Illinois General Assembly - Full Text of HB4554
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Full Text of HB4554  102nd General Assembly




State of Illinois
2021 and 2022


Introduced 1/21/2022, by Rep. Maurice A. West, II


New Act

    Creates the Consumer Income Share Agreement Act. Provides that no person, partnership, association, limited liability company, or corporation may engage in the business of making income share agreements without a license provided under the Act. Sets forth provisions concerning applications for an income share agreement license, investigations, fees, suspension or revocation of licenses, closing of business, books and records, prohibitions and limitations of income share agreements, required disclosures, statements of account, advertising, penalties, and cease and desist orders. Provides that a person who engages in business as a licensee without the license required by the Act commits a Class 4 felony. Provides that the Department of Financial and Professional Regulation may adopt and enforce reasonable rules, directions, orders, decisions, and findings as the execution and enforcement of the provisions of the Act require, and rules in connection with the activities of licensees that are necessary and appropriate for the protection of consumers in the State. Provides that if it appears to the Director that a person or any entity has committed or is about to commit a violation of the Act, a rule adopted under the Act, or an order of the Director, the Director may apply to the circuit court for an order enjoining the person or entity from the violation. Provides that the provisions of the Act are severable. Defines terms. Makes other changes. Effective immediately.

LRB102 22903 BMS 32056 b





HB4554LRB102 22903 BMS 32056 b

1    AN ACT concerning regulation.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 1. Short title. This Act may be cited as the
5Consumer Income Share Agreement Act.
6    Section 5. Definitions. As used in this Act:
7    "Amount financed" means the amounts advanced by the
8licensee to the consumer or on behalf of the consumer or, if
9the licensee is a merchant financing the sale of goods or
10services to the consumer using an income share agreement, the
11amount credited by the licensee toward the purchase of such
12goods and services on behalf of the consumer.
13    "Annual percentage rate" or "APR" means the percentage
14rate calculated according to the Federal Reserve Board's
15methodology as set forth under Regulation Z, 12 CFR Part 1026.
16The "annual percentage rate" of an income share agreement is
17the measure of the cost of the income share agreement,
18expressed as a yearly rate, that relates to the amount and
19timing of value received by the consumer to the amount and
20timing of payments made. The "annual percentage rate" is
21determined in accordance with either the actuarial method or
22the United States rule method.
23    "Consumer" means a natural person who enters into an



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1income share agreement for personal, family, or household use.
2    "Department" means the Department of Financial and
3Professional Regulation.
4    "Director" means the Director of the Division of Financial
5Institutions of the Department of Financial and Professional
7    "Disposable earnings" means that part of the earnings of
8an individual remaining after the deduction from total
9earnings of amounts required by law to be withheld.
10    "Educational ISA" means an income share agreement that:
11        (1) is not made, insured, or guaranteed under Title IV
12    of the Higher Education Act of 1965, 20 U.S.C. 1070 et
13    seq., or another federally subsidized educational finance
14    program;
15        (2) is extended to a consumer expressly, in whole or
16    in part, for postsecondary educational expenses, tuition,
17    or other obligations of, or pays amounts to, or on behalf
18    of, such individual for costs associated with a
19    postsecondary training program or any other program
20    designed to increase the individual's human capital,
21    employability, or earning potential, and is not limited to
22    programs eligible to participate as programs under Title
23    IV of the Higher Education Act of 1965, 20 U.S.C. 1070 et
24    seq., as well as any personal expenses, such as books,
25    supplies, transportation, and living costs, incurred by
26    the individual while enrolled in such a program and any



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1    other costs or expenses included in the definition of a
2    "qualified higher education expense" as specified in 26
3    U.S.C. 529(e)(3)(A), including refinancing of loans or
4    income share agreements used for the purposes described in
5    this paragraph, and regardless of whether the income share
6    agreement is provided by the educational institution that
7    the consumer attends; and
8        (3) does not include loans, open-end credit, or any
9    loan or income share agreement that is secured by real
10    property or a dwelling.
11    "Federal poverty guidelines" means the poverty guidelines
12updated periodically in the Federal Register by the U.S.
13Department of Health and Human Services under the authority of
1442 U.S.C. 9902(2).
15    "Garnishment" means any legal or equitable procedure
16through which earnings of an individual are required to be
17withheld for payment of the income share agreement.
18    "Income" means the salary, wages, income, tips, capital
19gains, earnings, and other sources of income of a consumer as
20set forth in an income share agreement.
21    "Income share agreement" or "ISA" means an agreement
22between a consumer and an ISA provider under which:
23        (1) the ISA provider advances a sum of money to the
24    consumer or to a third party on the consumer's behalf or,
25    if the ISA provider is a seller of goods or services to the
26    consumer, the ISA provider credits toward the purchase of



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1    such goods or services;
2        (2) the consumer is obligated to make periodic
3    payments, if any become due, to the ISA provider
4    calculated, based upon, or determined by the consumer's
5    income;
6        (3) the consumer's obligation to make payments, if any
7    become due, to the ISA provider is conditional on the
8    consumer's income exceeding the income threshold set forth
9    in the income share agreement;
10        (4) there is an ISA duration; and
11        (5) each of these elements is available at the time of
12    contracting of the income share agreement.
13    "Income threshold" means a fixed dollar amount that, if a
14consumer earns less than such amount during the relevant
15period, the consumer is not required to make a payment for such
16payment period.
17    "Index" means the Consumer Price Index for Urban Wage
18Earners and Clerical Workers: U.S. City Average, All Items,
191967=100, compiled by the Bureau of Labor Statistics, United
20States Department of Labor.
21    "ISA duration" means the maximum length of time during
22which income may be subject to an ISA payment, absent periods
23of payment relief pause at the request of the consumer. "ISA
24duration" does not include periods of payment relief pause.
25    "ISA maximum number of payments" means the maximum number
26of ISA payments during ISA payment periods in which the



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1consumer's income is equal to or greater than the income
2threshold that a consumer could be required to make. "ISA
3maximum number of payments" does not include periods of
4payment relief pause.
5    "ISA payment" means the amount of a consumer's periodic
6payment obligation, if any, based on the terms of the income
7share agreement. The "ISA payment" is equal to the product of
8the ISA percentage multiplied by the consumer's income, except
9in cases of an ISA where the ISA payment amount is determined
10by a schedule of fixed amounts based on a consumer's income in
11a given payment period. An "ISA payment" is required only for
12income earned during an ISA payment period in which the
13consumer's income was equal to or greater than the income
15    "ISA payment cap" means the maximum amount of money a
16consumer must pay to satisfy the terms of an income share
18    "ISA percentage" or "percentage" means the percentage of
19income or schedule of percentages of income or fixed amounts
20based on the consumer's income in a given ISA payment period
21used to calculate a consumer's ISA payment pursuant to an
22income share agreement.
23    "ISA provider" means a person who provides funding to a
24consumer pursuant to an income share agreement or, if the ISA
25provider is a seller of goods and services, the seller.
26    "Licensee" means a person who is licensed under this Act.



