Full Text of SB3936 96th General Assembly
SB3936 96TH GENERAL ASSEMBLY
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96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010 SB3936
Introduced 5/26/2010, by Sen. John J. Cullerton SYNOPSIS AS INTRODUCED: |
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09600HB4781eng, Sec. 20 |
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09600HB4781eng, Sec. 125 |
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09600HB4781eng, Sec. 160 new |
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Amends the Debt Settlement Consumer Protection Act, if and only if House Bill 4781 of the 96th General Assembly becomes law. Deletes the provision that requires every applicant for a license to operate as a debt settlement provider to submit a bond in the sum of $100,000 or an additional amount as required by the Secretary of Financial and Professional Regulation. Provides instead that the surety bond must be in the amount of $50,000 or other larger or smaller amount that the Secretary determines. Sets forth other requirements concerning the surety bond. Provides that instead of the surety bond required under the Act, a provider may deliver to the Secretary, under certain conditions, a certificate of insurance or other instrument with the approval of the Secretary. Deletes the provision prohibiting a debt settlement provider from charging a settlement fee in an amount greater than 15% of the savings. Provides instead that a debt settlement provider may calculate fees on a percentage of debt basis or on a percentage of savings basis. Sets forth provisions concerning the calculation and collection of fees. Provides that the Act is repealed 2 years after its effective date. Makes other changes. Effective immediately or on the effective date of House Bill 4781, whichever is later.
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A BILL FOR
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SB3936 |
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| AN ACT concerning debt settlement.
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| Be it enacted by the People of the State of Illinois,
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| represented in the General Assembly:
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| 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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| 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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| 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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| (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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| 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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| of the provisions of this Act.
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| 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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| (Source: 09600HB4781eng, Sec. 20.) | 2 |
| (09600HB4781eng, Sec. 125)
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| 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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| (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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| $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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| 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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| 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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| (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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| (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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| (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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| (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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| (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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| (Source: 09600HB4781eng, Sec. 125.) |
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| (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. |
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