Full Text of HB1519 103rd General Assembly
HB1519eng 103RD GENERAL ASSEMBLY |
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| 1 | | AN ACT concerning regulation.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Student Loan Servicing Rights Act is | 5 | | amended by changing Sections 1-5 and 25-5 and by adding | 6 | | Article 7 as follows: | 7 | | (110 ILCS 992/1-5)
| 8 | | Sec. 1-5. Definitions. As used in this Act: | 9 | | "Applicant" means a person applying for a license pursuant | 10 | | to this Act. | 11 | | "Borrower" or "student loan borrower" means a person who | 12 | | has received or agreed to pay a student loan for his or her own | 13 | | educational expenses. | 14 | | "Cosigner" means a person who has agreed to share | 15 | | responsibility for repaying a student loan with a borrower. | 16 | | "Department" means the Department of Financial and | 17 | | Professional Regulation. | 18 | | "Division of Banking" means the Division of Banking of the | 19 | | Department of Financial and Professional Regulation. | 20 | | "Federal loan borrower eligible for referral to a | 21 | | repayment specialist" means a borrower who possesses any of | 22 | | the following characteristics: | 23 | | (1) requests information related to options to reduce |
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| 1 | | or suspend his or her monthly payment; | 2 | | (2) indicates that he or she is experiencing or | 3 | | anticipates experiencing financial hardship, distress, or | 4 | | difficulty making his or her payments; | 5 | | (3) has missed 2 consecutive monthly payments; | 6 | | (4) is at least 75 days delinquent; | 7 | | (5) is enrolled in a discretionary forbearance for | 8 | | more than 9 of the previous 12 months; | 9 | | (6) has rehabilitated or consolidated one or more | 10 | | loans out of default within the past 12 months; or | 11 | | (7) has not completed a course of study, as reflected | 12 | | in the servicer's records, or the borrower identifies | 13 | | himself or herself as not having completed a program of | 14 | | study. | 15 | | "Federal education loan" means any loan made, guaranteed, | 16 | | or insured under Title IV of the federal Higher Education Act | 17 | | of 1965. | 18 | | "Income-driven payment plan certification" means the | 19 | | documentation related to a federal student loan borrower's | 20 | | income or financial status the borrower must submit to renew | 21 | | an income-driven repayment plan. | 22 | | "Income-driven repayment options" includes the | 23 | | Income-Contingent Repayment Plan, the Income-Based Repayment | 24 | | Plan, the Income-Sensitive Repayment Plan, the Pay As You Earn | 25 | | Plan, the Revised Pay As You Earn Plan, and any other federal | 26 | | student loan repayment plan that is calculated based on a |
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| 1 | | borrower's income. | 2 | | "Licensee" means a person licensed pursuant to this Act. | 3 | | "Other repayment plans" means the Standard Repayment Plan, | 4 | | the Graduated Repayment Plan, the Extended Repayment Plan, or | 5 | | any other federal student loan repayment plan not based on a | 6 | | borrower's income. | 7 | | "Private loan borrower eligible for referral to a | 8 | | repayment specialist" means a borrower who possesses any of | 9 | | the following characteristics: | 10 | | (1) requests information related to options to reduce | 11 | | or suspend his or her monthly payments; or | 12 | | (2) indicates that he or she is experiencing or | 13 | | anticipates experiencing financial hardship, distress, or | 14 | | difficulty making his or her payments. | 15 | | "Requester" means any borrower or cosigner that submits a | 16 | | request for assistance. | 17 | | "Request for assistance" means all inquiries, complaints, | 18 | | account disputes, and requests for documentation a servicer | 19 | | receives from borrowers or cosigners. | 20 | | "Secretary" means the Secretary of Financial and | 21 | | Professional Regulation, or his or her designee, including the | 22 | | Director of the Division of Banking of the Department of | 23 | | Financial and Professional Regulation. | 24 | | "Servicing" means: (1) receiving any scheduled periodic | 25 | | payments from a student loan borrower or cosigner pursuant to | 26 | | the terms of a student loan; (2) applying the payments of |