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1    "Net worth" means total assets minus total liabilities.
2    "Payment relief pause" means a period of time that is
3requested by the consumer during which the consumer is not
4required to make payments despite the consumer's income
5exceeding the income threshold.
6    Section 10. License required to engage in business.
7Without a license provided under this Act, no person,
8partnership, association, limited liability company, or
9corporation may engage in the business of:
10        (1) making income share agreements; or
11        (2) taking assignments of and undertaking direct
12    collection of payments from or enforcement of rights
13    against consumers arising from income share agreements,
14    except for collection of payments and enforcement of
15    rights for 3 months without a license if the person or
16    entity promptly applies for a license and the application
17    has not been denied.
18    Section 15. Application for income share agreement
19license; fees; surety bond.
20    (a) Application for a license shall be in writing and in a
21form prescribed by the Director. The applicant at the time of
22making an application shall pay the Director the sum of $300 as
23an application fee and the additional sum of $450 as an annual
24license fee for a period terminating on the last day of the



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1current calendar year; however, if the application is filed
2after June 30 in any year, the license fee shall be half of the
3annual license fee for the year.
4    (b) Before the license is granted, every applicant shall
5provide in a form satisfactory to the Director that the
6applicant has or will maintain a positive net worth in a
7minimum of $30,000. Every applicant and licensee shall
8maintain a surety bond in the principal sum of $25,000 issued
9by a bonding company authorized to do business in this State
10and that shall be approved by the Director. The bond shall run
11to the Director and shall be for the benefit of any consumer
12who incurs damages as a result of a violation of this Act or
13rules adopted pursuant to this Act by a licensee. If the
14Director at any time finds that a bond is of insufficient size,
15is insecure, is exhausted, or is otherwise doubtful, an
16additional bond in such amount as determined by the Director
17shall be filed by the licensee within 30 days after written
18demand therefor by the Director.
19    Section 20. Appointment of attorney-in-fact for service of
20process. Every licensee shall appoint, in writing, the
21Director and his or her successors in office or any official
22who shall be charged with the administration of this Act, as
23attorney-in-fact upon whom all lawful process against the
24licensee may be served within the same legal force and
25validity as if served on the licensee. A copy of such written



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1appointment, duly certified, shall be filed in the office of
2the Director, and a copy thereof certified by him or her shall
3be sufficient evidence. This appointment shall remain in
4effect while any liability remains outstanding in this State
5against the licensee. When summons is served upon the Director
6as attorney-in-fact for such licensee, the Director shall
7immediately notify the licensee by registered mail, enclosing
8the summons and specifying the hour and day of service.
9    Section 25. Investigation; license issuance.
10    (a) Upon the filing of an application and the payment of
11the fees, the Director shall investigate to determine:
12        (1) that the reputation of the applicant, including
13    the managers of a limited liability company, and the
14    partners, owners, officers, or directors thereof warrants
15    belief that the business will be operated honestly and
16    fairly within the purposes of this Act; and
17        (2) that the applicant meets the positive net worth
18    requirements of this Act.
19    Unless the Director makes findings enumerated in this
20subsection, he or she shall not issue a license and shall
21notify the applicant of the denial and return to the applicant
22the sum paid by the applicant as a license fee, but shall
23retain the $300 application fee. The Director shall approve or
24deny every application for license within 60 days after the
25filing of an application with payment of a fee.



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1    (b) Upon written request, the applicant is entitled to a
2hearing on the question of his or her qualifications for a
3license if:
4        (1) the Director notifies the applicant in writing
5    that his or her application has been denied; or
6        (2) the Director does not issue a license within 60
7    days after the application for the license was filed.
8    A request for a hearing may not be made more than 15 days
9after the Director mails a writing to the applicant notifying
10him or her that the application has been denied and stating in
11substance the Director's findings supporting denial.
12    Section 30. License. The license shall state the address,
13including the city and state, at which the business is to be
14conducted and shall state fully the name of the licensee. The
15license shall be conspicuously posted in the place of business
16of the licensee and shall not be transferable or assignable.
17    Section 35. License; place of business.
18    (a) Not more than one place of business shall be
19maintained under the same license, but the Director may issue
20more than one license to the same licensee upon compliance
21with all the provisions of this Act governing the original
22issuance of a license. A webpage operated by the licensee
23shall constitute a location.
24    (b) Whenever a licensee changes his or her place of



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1business to a location other than that set forth in the
2license, he or she shall give written notice to the Director at
3least 10 days before the relocation. However, if the new
4location is in excess of 15 miles from the previous location,
5the licensee shall obtain written approval from the Director
6before relocation.
7    Section 40. Annual license fee; expenses.
8    (a) Before December 1 of each year, a licensee shall pay to
9the Director, and the Department must receive, the annual
10license fee required by this Act for the next succeeding
11calendar year. The license shall expire on January 1 of the
12following year unless the licensee fee has been paid before
14    (b) In addition to the license fee, the reasonable expense
15of any examination, investigation, or custody by the Director
16under any provisions of this Act shall be borne by the
18    (c) If a licensee fails to renew his or her license by
19December 31, it shall automatically expire and the licensee is
20not entitled to a hearing; however, the Director, in his or her
21discretion, may reinstate an expired license upon payment of
22the annual renewal fee and proof of good cause for failure to
24    Section 45. Suspension or revocation of license.



