 | or guaranteed by the United States or bonds or other | ||||||
24 | obligations of this State or a political subdivision of | ||||||
25 | this State, to be deposited and maintained with a bank | ||||||
26 | approved by the Secretary for this purpose. |
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1 | (Source: 09600HB4781eng, Sec. 20.) | ||||||
2 | (09600HB4781eng, Sec. 125)
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3 | Sec. 125. Fees. | ||||||
4 | (a) A debt settlement provider shall not charge fees of any | ||||||
5 | type or receive compensation from a consumer in a type, amount, | ||||||
6 | or timing other than fees or compensation permitted in this | ||||||
7 | Section.
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8 | (b) A debt settlement provider may calculate fees on a | ||||||
9 | percentage of debt basis or on a percentage of savings basis. | ||||||
10 | The fee structure shall be clearly disclosed and explained in | ||||||
11 | the debt settlement services agreement. The debt settlement | ||||||
12 | provider may only charge fees as provided in either paragraph | ||||||
13 | (1) or (2) as follows: | ||||||
14 | (1) Fees calculated as a percentage of debt shall | ||||||
15 | comport with the following provisions: | ||||||
16 | (A) The total amount of the fees claimed, demanded, | ||||||
17 | charged, collected, or received under this paragraph | ||||||
18 | (1) may not exceed 15% of the aggregate debt that a | ||||||
19 | consumer enrolls in a debt settlement program. A debt | ||||||
20 | settlement provider that calculates fees as a | ||||||
21 | percentage of debt may: | ||||||
22 | (i) charge an origination fee or set-up fee, | ||||||
23 | which may be designated by the debt settlement | ||||||
24 | provider as nonrefundable, of: | ||||||
25 | (a) $200 on aggregate debt of less than |
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1 | $20,000; or | ||||||
2 | (b) $400 on aggregate debt of $20,000 or | ||||||
3 | more; | ||||||
4 | (ii) charge a monthly account service fee of: | ||||||
5 | (a) no greater than $75 per month on | ||||||
6 | aggregate debt of less than $40,000; or | ||||||
7 | (b) no greater than $100 per month on | ||||||
8 | aggregate debt of $40,000 or more; and | ||||||
9 | (iii) charge a settlement fee for the | ||||||
10 | remainder of the allowable fees, which may be | ||||||
11 | demanded and collected no earlier than upon | ||||||
12 | delivery to the debt settlement provider by a | ||||||
13 | creditor of a bona fide written settlement offer | ||||||
14 | consistent with the terms of the debt settlement | ||||||
15 | services agreement; a settlement fee may be | ||||||
16 | assessed for each debt settled, but the sum total | ||||||
17 | of the origination fee, the monthly fee, and the | ||||||
18 | settlement fee may not exceed 15% of the aggregate | ||||||
19 | debt. | ||||||
20 | (B) The collection of monthly fees shall cease | ||||||
21 | under this paragraph (1) when the total monthly fees | ||||||
22 | and the origination fee together equal 40% of the total | ||||||
23 | fees allowable under this paragraph. | ||||||
24 | (C) In no event may more than 40% of the total | ||||||
25 | amount of fees allowable be claimed, demanded, | ||||||
26 | charged, collected, or received by a debt settlement |
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1 | provider any earlier than upon delivery to the debt | ||||||
2 | settlement provider by a creditor of a bona fide | ||||||
3 | written settlement offer consistent with the terms of | ||||||
4 | the debt settlement services agreement. | ||||||
5 | (2) Fees calculated as a percentage of savings shall | ||||||
6 | comport with the following provisions: | ||||||
7 | (A) The total amount of the fees claimed, demanded, | ||||||
8 | charged, collected, or received under this paragraph | ||||||
9 | (2) may not exceed 30% of the amount a consumer is | ||||||
10 | saved in a debt settlement program. More specifically, | ||||||
11 | a debt settlement provider that calculates fees as a | ||||||
12 | percentage of savings may: | ||||||
13 | (i) charge a fee for consultation, obtaining a | ||||||
14 | credit report, and setting up an account in an | ||||||
15 | amount not exceeding the lesser of $400 or 4% of | ||||||
16 | the debt in the plan at the inception of the plan | ||||||
17 | or a higher amount set forth by regulation; | ||||||
18 | (ii) charge a monthly service fee, not to | ||||||
19 | exceed $10 or a higher amount set forth by | ||||||
20 | regulation, multiplied by the number of creditors | ||||||
21 | remaining in the plan at the time the fee is | ||||||
22 | assessed, but not more than $50 total or a higher | ||||||
23 | amount set forth by regulation, in any month; and | ||||||
24 | (iii) charge a settlement fee not to exceed 30% | ||||||
25 | of the excess of the outstanding amount of each | ||||||
26 | debt over the amount actually paid to the creditor, |
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1 | as calculated at the time of settlement; | ||||||
2 | settlement fees authorized under this paragraph | ||||||
3 | (2) shall become billable only as debts are | ||||||
4 | settled, and the total aggregate amount of fees | ||||||
5 | charged to any individual under this paragraph, | ||||||
6 | including fees charged under items (i) and (ii) of | ||||||
7 | this subparagraph (A), may not exceed 20% of the | ||||||
8 | principal amount of debt included in the agreement | ||||||
9 | at the agreement's inception.