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| 1 | | principal and interest and such other payments with respect to | 2 | | the amounts received from a student loan borrower or cosigner, | 3 | | as may be required pursuant to the terms of a student loan; and | 4 | | (3) performing other administrative services with respect to a | 5 | | student loan. | 6 | | "Student loan" or "loan" means any federal education loan | 7 | | or other loan primarily for use to finance a postsecondary | 8 | | education and costs of attendance at a postsecondary | 9 | | institution, including, but not limited to, tuition, fees, | 10 | | books and supplies, room and board, transportation, and | 11 | | miscellaneous personal expenses. "Student loan" includes a | 12 | | loan made to refinance a student loan. | 13 | | "Student loan" shall not include an extension of credit | 14 | | under an open-end consumer credit plan, a reverse mortgage | 15 | | transaction, a residential mortgage transaction, or any other | 16 | | loan that is secured by real property or a dwelling. | 17 | | "Student loan" shall not include an extension of credit | 18 | | made by a postsecondary educational institution to a borrower | 19 | | if one of the following apply: | 20 | | (1) The term of the extension of credit is no longer | 21 | | than the borrower's education program. | 22 | | (2) The remaining, unpaid principal balance of the | 23 | | extension of credit is less than $1,500 at the time of the | 24 | | borrower's graduation or completion of the program. | 25 | | (3) The borrower fails to graduate or successfully | 26 | | complete his or her education program and has a balance |
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| 1 | | due at the time of his or her disenrollment from the | 2 | | postsecondary institution. | 3 | | "Student loan servicer" or "servicer" means any person | 4 | | engaged in the business of servicing student loans. "Student | 5 | | loan servicer" or "servicer" includes persons or entities | 6 | | acting on behalf of the State Treasurer. "Student loan | 7 | | servicer" includes an income share agreement provider as set | 8 | | forth under Article 7 of this Act. | 9 | | "Student loan servicer" shall not include: | 10 | | (1) a bank, savings bank, savings association, or | 11 | | credit union organized under the laws of the State or any | 12 | | other state or under the laws of the United States; | 13 | | (2) a wholly owned subsidiary of any bank, savings | 14 | | bank, savings association, or credit union organized under | 15 | | the laws of the State or any other state or under the laws | 16 | | of the United States; | 17 | | (3) an operating subsidiary where each owner of the | 18 | | operating subsidiary is wholly owned by the same bank, | 19 | | savings bank, savings association, or credit union | 20 | | organized under the laws of the State or any other state or | 21 | | under the laws of the United States; | 22 | | (4) the Illinois Student Assistance Commission and its | 23 | | agents when the agents are acting on the Illinois Student | 24 | | Assistance Commission's behalf; | 25 | | (5) a public postsecondary educational institution or
| 26 | | a private nonprofit postsecondary educational institution
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| 1 | | servicing a student loan it extended to the borrower; | 2 | | (6) a licensed debt management service under the Debt
| 3 | | Management Service Act, except to the extent that the
| 4 | | organization acts as a subcontractor, affiliate, or
| 5 | | service provider for an entity that is otherwise subject | 6 | | to licensure under this Act; | 7 | | (7) any collection agency licensed under the
| 8 | | Collection Agency Act that is collecting post-default
| 9 | | debt; | 10 | | (8) in connection with its responsibilities as a | 11 | | guaranty agency engaged in default aversion, a State or | 12 | | nonprofit private institution or organization having an | 13 | | agreement with the U.S. Secretary of Education under | 14 | | Section 428(b) of the Higher Education Act (20 U.S.C. | 15 | | 1078(B));
| 16 | | (9) a State institution or a nonprofit private | 17 | | organization designated by a governmental entity to make | 18 | | or service student loans, provided in each case that the | 19 | | institution or organization services fewer than 20,000 | 20 | | student loan accounts of borrowers who reside in Illinois;
| 21 | | (10) a law firm or licensed attorney that is | 22 | | collecting post-default debt; or | 23 | | (11) the State Treasurer. | 24 | | (Source: P.A. 100-540, eff. 12-31-18; 100-635, eff. 12-31-18; | 25 | | 101-586, eff. 8-26-19.) |