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1    (a) The Director may issue to a licensee an order to show
2cause why his or her license should not be suspended for a
3period not in excess of 6 months or be revoked. The order shall
4set a place for a hearing and a time therefor that is no less
5than 10 days after the date of the order. After the hearing the
6Director shall revoke or suspend the license, or, if there are
7mitigating circumstances, may accept an assurance of
8discontinuance and allow retention of the license, if the
9Director finds that:
10        (1) the licensee has repeatedly and intentionally
11    violated this Act or any rule or order lawfully made
12    pursuant to this Act, or has violated an assurance of
13    discontinuance; or
14        (2) facts or conditions exist that clearly would have
15    justified the Director in refusing to grant a license for
16    that place or those places of business were the facts or
17    conditions known to exist at the time the application for
18    the license was made.
19    (b) A revocation or suspension of a license is not lawful
20unless the Director, before instituting proceedings, gives
21notice to the licensee of the facts or conduct that warrant the
22intended action and the licensee is afforded an opportunity to
23show compliance with all lawful requirements for retention of
24the license.
25    (c) If the Director finds that probable cause for
26revocation of a license exists and that enforcement of this



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1Act requires immediate suspension of the license pending
2investigation, the Director, after a hearing upon 10 days'
3written notice, may enter an order suspending the license for
4not more than 30 days.
5    (d) Whenever the Director revokes or suspends a license,
6he or she shall enter an order to that effect and forthwith
7notify the licensee of the revocation or suspension. Within 10
8days after entry of the order he or she shall deliver to the
9licensee a copy of the order and the findings supporting the
11    (e) A person holding a license to make income share
12agreements may relinquish the license by notifying the
13Director in writing of its relinquishment, but the
14relinquishment does not affect his or her liability for acts
15previously committed.
16    (f) Revocation, suspension, or relinquishment of a license
17does not impair or affect the obligation of any preexisting
18lawful contract between the licensee and any consumer.
19    (g) The Director may reinstate a license, terminate a
20suspension, or grant a new license to a person whose license
21has been revoked or suspended if no fact or condition then
22exists that clearly would have justified the Director in
23refusing to grant a license.
24    Section 50. Closing of business; surrender of license.
25    (a) At least 10 days before a licensee ceases operations,



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1closes business, or files for bankruptcy, the licensee shall
2do the following:
3        (1) Notify the Department of its action in writing.
4        (2) With the exception of filing for bankruptcy,
5    surrender its license to the Director for cancellation;
6    the surrender of the license shall not affect the
7    licensee's civil or criminal liability for acts committed
8    before surrender or entitle the licensee to return any
9    part of the annual license fee.
10        (3) Notify the Director of the location where the
11    books, accounts, contracts, and records will be maintained
12    and the procedure to ensure prompt return of contracts,
13    titles, and releases to the customers.
14        (4) Ensure that the accounts, books, records, and
15    contracts shall be maintained and serviced by the licensee
16    or another licensee under this Act or an entity exempt
17    from licensure under this Act.
18    (b) The Department shall have the authority to conduct
19examinations of the books, records, and loan documents at any
20time after surrender of the license, filing of bankruptcy, or
21the cessation of operations.
22    Section 55. Examinations and investigations of conduct of
24    (a) The Director shall examine periodically, at intervals
25he or she deems appropriate but not less than once per year,



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1income share agreements, business, and records of every
2licensee. In addition, for the purpose of discovering
3violations of this Act or securing information lawfully
4required, the Director at any time may investigate the income
5share agreements, business, and records of any licensee. For
6these purposes the Director shall have free and reasonable
7access to the offices, places of business, and records of the
9    (b) If the licensee's records are located outside this
10State, the licensee at the Director's request shall make them
11available to the Director at a convenient location within this
12State, or pay the reasonable and necessary expenses for the
13Director or his or her representative to examine them where
14they are located. The Director may designate representatives,
15including comparable officials of the state in which the
16records are located, to inspect them on the Director's behalf.
17    (c) For purposes of this Section, the Director may
18administer oaths or affirmations, and upon request of a party
19or his or her own motion may subpoena witnesses, compel their
20attendance, adduce evidence, and require the production of any
21matter that is relevant to the investigation, including the
22existence, description, nature, custody, condition, and
23location of any books, documents, or other tangible things and
24the identity and location of persons having knowledge of
25relevant facts or any other matter reasonably calculated to
26lead to the discovery of admissible evidence.



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1    (d) Upon failure without lawful excuse to obey a subpoena
2or to give testimony and upon reasonable notice to all persons
3affected thereby, the Director may apply to the court for an
4order compelling compliance.
5    Section 60. Books and records.
6    (a) Every licensee shall maintain records in conformity
7with generally accepted accounting principles and practices in
8a manner that will enable the Director to determine whether
9the licensee is complying with this Act. The recordkeeping
10system of a licensee is sufficient if it makes the required
11information reasonably available. The records pertaining to
12any income share agreement need not be preserved for more than
132 years after making the final entry relating to the income
14share agreement.
15    (b) On or before April 15 of each year, every licensee
16shall file with the Director a composite annual report in a
17form prescribed by the Director relating to all income share
18agreements made by the licensee. Information contained in
19annual reports shall be confidential and may be published only
20in composite form.
21    Section 65. No other business allowed.
22    (a) A licensee may not carry on other business for the
23purpose of evasion or violation of this Act at a location where
24the licensee makes income share agreements.



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1    (b) Upon application by the licensee, the Director may
2approve the conduct of other businesses not specifically
3permitted by this Act in the licensee's place of business,
4unless the Director finds that such conduct will conceal or
5facilitate evasion or violation of this Act. The Director's
6approval shall be in writing and shall describe the other
7businesses which may be conducted in the licensed office.
8    Section 70. Prohibitions.
9    (a) No licensee shall take any power of attorney in
10connection with an income share agreement.
11    (b) A consumer may not authorize any person to confess
12judgment on a claim arising out of an income share agreement.
13An authorization in violation of this Section is void.
14    Section 75. Pledge or sale of income share agreement.
15    (a) No licensee or other person shall pledge, hypothecate,
16or sell an income share agreement entered into under this Act
17by a consumer except to another licensee under this Act, a
18bank, savings bank, savings and loan association, or credit
19union created under the laws of this State or the United
20States, or to other persons or entities authorized by the
21Director in writing. Sales of such notes by licensees under
22this Act or other persons shall be made by agreement in writing
23and shall authorize the Director to examine the income share
24agreement documents so hypothecated, pledged, or sold.