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10 | (c) No fees, charges, assessments, or any other | ||||||
11 | compensation may be claimed, demanded, charged, collected, or | ||||||
12 | received other than the fees allowed under this Section. Any | ||||||
13 | fees collected in excess of those allowed under this Section | ||||||
14 | must be immediately returned to the debtor. | ||||||
15 | (d) No monthly fees shall be charged or collected by a debt | ||||||
16 | settlement provider unless services are provided to an | ||||||
17 | individual during that calendar month. Services shall be | ||||||
18 | documented by the debt settlement provider and may include, but | ||||||
19 | are not limited to, the following:
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20 | (1) client qualification; | ||||||
21 | (2) account management; | ||||||
22 | (3) debt program organization; | ||||||
23 | (4) negotiation and settlement discussions with | ||||||
24 | creditors; | ||||||
25 | (5) consumer rights education and counseling; | ||||||
26 | (6) referral to legal assistance; and |
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1 | (7) third-party payment management. | ||||||
2 | (b) A debt settlement provider shall not charge or receive | ||||||
3 | from a consumer any enrollment fee, set up fee, up front fee of | ||||||
4 | any kind, or any maintenance fee, except for a one-time | ||||||
5 | enrollment fee of no more than $50.
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6 | (c) A debt settlement provider may charge a settlement fee, | ||||||
7 | which shall not exceed an amount greater than 15% of the | ||||||
8 | savings. If the amount paid by the debt settlement provider to | ||||||
9 | the creditor or negotiated by the debt settlement provider and | ||||||
10 | paid by the consumer to the creditor pursuant to a settlement | ||||||
11 | negotiated by the debt settlement provider on behalf of the | ||||||
12 | consumer as full and complete satisfaction of the creditor's | ||||||
13 | claim with regard to that debt is greater than the principal | ||||||
14 | amount of the debt, then the debt settlement provider shall not | ||||||
15 | be entitled to any settlement fee.
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16 | (d) A debt settlement provider shall not collect any | ||||||
17 | settlement fee from a consumer until a creditor enters into a | ||||||
18 | legally enforceable agreement to accept funds in a specific | ||||||
19 | dollar amount as full and complete satisfaction of the | ||||||
20 | creditor's claim with regard to that debt and those funds are | ||||||
21 | provided by the debt settlement provider on behalf of the | ||||||
22 | consumer or are provided directly by the consumer to the | ||||||
23 | creditor pursuant to a settlement negotiated by the debt | ||||||
24 | settlement provider
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25 | (Source: 09600HB4781eng, Sec. 125.) |
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1 | (09600HB4781eng, Sec. 160 new) | ||||||
2 | Sec. 160. Repeal of Act. This Act is repealed 2 years after | ||||||
3 | its effective date. | ||||||
4 | Section 99. Effective date. This Act takes effect upon | ||||||
5 | becoming law or on the effective date of House Bill 4781 of the | ||||||
6 | 96th General Assembly, whichever is later. |