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| 1 | | (110 ILCS 992/Art. 7 heading new) | 2 | | ARTICLE 7. EDUCATIONAL INCOME SHARE AGREEMENTS | 3 | | (110 ILCS 992/7-1 new) | 4 | | Sec. 7-1. Purpose and Construction. This Article shall be | 5 | | construed as a consumer protection law for all purposes. This | 6 | | Article shall be liberally construed to effectuate its | 7 | | purpose. | 8 | | (110 ILCS 992/7-5 new) | 9 | | Sec. 7-5. Definitions. As used in this Article: | 10 | | "Amount financed" means the amounts advanced by the income | 11 | | share agreement provider to the consumer or on behalf of the | 12 | | consumer or, if the income share agreement provider is a | 13 | | merchant financing the sale of goods or services to the | 14 | | consumer using an income share agreement, "amount financed" | 15 | | means the amount credited by the income share agreement | 16 | | provider toward the purchase of such goods and services on | 17 | | behalf of the consumer. | 18 | | | 19 | | "Annual percentage rate" or "APR" means the percentage | 20 | | rate calculated according to the Federal Reserve Board's | 21 | | methodology as set forth under Regulation Z, 12 CFR Part 1026. | 22 | | The "annual percentage rate" of an income share agreement is | 23 | | the measure of the cost of the income share agreement, | 24 | | expressed as a yearly rate, that relates to the amount and |
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| 1 | | timing of value received by the consumer to the amount and | 2 | | timing of payments made. The "annual percentage rate" is | 3 | | determined in accordance with either the actuarial method or | 4 | | the United States rule method. | 5 | | "Cash price" means the price that the consumer would pay | 6 | | for the goods or services for which the educational income | 7 | | share agreement proceeds are advanced in an equivalent cash | 8 | | transaction between the consumer and the provider of goods or | 9 | | services. The Cash price excludes any amounts paid by the | 10 | | consumer as a down payment to the income share agreement | 11 | | provider. | 12 | | "Consumer" means a natural person who enters into an | 13 | | Educational Income Share Agreement for educational purposes. | 14 | | "Disposable earnings" means that part of the earnings of | 15 | | an individual remaining after the deduction from total | 16 | | earnings of amounts required by law to be withheld. | 17 | | "Educational Income Share Agreement" means an income share | 18 | | agreement that: | 19 | | (1) is not made, insured, or guaranteed under Title IV | 20 | | of the Higher Education Act of 1965, 20 U.S.C. 1070 et | 21 | | seq., or another federally subsidized educational finance | 22 | | program; and | 23 | | (2) is extended to a consumer expressly, in whole or | 24 | | in part, for postsecondary educational expenses, tuition, | 25 | | or other obligations of, or pays amounts to, or on behalf | 26 | | of, such individual for costs associated with a |
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| 1 | | postsecondary training program or any other program | 2 | | designed to increase the individual's human capital, | 3 | | employability, or earning potential, and is not limited to | 4 | | programs eligible to participate as programs under Title | 5 | | IV of the Higher Education Act of 1965, 20 U.S.C. 1070 et | 6 | | seq., as well as any personal expenses, such as books, | 7 | | supplies, transportation, and living costs, incurred by | 8 | | the individual while enrolled in such a program and any | 9 | | other costs or expenses included in the definition of a | 10 | | "qualified higher education expense" as specified in 26 | 11 | | U.S.C. 529(e)(3)(A), including refinancing of loans or | 12 | | income share agreements used for the purposes described in | 13 | | this paragraph, and regardless of whether the income share | 14 | | agreement is provided by the educational institution that | 15 | | the consumer attends. | 16 | | "Federal poverty guidelines" means the poverty guidelines | 17 | | published by the federal Department of Health and Human | 18 | | Services under the authority of 42 U.S.C. 9902(2) in the | 19 | | Federal Register. | 20 | | "Garnishment" means any legal or equitable procedure | 21 | | through which earnings of an individual are required to be | 22 | | withheld for payment of obligations to an income share | 23 | | agreement provider as set forth in the Code of Civil | 24 | | Procedure. | 25 | | "Income share agreement" or "ISA" means an agreement | 26 | | between a consumer and an ISA provider under which: |