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1    (b) A consumer may pay the original ISA provider until he
2or she receives notification of assignment of rights to
3payment pursuant to an income share agreement and that payment
4is to be made to the assignee. A notification that does not
5reasonably identify the rights assigned is ineffective. If
6requested by the consumer, the assignee shall seasonably
7furnish reasonable proof that the assignment has been made and
8unless the proof is furnished the consumer may pay the
9original ISA provider.
10    (c) An assignee of the rights of the ISA provider is
11subject to all claims and defenses of the consumer against the
12ISA provider arising from the income share agreement. A claim
13or defense of a consumer may be asserted against the assignee
14under this Section only if the consumer has made a good faith
15attempt to obtain satisfaction from the ISA provider with
16respect to the claim or defense and then only to the extent of
17the amount owing to the assignee with respect to the ISA
18provider or defense that arose at the time the assignee has
19notice of the claim or defense. Notice of the claim or defense
20may be given before the good faith attempt specified in this
21subsection. Oral notice is effective unless the assignee
22requests written confirmation when or promptly after oral
23notice is given and the consumer fails to give the assignee
24written confirmation within the period of time, not less than
2514 days, stated to the consumer when written confirmation is
26requested. An agreement may not limit or waive the claims or



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1defenses of a consumer under this Section.
2    Section 80. Monthly payment affordability.
3    (a) Maximum income percentage. Each income share agreement
4shall specify the ISA percentage applicable to the income
5share agreement and shall comply with the following:
6        (1) The income share agreement may not include an ISA
7    percentage in excess of 20%, or if an ISA defines a series
8    of fixed amounts based on the consumer's income, such
9    amounts shall not equate to more than 20% of the
10    consumer's income.
11        (2) A licensee may not enter into an educational ISA
12    with a consumer if the consumer would be committing more
13    than 20% of his or her income, inclusive of other
14    educational ISA and education loans known at the time. The
15    licensee must confirm a consumer's educational ISA and
16    education loan liabilities through a verifiable
17    third-party source. At a minimum, the licensee must
18    confirm such liabilities using information maintained by a
19    nationwide consumer reporting agency, as defined by 15
20    U.S.C. 1681a(f), and doing so is sufficient for meeting
21    the requirement in this paragraph; however, nothing in
22    this paragraph shall prohibit a licensee from using other
23    sources to provide additional verification. For the
24    purposes of calculating the portion of a student's future
25    income that would be consumed by the educational ISA for



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1    which the student has applied and other educational ISAs
2    and education loans known at the time, the ISA provider
3    shall calculate the aggregate future burden of all such
4    obligations, including the educational ISA for which the
5    student is applying, at hypothetical future income levels
6    ranging from the income threshold of the ISA for which the
7    student has applied up to $70,000, with such number
8    adjusting for inflation each year, in increments of
9    $10,000. The terms of the educational ISA for which the
10    student has applied cannot cause the student's aggregate
11    future burden to exceed the limit in subsection (b) at any
12    of the income increments stated in this paragraph. For the
13    purpose of calculating the percentage burden of an
14    educational ISA at a given future income level, the ISA
15    provider shall use the income percentage that would be
16    applicable for the ISA at such income level, or the fixed
17    amount divided by the income level, where applicable. For
18    the purpose of calculating the percentage burden of an
19    educational loan at a given future income level, the ISA
20    provider shall divide the annual payment obligation by
21    income level using the most affordable payment option that
22    would be available to the student at such income level
23    under such loan. For students enrolled in a Title IV
24    program, as part of this analysis the ISA provider shall
25    assume a federal loan balance equal to the larger of (1)
26    the student's existing federal loan balance, and (2) the



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1    maximum amount the student is eligible to borrow under
2    Federal Direct Stafford Loans for his or her status,
3    dependent or independent.
4    (b) Protections during periods of low earnings. The income
5share agreement must state that when a consumer has income
6that is equal to or below the income threshold set forth in the
7income share agreement that the consumer's payment obligation
8is zero dollars. The income threshold at the time of
9origination must be high enough such that the consumer's gross
10income minus any income share agreement obligation must leave
11the consumer with gross income equal to at least 200% of the
12federal poverty guidelines for a single person.
13    (c) Required payment relief pauses. An income share
14agreement must offer at least 3 months of voluntary payment
15relief pauses, so long as a consumer's current income at the
16time of requesting the payment relief pause is equal to or less
17than 400% of the federal poverty guidelines for a single
18individual, for every 30 income-determined payments required
19under the income share agreement.
20    Section 85. Maximum effective annual percentage rate. An
21income share agreement must specify that the maximum amount
22that a consumer could be required to pay based on the
23consumer's income under the income share agreement will not
24result in a consumer ever being required to pay an effective
25annual percentage rate that is greater than 36%. If at any time



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1the consumer makes payment of an amount that would cause the
2limit in this Section to apply, all further obligations under
3the income share agreement shall cease.
4    Section 90. Limits on duration of income share agreements.
5    (a) An income share agreement shall specify that the
6maximum number of payments may not exceed 240 monthly
8    (b) An income share agreement shall specify that the ISA
9duration may not exceed 360 months, except in the case of a
10payment relief pause requested by the consumer.
11    Section 95. Risk sharing.
12    (a) A licensee may not contract for income share agreement
13terms that would result in a consumer having income that is
14less than or equal to 300% of the federal poverty guidelines
15for a single person for the ISA duration being required to make
16a stream of ISA payments that would yield an effective APR
17greater than 8%, or the high yield of the 10-year United States
18Constant Maturity Treasury Notes auctioned at the final
19auction held before the current calendar year in which an ISA
20offering is made plus 7%, whichever is greater.
21    (b) A licensee may not contract for income share agreement
22terms that would result in a consumer having income that is
23less than or equal to 400% of the federal poverty guidelines
24for a single person for the ISA duration being required to make



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1a stream of ISA payments that would yield an effective APR
2greater than 12%, or the high yield of the 10-year United
3States Constant Maturity Treasury Notes auctioned at the final
4auction held before the current calendar year in which an ISA
5offering is made plus 11%, whichever is greater.
6    (c) A licensee may not contract for income share agreement
7terms that would result in a consumer having income that is
8less than or equal to 500% of the federal poverty guidelines
9for a single person for the ISA duration being required to make
10a stream of ISA payments that would yield an effective APR
11greater than 15%, or the high yield of the 10-year United
12States Constant Maturity Treasury Notes auctioned at the final
13auction held before the current calendar year in which an ISA
14offering is made plus 14%, whichever is greater.
15    (d) A licensee may not contract for income share agreement
16terms that would result in a consumer having income that is
17less than or equal to 600% of the federal poverty guidelines
18for a single person for the ISA duration being required to make
19a stream of ISA payments that would yield an effective APR
20greater than 18%, or the high yield of the 10-year United
21States Constant Maturity Treasury Notes auctioned at the final
22auction held before the current calendar year in which an ISA
23offering is made plus 17%, whichever is greater.
24    (e) For the purposes of determining the various tiers set
25forth in this Section, a licensee shall calculate the
26effective APR by determining the various federal poverty



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1guidelines tiers at the time the consumer's income share
2agreement is originated and assuming such amounts are fixed
3through the ISA duration.
4    (f) For the purposes of determining ISA duration in this
5Section: in the case of an educational ISA, a licensee shall
6assume the ISA duration started after a period equal to the
7expected length of the program for which a consumer is
8enrolling; or in the case of a non-educational ISA, a licensee
9shall assume the ISA duration started immediately.
10    Section 100. Limits on covered income. An income share
11agreement must specify the definition of income to be used for
12the purposes of calculating a consumer's payment obligation
13under the income share agreement. No income share agreement
14shall include any of the following in its definition of
16        (1) The income of the consumer's children or
17    dependents.
18        (2) Any amount paid by the consumer under Title II or
19    XVI of the Social Security Act, 42 U.S.C. 401 et seq., 42
20    U.S.C. 1381 et seq.; or under a State program funded by
21    Title IV of the Social Security Act, 42 U.S.C. 601 et seq.
22        (3) Individual retirement account distributions.
23        (4) Pensions and annuities.
24        (5) Social security benefits.
25        (6) Other sources of federal or State aid provided to



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1    individuals through any of the following:
2            (A) unemployment programs;
3            (B) disaster relief programs;
4            (C) Medicare or Medicaid benefits;
5            (D) benefits received through the Supplemental
6        Nutrition Assistance Program;
7            (E) economic impact payments; or
8            (F) other income excluded from the definition of
9        taxable income set forth by the Internal Revenue
10        Service.
11    Section 105. Fees permitted. In addition to the ISA
12percentage permitted by this Act, a licensee may contract for
13and receive the following additional charges:
14        (1) Official fees and taxes.
15        (2) A fee, which shall not exceed the sum of $25, for
16    failure to provide documentation to the licensee for the
17    confirmation and reconciliation of the consumer's income.
18        (3) A fee for processing any forms to confirm the
19    consumer's income with the United States Internal Revenue
20    Service or a State department of revenue or taxation on a
21    dollar-for-dollar, pass-through basis of the expenses
22    incurred by the licensee.
23        (4) A late payment fee in an amount of $20 or 5% of the
24    late payment, whichever is greater, for any payment that
25    is more than 15 days past due; no late payment fee may be



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1    charged more than once per late payment.
2        (5) An amount not exceeding $25, plus any actual
3    expenses incurred in connection with a check or draft that
4    is not honored because of insufficient or uncollected
5    funds or because no such account exists.
6        (6) Charges for other benefits conferred on the
7    consumer, if the benefits are of value to her or him and
8    the charges are reasonable in relation to the benefits,
9    are of a type that is not for credit, and are authorized as
10    permissible additional charges by rule adopted by the
11    Department.
12        (7) Before or after default in payment of a scheduled
13    payment of an income share agreement, the parties to the
14    income share agreement may agree in writing to a deferral
15    of all or part of one or more unpaid payments and the
16    licensee may make, at the time of deferral and receive at
17    that time or at any time thereafter, a deferral charge not
18    exceeding an amount equal to 10% of the missed payment.
19    Section 110. Restriction on security interest. Under no
20circumstances shall a licensee take a security interest in any
21collateral in connection with an income share agreement.
22    Section 115. Discharge of obligations.
23    (a) All further obligations under an income share
24agreement, except those accruing before the date of



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1determination by a relevant governmental agency, shall
2terminate if the consumer is deemed totally and permanently
3disabled by the applicable governmental agency.
4    (b) All further obligations under the income share
5agreement, except those accruing before the consumer's death,
6shall terminate upon the death of the consumer.
7    Section 120. Prohibition on co-signers. No income share
8agreement shall include or permit the use of a co-signer in
9connection with any obligation related to an income share
11    Section 125. Limitation on acceleration.
12    (a) Licensees may not attempt to accelerate or otherwise
13liquidate a future payment stream under an income share
15    (b) Notwithstanding subsection (a), nothing in this
16Section shall prevent a licensee from collecting or pursuing
17any other remedy available to the licensee for the collection
18of amounts that were due from the consumer under an income
19share agreement but that were not paid or properly remitted to
20the licensee. These amounts may include projected future
21payments as provided in the income share agreement if the
22consumer does not provide contractually obligated
23documentation of income.
24    (c) Notwithstanding subsection (a), an income share



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1agreement may contain a provision that allows a consumer to
2terminate his or her income share agreement before the events
3terminating further obligations under the income share
4agreement. The early termination mechanisms, such as total
5caps on payments due to the licensee or other rights to
6partially or fully terminate further obligations under the
7income share agreement, must be optional to the consumer and
8within the consumer's control. In such circumstances, such
9mechanisms will not be deemed a form of acceleration, early
10termination penalty, or prepayment penalty.
11    Section 130. No assignment of wages.
12    (a) A licensee may not take an assignment of earnings of
13the consumer for payment or as security for payment of a debt
14arising out of an income share agreement. An assignment of
15earnings in violation of this Section is unenforceable by the
16assignee of the earnings and revocable by the consumer. This
17Section does not prohibit a consumer from authorizing
18deductions from his or her earnings in favor of a licensee if
19the authorization is revocable, the consumer is given a
20complete copy of the writing evidencing the authorization at
21the time the consumer signs it, and the writing contains on its
22face a conspicuous notice of the consumer's right to revoke
23the authorization.
24    (b) A sale of unpaid earnings made in consideration of the
25payment of money to or for the account of the seller of the