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| 1 | | (1) the ISA provider credits or advances a sum of | 2 | | money to the consumer or to a third party on the consumer's | 3 | | behalf or, if the ISA provider is a seller of goods or | 4 | | services to the consumer, the ISA provider credits or | 5 | | advances toward the purchase of such goods or services; | 6 | | (2) the consumer is obligated to make periodic | 7 | | payments, if any become due, to the ISA provider | 8 | | calculated, based upon, or determined by the consumer's | 9 | | income; | 10 | | (3) the consumer only incurs an obligation in each | 11 | | payment period if the individual's income in that period | 12 | | is above an income threshold specified in the ISA | 13 | | agreement; | 14 | | (4) there is an ISA duration after which the | 15 | | obligation is complete regardless of how much has been | 16 | | paid, as long as the consumer has paid any prior amounts | 17 | | due; and | 18 | | (5) each of these elements is available at the time of | 19 | | contracting of the income share agreement. For purposes of | 20 | | this definition, an income share agreement shall be | 21 | | treated as "credit", within the meaning of that term under | 22 | | 15 U.S.C. 1602(f), and as a "private education loan", | 23 | | within the meaning of that term under 15 U.S.C. | 24 | | 1650(a)(8), to the extent the proceeds of the ISA are used | 25 | | for postsecondary educational expenses in a manner | 26 | | consistent with the definition of that term. |
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| 1 | | "Income threshold" means a fixed dollar amount that is the | 2 | | minimum income per payment period that an ISA recipient is | 3 | | required to earn before the ISA recipient is required to make a | 4 | | payment on an income share agreement for such payment period. | 5 | | "Index" means the Consumer Price Index for Urban Wage | 6 | | Earners and Clerical Workers: U.S. City Average, All Items, | 7 | | 1967=100, compiled by the Bureau of Labor Statistics, United | 8 | | States Department of Labor. | 9 | | "ISA duration" means the maximum time during which a | 10 | | consumer could remain obligated on the income share agreement, | 11 | | other than periods when an income share agreement provider is | 12 | | attempting to collect past-due amounts and absent periods of | 13 | | payment relief pauses, forbearance, military service | 14 | | suspension, or other suspension of obligations at the request | 15 | | of the consumer, regardless of whether the consumer's income | 16 | | is greater than the minimum income. | 17 | | "ISA maximum number of payments" means the maximum number | 18 | | of ISA payments during ISA payment periods in which the | 19 | | consumer's income is equal to or greater than the income | 20 | | threshold that a consumer could be required to make pursuant | 21 | | to the terms of the income share agreement. "ISA maximum | 22 | | number of payments" does not include periods of payment relief | 23 | | pause. | 24 | | "ISA payment" means a calculated monthly payment in excess | 25 | | of $0.00 that counts toward the maximum income-based payments | 26 | | under the ISA. An "ISA payment" is required only for income |
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| 1 | | earned during an ISA payment period in which the consumer's | 2 | | income was equal to or greater than the income threshold. | 3 | | "ISA payment calculation method" means the mechanism, | 4 | | formula, percentage, dollar figure, or other means of | 5 | | calculating a student's payment obligation, based on the | 6 | | student's income, under the terms of the income share | 7 | | agreement. | 8 | | "ISA payment cap" means the maximum amount of money a | 9 | | consumer must pay to satisfy the terms of an income share | 10 | | agreement, which may be expressed as a dollar value, a | 11 | | multiple of the amount funded to the student or on the | 12 | | student's behalf, or as a maximum effective annual percentage | 13 | | rate. | 14 | | "ISA payment cap" does not include charges related to | 15 | | default or other charges and fees that are due under the income | 16 | | share agreement. | 17 | | "Income share agreement provider" means: | 18 | | (1) a person that provides money, payments, or credits | 19 | | to or on behalf of a consumer pursuant to the terms of an | 20 | | income share agreement; or | 21 | | (2) any other person engaged in the business of | 22 | | soliciting, making, funding, or extending income share | 23 | | agreements. This subsection does not apply to an entity | 24 | | that either: (A) has no direct interactions with the | 25 | | consumer and is not responsible for making credit | 26 | | decisions regarding the consumer, or (B) is the provider |