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1earnings is deemed to be a loan to the seller secured by an
2assignment of earnings.
3    Section 135. Limitations on garnishment.
4    (a) Before entry of judgment in an action against a
5consumer for a payment arising from an income share agreement,
6a licensee may not attach unpaid earnings of the consumer by
7garnishment or like proceedings.
8    (b) The maximum part of the aggregate disposable earnings
9of an individual for any workweek which is subjected to
10garnishment to enforce payment of a judgment arising from an
11income share agreement may not exceed the lesser of:
12        (1) 25% of the individual's disposable earnings for
13    that week; or
14        (2) the amount by which the individual's disposable
15    earnings for that week exceed 40 times the federal minimum
16    hourly wage prescribed by Section 6(a)(1) of the Fair
17    Labor Standards Act of 1938, 29 U.S.C. 206(a)(1), in
18    effect at the time the earnings are payable.
19    In case of earnings for a pay period other than a week, the
20Department shall prescribe by rule a multiple of the federal
21minimum hourly wage equivalent to the amount set forth in
22paragraph (2).
23    (c) No court may make, execute, or enforce an order or
24process in violation of this Section.
25    (d) At any time after entry of a judgment in favor of a



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1licensee in an action against a consumer for a payment arising
2from an income share agreement, the consumer may file with the
3court a verified application for an order exempting from
4garnishment pursuant to that judgment, for an appropriate
5period of time, a greater portion or all of the consumer's
6aggregate disposable earnings for a workweek or other
7applicable pay period than is provided for in subsection (b).
8The consumer shall in the application designate the portion of
9earnings not exempt from garnishment under this Section and
10other law, designate the period of time for which the
11additional exemption is sought, describe the judgment with
12respect to which the application is made, and state that the
13designated portion as well as his or her earnings that are
14exempt by law are necessary for the maintenance of the
15consumer or a family supported wholly or partly by the
16earnings. Upon filing a sufficient application under this
17subsection, the court may issue any temporary order necessary
18under the circumstances to stay enforcement of the judgment by
19garnishment, shall set a hearing on the application not less
20than 5 nor more than 10 days after the date of filing of the
21application, and shall cause notice of the application and the
22hearing date to be served on the judgment creditor or the
23creditor's attorney of record. At the hearing, if it appears
24to the court that all or any portion of the earnings sought to
25be additionally exempt are necessary for the maintenance of
26the consumer or a family supported wholly or partly by the



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1earnings of the consumer for all or any part of the time
2requested in the application, the court shall issue an order
3granting the application to that extent; otherwise it shall
4deny the application. The order is subject to modification or
5vacation upon further application of any party to it upon a
6showing of changed circumstances after a hearing upon notice
7to all interested parties.
8    (e) An employer may not discharge an employee because a
9licensee has subjected or attempted to subject unpaid earnings
10of the employee to garnishment or like proceedings directed to
11the employer for the purpose of paying a judgment arising from
12an income share agreement.
13    Section 140. Use of multiple agreements. A licensee may
14not use multiple agreements with respect to a single income
15share agreement with intent to violate any limitations of this
17    Section 145. Required disclosures.
18    (a) A licensee shall disclose the following information to
19each consumer, clearly and conspicuously, in a form that the
20consumer can keep at the time the transaction is consummated:
21        (1) The date of the contract.
22        (2) The dollar amount of the amount financed.
23        (3) The ISA percentage, expressed as a percentage, and
24    an explanation of whether the ISA percentage is fixed or



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1    will vary; and any limitation on the ISA percentage
2    adjustments or lack of limitations if the ISA percentage
3    will change after consummation of the income share
4    agreement. The ISA percentage shall be rounded to the
5    nearest one-hundredth of 1% if the ISA percentage is not a
6    whole number.
7        (4) The maximum number of payments expressed as a
8    whole number.
9        (5) The maximum duration expressed as a whole number
10    of the period of time.
11        (6) The income threshold expressed as a dollar amount
12    and a statement that payments will only be required during
13    periods when the consumer's income is equal to or exceeds
14    the income threshold.
15        (7) An itemization of the amount financed; if the ISA
16    provider is a seller of goods or services, then the amount
17    of any down payment and any additional fees or costs shall
18    be itemized.
19        (8) The definition of income to be used for the
20    purposes of calculating the consumer's obligations under
21    the income share agreement.
22        (9) A description of the terms under which the
23    obligations of the consumer under the income share
24    agreement will be extinguished before the full ISA
25    duration.
26        (10) A payment schedule that shows the date on which



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1    the first payment will be due and reflecting each date
2    thereafter during the ISA duration that a payment may be
3    due.
4        (11) An itemization of any permissible fees associated
5    with the ISA.
6        (12) A description of the methods used by the ISA
7    provider to engage in a process of reconciliation and
8    verification to determine if the consumer's payments are
9    more than, equal to, or less than the payments owed by the
10    consumer under his or her income share agreement; this
11    description shall include the following:
12                (i) a description of the frequency or triggers
13            for the commencement of the income verification
14            process;
15                (ii) a description of the requirements and
16            timing of the process in which the consumer must
17            participate in order for the ISA provider to
18            verify the consumer's income; and
19                (iii) a description of any records or forms,
20            including tax records, that the consumer may be
21            required to execute or submit.
22        (13) The name and address of the ISA provider.
23        (14) A table displaying the dollar amounts of each
24    payment, the number of payments, the effective annual
25    percentage rate, and the sum total of all payments that a
26    consumer would be required to pay under the income share



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1    agreement at a range of annual income levels based on the
2    ISA duration. The comparison table shall include a
3    statement that "This Comparison Table is for illustrative
4    purposes only and may not reflect the amounts that you are
5    likely to pay under this income share agreement. This
6    table assumes you have the same income over the entire
7    term of your income share agreement. It does not take into
8    account changes in income. Your income will likely change
9    over time. This table does not represent the income or
10    range of incomes that you are likely to earn in the
11    future.". In computing the APR, the ISA provider shall use
12    the amount financed and may assume that the income share
13    agreement will be disbursed in the amount and with the
14    disbursement schedule that it reasonably expects to follow
15    for such income share agreement and that payments would
16    commence on the date set forth in the income share
17    agreement. The income used in this disclosure shall
18    include, at minimum, the obligations at the following
19    incomes:
20                (i) no income;
21                (ii) income equal to the annual equivalent of
22            the income threshold;
23                (iii) various income scenarios with at least
24            calculations at annual incomes of $40,000,
25            $60,000, $80,000, $100,000, $125,000, $150,000,
26            $175,000, and $200,000; and



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1                (iv) if known by the ISA provider, the
2            consumer's current income.
3        (15) A statement that the income share agreement is
4    not a fixed payment installment loan and that the amount
5    the consumer will be required to pay under the income
6    share agreement:
7                (i) may be more or less than the amount
8            financed by the ISA provider; and
9                (ii) will vary in proportion with the
10            consumer's income.
11    (b) The disclosures required by this Section shall be
12grouped together and segregated from all other information.
13    (c) The disclosures required by this Section may be
14provided to a consumer in electronic form, subject to
15compliance with the consumer's consent and other applicable
16provisions of the Electronic Signatures in Global and National
17Commerce Act, 15 U.S.C. 7001 et seq., and applicable State
19    (d) If model documents are established pursuant to any
20federal law covering income share agreements, compliance with
21those forms shall be considered compliance with this Act with
22respect to the disclosure requirements contained in this Act.
23    Section 150. Early completion. An income share agreement
24shall specify the terms and conditions by which the consumer
25may extinguish his or her obligations under the income share



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1agreement before the end of the income share agreement's
2duration. An income share agreement may include any method to
3determine the early completion payment; however, a consumer
4may always cancel an income share agreement by making
5aggregate payments, excluding payments to fees, equal to the
6ISA payment cap. The consumer is entitled to this early
7completion regardless of whether the consumer makes this early
8completion payment by making regularly scheduled payments or
9by making a single lump sum payment in the amount of the early
10completion payment.
11    Section 155. Assumption of increase in future income.
12    (a) If a consumer fails to provide income documentation as
13reasonably required by an income share agreement, a licensee
14may assign an amount of income to the consumer and compute the
15consumer's monthly payment amount by any of the following
16methods, to the extent disclosed in the income share
18        (1) assigning an income amount obtained from a
19    reasonably reliable third party or a credit reporting
20    agency;
21        (2) if the consumer previously provided income
22    documentation or has had an income assigned in the prior
23    12-month period that has increased by an amount not to
24    exceed 10%, but such increase may not be applied more than
25    once per 12-month period;



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1        (3) contacting the consumer's employer, or any person
2    or entity reasonably believed to represent the consumer's
3    employer, to obtain, verify, or update the consumer's
4    income information;
5        (4) contacting the Department of Revenue or the
6    Internal Revenue Service to obtain the most recent
7    information available about the student's income; or
8        (5) for licensees providing educational income share
9    agreements, assigning a reasonable qualified income based
10    on the incomes of:
11            (A) the nearest reasonably relevant quantile of
12        income for individuals working in the profession for
13        which the consumer's educational program was intended
14        to prepare the participant, as determined by
15        information published by the Bureau of Labor
16        Statistics or other reasonably reliable publicly
17        available data sources; or
18            (B) the nearest reasonably relevant quantile of
19        income of consumers who attended the same or a
20        reasonably comparable covered educational program or
21        course of study, as determined by information
22        published by the Bureau of Labor Statistics or other
23        reasonably reliable publicly available data sources.
24    (b) If a licensee assigns an income to a consumer's income
25share agreement, it shall:
26        (1) notify the consumer in the monthly billing



HB4554- 37 -LRB102 22903 BMS 32056 b

1    statement, and in each billing statement thereafter while
2    the assigned income remains applicable to the consumer's
3    income share agreement, that income has been assigned and
4    of the consumer's rights under this Section;
5        (2) if the consumer does provide income information as
6    reasonably required by the income share agreement within
7    one year of the date on which the licensee notified the
8    consumer that assigned income will be applied to the
9    income share agreement, then, within 15 days after the
10    licensee's receipt of such information, the licensee shall
11    update each prior instance in which assigned income was
12    applied using the income information provided by the
13    consumer; and
14        (3) if the consumer provides income information more
15    than one year after the licensee first assigned income to
16    the consumer's income share agreement, then the licensee
17    may, but is not obligated to, update each prior instance
18    in which assigned income was applied using the income
19    information provided by the consumer.
20    (c) A licensee that assigns income to an income share
21agreement shall retain all applicable records relating to the
22method and data sources used to make such estimation for 3
23years after the end of that income share agreement.
24    Section 160. Receipts; statements of account; evidence of



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1    (a) The licensee shall deliver or mail to the consumer,
2without request, a written receipt for each payment made
3pursuant to an income share agreement. A periodic statement
4showing a payment received by mail complies with this
6    (b) Upon written request of a consumer, the licensee shall
7provide a written statement of the dates and amounts of
8payments made within the 12 months preceding the month in
9which the request is received. The statement shall be provided
10without charge once during each year of the term of the
11obligation. If additional statements are requested, the
12licensee may charge an amount not to exceed $5.00 for each
13additional statement.
14    (c) After a consumer has fulfilled all obligations with
15respect to an income share agreement, the licensee, upon
16request of the consumer, shall deliver or mail to the consumer
17written evidence acknowledging termination of all obligations
18with respect to the income share agreement.
19    Section 165. Advertising. A licensee may not advertise,
20print, display, publish, distribute, broadcast, or cause to be
21advertised, printed, displayed, published, distributed, or
22broadcast in any manner any statement or representation that
23is false, deceptive, or misleading.
24    Section 170. Penalties.