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| 1 | | of the educational services to the consumer, even if these | 2 | | entities may qualify under subsection (1), or (C) whose | 3 | | role is solely limited to the marketing or advertising of | 4 | | the income share agreement to the consumer on behalf of a | 5 | | licensed income share agreement provider. | 6 | | An income share agreement provider who is a student loan | 7 | | servicer as defined in the Student Loan Servicing Rights Act | 8 | | shall also comply with the provisions of this Article 7. | 9 | | "Payment relief pause" means a period of time that is | 10 | | requested by the consumer during which the consumer is not | 11 | | required to make payments despite the consumer's income | 12 | | exceeding the income threshold. | 13 | | "Sales price" means, for an educational income share | 14 | | agreement, the sum of the cash price and any other amounts | 15 | | financed by the educational income share agreement. | 16 | | (110 ILCS 992/7-10 new) | 17 | | Sec. 7-10. Monthly payment affordability. | 18 | | (a) Maximum ISA income obligation. Each income share | 19 | | agreement shall specify the ISA payment calculation method | 20 | | applicable to the income share agreement and shall comply with | 21 | | the following: | 22 | | (1) An income share agreement provider shall not enter | 23 | | into an ISA with a consumer if the consumer would be | 24 | | committing more than a total of 20% of the consumer's | 25 | | future income toward the payment of the ISA. |
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| 1 | | (2) An income share agreement provider shall not enter | 2 | | into an educational ISA with a consumer if the consumer | 3 | | would be committing to pay more than 20% of his or her | 4 | | income at any time during the ISA duration, based on | 5 | | information available to the income share agreement | 6 | | provider at the time of the projection, inclusive of any | 7 | | payment obligations that the income share agreement | 8 | | provider knows will arise in the future for other | 9 | | educational ISAs and education loans upon which the | 10 | | consumer is obligated at the time of the projection. The | 11 | | ISA provider must confirm a consumer's educational ISA and | 12 | | education loan liabilities through a verifiable | 13 | | third-party source. At a minimum, the income share | 14 | | agreement provider must confirm such liabilities using | 15 | | information maintained by a nationwide consumer reporting | 16 | | agency, as defined by 15 U.S.C. 1681a(f), and doing so is | 17 | | sufficient for meeting the requirement in this paragraph; | 18 | | however, nothing in this paragraph shall prohibit an | 19 | | income share agreement provider from using other sources | 20 | | to provide additional verification. For the purposes of | 21 | | calculating the portion of a student's future income that | 22 | | would be consumed by the educational ISA for which the | 23 | | student has applied and other educational ISAs and | 24 | | education loans known at the time, the ISA provider shall | 25 | | calculate the aggregate future burden of all such | 26 | | obligations, including the educational ISA for which the |
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| 1 | | student is applying, at hypothetical future income levels | 2 | | ranging from the income threshold of the ISA for which the | 3 | | student has applied up to $70,000, with such number | 4 | | adjusting for inflation each year, in increments of | 5 | | $10,000. The terms of the educational ISA for which the | 6 | | student has applied cannot cause the student's aggregate | 7 | | future burden to exceed the limit in subsection (b) at any | 8 | | of the income increments stated in this paragraph. For the | 9 | | purpose of calculating the percentage burden of an | 10 | | educational ISA at a given future income level, the ISA | 11 | | provider shall use the ISA payment amount that would be | 12 | | applicable for the ISA at such income level. For the | 13 | | purpose of calculating the percentage burden of an | 14 | | educational loan at a given future income level, the ISA | 15 | | provider shall divide the annual payment obligation by | 16 | | income level using the most affordable payment plan or | 17 | | option which would yield the lowest monthly payments that | 18 | | would be available to the student at such income level | 19 | | under such loan. For students enrolled in a Title IV | 20 | | program, as part of this analysis the ISA provider shall | 21 | | assume a federal loan balance equal to the larger of (1) | 22 | | the student's existing federal loan balance, and (2) the | 23 | | aggregate maximum amount the student is eligible to borrow | 24 | | under Federal Direct Stafford Loans for his or her status, | 25 | | dependent or independent. | 26 | | (b) Protections during periods of low earnings. The income |
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| 1 | | share agreement must state that when a consumer has income | 2 | | that is equal to or below the income threshold set forth in the | 3 | | income share agreement that the consumer's payment obligation | 4 | | is zero dollars. The income threshold at the time of | 5 | | origination must be high enough such that the consumer's gross | 6 | | income minus any income share agreement obligation must leave | 7 | | the consumer with gross income equal to at least 200% of the | 8 | | federal poverty guidelines for a single person. | 9 | | (c) Required payment relief pauses. An income share | 10 | | agreement must offer at least 3 months of voluntary payment | 11 | | relief pauses, so long as a consumer's current income at the | 12 | | time of requesting the payment relief pause is equal to or less | 13 | | than 400% of the federal poverty guidelines for a single | 14 | | individual, for every 30 income-determined payments required | 15 | | under the income share agreement. | 16 | | (110 ILCS 992/7-15 new) | 17 | | Sec. 7-15. Maximum effective annual percentage rate. An | 18 | | income share agreement must specify that the maximum amount | 19 | | that a consumer could be required to pay under the income share | 20 | | agreement will not result in a consumer ever being required to | 21 | | pay an effective annual percentage rate that is greater than | 22 | | 36%. If at any time the provider accepts a payment of an amount | 23 | | that would cause the limit in this Section to apply, the | 24 | | provider shall refund any amounts, within 20 calendar days, | 25 | | necessary to ensure that the consumer's payments do not result |
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| 1 | | in an effective annual percentage rate that is greater than | 2 | | the limit specified in this Section. | 3 | | (110 ILCS 992/7-20 new) | 4 | | Sec. 7-20. Limits on duration of income share agreements. | 5 | | (a) ISA maximum number of payments shall not exceed 180 | 6 | | monthly payments. | 7 | | (b) The ISA duration shall not exceed 240 months, | 8 | | excluding any months in which a consumer has requested and | 9 | | received a payment relief pause. | 10 | | (110 ILCS 992/7-25 new) | 11 | | Sec. 7-25. Risk sharing. | 12 | | (a) An income share agreement provider may not contract | 13 | | for income share agreement terms that would result in a | 14 | | consumer having income that is less than or equal to 300% of | 15 | | the federal poverty guidelines for a single person for the ISA | 16 | | duration being required to make a stream of ISA payments that | 17 | | would yield an effective APR greater than 8%, or the high yield | 18 | | of the 10-year United States Constant Maturity Treasury Notes | 19 | | auctioned at the final auction held before the current | 20 | | calendar year in which an ISA offering is made plus 7%, | 21 | | whichever is greater. | 22 | | (b) An income share agreement provider may not contract | 23 | | for income share agreement terms that would result in a | 24 | | consumer having income that is less than or equal to 400% of |
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| 1 | | the federal poverty guidelines for a single person for the ISA | 2 | | duration being required to make a stream of ISA payments that | 3 | | would yield an effective APR greater than 12%, or the high | 4 | | yield of the 10-year United States Constant Maturity Treasury | 5 | | Notes auctioned at the final auction held before the current | 6 | | calendar year in which an ISA offering is made plus 11%, | 7 | | whichever is greater. | 8 | | (c) An income share agreement provider may not contract | 9 | | for income share agreement terms that would result in a | 10 | | consumer having income that is less than or equal to 500% of | 11 | | the federal poverty guidelines for a single person for the ISA | 12 | | duration being required to make a stream of ISA payments that | 13 | | would yield an effective APR greater than 15%, or the high | 14 | | yield of the 10-year United States Constant Maturity Treasury | 15 | | Notes auctioned at the final auction held before the current | 16 | | calendar year in which an ISA offering is made plus 14%, | 17 | | whichever is greater. | 18 | | (d) An income share agreement provider may not contract | 19 | | for income share agreement terms that would result in a | 20 | | consumer having income that is less than or equal to 600% of | 21 | | the federal poverty guidelines for a single person for the ISA | 22 | | duration being required to make a stream of ISA payments that | 23 | | would yield an effective APR greater than 18%, or the high | 24 | | yield of the 10-year United States Constant Maturity Treasury | 25 | | Notes auctioned at the final auction held before the current | 26 | | calendar year in which an ISA offering is made plus 17%, |