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1    (a) A person who engages in business as a licensee without
2the license required by this Act commits a Class 4 felony.
3    (b) The consumer, before the expiration of 2 years after
4the date of his or her last scheduled payment, may recover such
5reasonable attorneys' fees and court costs as a court may
6assess. A bona fide error by a licensee in calculating
7charges, fees, or rebates is not a violation if the licensee
8corrects the error within a reasonable time after discovery.
9    (c) No provision of this Section imposing any liability
10shall apply to any act done or omitted in conformity with any
11rule or written interpretation of a rule by the Division of
12Financial Institutions of the Department of Financial and
13Professional Regulation, notwithstanding that after such act
14or omission has occurred, such rule or interpretation is
15amended, rescinded, or determined by judicial or other
16authority to be invalid for any reason. All interpretations
17must be written and signed by the Department's chief counsel
18and approved by the Director.
19    (d) Notwithstanding any other provision of this Section,
20if any person who does not have a license issued under this Act
21makes an income share agreement to an Illinois consumer, then
22the loan shall be null and void and the person who made the
23income share agreement shall have no right to collect,
24receive, or retain any amounts related to the income share



HB4554- 40 -LRB102 22903 BMS 32056 b

1    Section 175. Cease and desist.
2    (a) The Director may issue a cease and desist order to any
3licensee or another person doing business without a required
4license, when in the opinion of the Director, the licensee or
5the other person is violating or is about to violate any
6provision of this Act or any rule or requirement imposed in
7writing by the Department as a condition of granting any
8authorization permitted by this Act.
9    (b) The Director may issue a cease and desist order before
10a hearing.
11    (c) The Director shall serve notice of his or her action,
12designated as a cease and desist order made pursuant to this
13Section, including a statement of the reasons for the action,
14either personally or by certified mail, return receipt
15requested. Service by certified mail shall be deemed completed
16when the notice is deposited in the U.S. mail.
17    (d) Within 15 days after service of the cease and desist
18order, the licensee or the other person may request, in
19writing, a hearing.
20    (e) The Director shall schedule a hearing within 30 days
21after the request for a hearing unless otherwise agreed to by
22the parties.
23    (f) The cost for the administrative hearing shall be set
24by rule.
25    (g) If it is determined that the Director had the
26authority to issue the cease and desist order, he or she may



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1issue such orders as may be reasonably necessary to correct,
2eliminate, or remedy such conduct.
3    (h) The powers vested in the Director by this Section are
4additional to all other powers and remedies vested in the
5Director by law, and nothing in this Section shall be
6construed as requiring that the Director employ the power
7conferred in this Section instead of or as a condition
8precedent to the exercise of any other power or remedy vested
9in the Director.
10    (i) The Department shall have the authority to adopt rules
11for the administration of this Section.
12    Section 180. Civil action. A claim of violation of this
13Act may be asserted in a civil action.
14    Section 185. Application of Act. This Act does not apply
15to any person, partnership, association, limited liability
16company, or corporation doing business under and as permitted
17by any law of this State or the United States relating to
18banks, savings and loan associations, savings banks, or credit
19unions. This Act does not apply to any income share agreements
20or the like made with business or commercial entities.
21    Section 190. Rules. The Department may adopt and enforce
22such reasonable rules, directions, orders, decisions, and
23findings as the execution and enforcement of the provisions of



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1this Act require and that are not inconsistent with this Act.
2In addition, the Department may adopt rules in connection with
3the activities of licensees that are necessary and appropriate
4for the protection of consumers in this State. All rules and
5directions of a general character shall be sent electronically
6to all licensees.
7    Section 195. Judicial review. All final administrative
8decisions of the Department under this Act shall be subject to
9judicial review pursuant to the provisions of the
10Administrative Review Law and any rules adopted pursuant to
11the Administrative Review Law.
12    Section 200. Injunction; civil penalties; costs. If it
13appears to the Director that a person or any entity has
14committed or is about to commit a violation of this Act, a rule
15adopted under this Act, or an order of the Director, the
16Director may apply to the circuit court for an order enjoining
17the person or entity from violating or continuing to violate
18this Act, the rule, or order and for injunctive or other relief
19that the nature of the case may require and may, in addition,
20request the court to assess a civil penalty up to $1,000 along
21with costs and attorneys' fees.
22    Section 205. Adjustment of dollar amounts.
23    (a) From time to time the dollar amounts in this Act



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1designated as subject to change shall change, as provided in
2this Section, according to and to the extent of changes in the
4    (b) The index for December of the year preceding the year
5in which this Act becomes effective is the reference base
7    (c) The designated dollar amounts shall change on July 1
8of each even-numbered year if the percentage of change,
9calculated to the nearest whole percentage point, between the
10index and the end of the preceding year and the reference base
11index is 10% or more, but:
12        (1) the portion of the percentage change in the index
13    in excess of a multiple of 10% shall be disregarded and the
14    dollar amounts shall change only in multiples of 10% of
15    the amounts provided in this Act on the date of enactment;
16    and
17        (2) the dollar amounts shall not change if the amounts
18    required by this Section are those currently in effect
19    pursuant to this Act as a result of earlier application of
20    this Section.
21    (d) If the index is revised, the percentage of change
22pursuant to this Section shall be calculated on the basis of
23the revised index. If a revision of the index changes the
24reference base index, a revised reference base index shall be
25determined by multiplying the reference base index then
26applicable by the rebasing factor furnished by the Bureau of



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1Labor Statistics. If the index is superseded, the index
2referred to in this Section is the one represented by the
3Bureau of Labor Statistics as reflecting most accurately
4changes in the purchasing power of the dollar for consumers.
5    (e) The Department shall adopt a rule setting forth, on or
6before April 30 of each year in which dollar amounts are to
7change, the changes in dollar amounts required by this
8Section. As soon as practical after the changes occur, the
9Department shall adopt a rule setting forth the changes in the
10index required by subsection (d), including, if applicable,
11the numerical equivalent of the reference base index under a
12revised reference base index and the designation or title of
13any index superseding the index.
14    (f) A person does not violate this Act with respect to a
15transaction otherwise complying with this Act if he or she
16relies on dollar amounts either determined according to
17subsection (c) or appearing in the last rule of the Department
18announcing the then-current dollar amounts.
19    Section 210. Construction against implicit authority. This
20Act is a general act intended as a unified coverage of its
21subject matter; no part of this Act shall be construed to be
22impliedly repealed by subsequent legislation if that
23construction can reasonably be avoided.
24    Section 215. Application of Act.



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1    (a) During the first 90 days after the effective date of
2this Act, any person who has applied for a license under this
3Act or filed written notice of intention to apply for a license
4with the Director and whose application has not been denied,
5shall be subject to all provisions of this Act and may make
6income share agreements as if he or she were a licensee under
7this Act.
8    (b) This Act shall not apply to any contract or
9transaction made before the effective date of this Act.
10    Section 220. Severability. The provisions of this Act are
11severable under Section 1.31 of the Statute on Statutes.
12    Section 999. Effective date. This Act takes effect upon
13becoming law.