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| 1 | | whichever is greater. | 2 | | (e) For the purposes of determining the various tiers set | 3 | | forth in this Section, an income share agreement provider | 4 | | shall calculate the effective APR by determining the various | 5 | | federal poverty guidelines tiers at the time the consumer's | 6 | | income share agreement is originated and assuming such amounts | 7 | | are fixed through the ISA duration. | 8 | | (f) For the purposes of determining ISA duration in this | 9 | | Section: in the case of an educational ISA, an income share | 10 | | agreement provider shall assume the ISA duration started after | 11 | | a period equal to the expected length of the program for which | 12 | | a consumer is enrolling; or in the case of a non-educational | 13 | | ISA, an income share agreement provider shall assume the ISA | 14 | | duration started immediately. | 15 | | (110 ILCS 992/7-30 new) | 16 | | Sec. 7-30. Limits on covered income. An income share | 17 | | agreement must specify the definition of income to be used for | 18 | | the purposes of calculating a consumer's payment obligation | 19 | | under the income share agreement. No income share agreement | 20 | | shall include any of the following in its definition of | 21 | | income: | 22 | | (1) The income of the consumer's spouse, party to a | 23 | | civil union under the Illinois Religious Freedom and Civil | 24 | | Union Act, children or dependents. | 25 | | (2) Any amount paid by the consumer under Title II or |
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| 1 | | XVI of the Social Security Act, 42 U.S.C. 401 et seq., 42 | 2 | | U.S.C. 1381 et seq.; or under a State program funded by | 3 | | Title IV of the Social Security Act, 42 U.S.C. 601 et seq. | 4 | | (3) Individual retirement account distributions. | 5 | | (4) Pensions and annuities. | 6 | | (5) Social security benefits. | 7 | | (6) Other sources of federal or State aid provided to | 8 | | individuals through any of the following: | 9 | | (A) unemployment programs; | 10 | | (B) disaster relief programs; | 11 | | (C) Medicare or Medicaid benefits; | 12 | | (D) benefits received through the Supplemental | 13 | | Nutrition Assistance Program;
(E)economic impact | 14 | | payments; | 15 | | (E) the earned income tax credit or child tax | 16 | | credit; | 17 | | (F) other income excluded from the definition of | 18 | | taxable income set forth by the Internal Revenue | 19 | | Service; or | 20 | | (G) passive income that is not derived as a result | 21 | | of a consumer's active participation in any trade or | 22 | | business. | 23 | | (110 ILCS 992/7-35 new) | 24 | | Sec. 7-35. Fees permitted. In addition to the ISA | 25 | | obligation permitted by this Act, an income share agreement |
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| 1 | | provider may contract for and receive the following additional | 2 | | charges: | 3 | | (1) government fees and taxes; | 4 | | (2) a fee, which shall not exceed the sum of $25, for | 5 | | failure to provide documentation to the income share | 6 | | agreement provider for the confirmation and reconciliation | 7 | | of the consumer's income; | 8 | | (3) a fee for processing any forms to confirm the | 9 | | consumer's income with the United States Internal Revenue | 10 | | Service or a State department of revenue or taxation on a | 11 | | dollar-for-dollar, pass-through basis of the expenses | 12 | | incurred by the income share agreement provider; | 13 | | (4) a late payment fee in an amount of $20 or 5% of the | 14 | | late payment, whichever is greater, for any payment that | 15 | | is more than 15 days past due; no late payment fee may be | 16 | | charged more than once per late payment; | 17 | | (5) an amount not exceeding $25, plus any actual | 18 | | expenses incurred in connection with a check or draft that | 19 | | is not honored because of insufficient or uncollected | 20 | | funds or because no such account exists; | 21 | | (6) other fees authorized by the Secretary. In | 22 | | determining whether to authorize a charge, the Secretary | 23 | | shall consider whether the charge benefits the consumer | 24 | | and is reasonable; | 25 | | (7) before or after default in payment of a scheduled | 26 | | payment of an income share agreement, the parties to the |
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| 1 | | income share agreement may agree in writing to a deferral | 2 | | of all or part of one or more unpaid payments and the | 3 | | income share agreement provider may make, at the time of | 4 | | deferral and receive at that time or at any time | 5 | | thereafter, a deferral charge not exceeding an amount | 6 | | equal to 10% of the missed payment. Provided this | 7 | | subsection shall not apply to voluntary payment relief | 8 | | pauses. | 9 | | (110 ILCS 992/7-40 new) | 10 | | Sec. 7-40. Restriction on security interest. Under no | 11 | | circumstances shall an income share agreement provider take a | 12 | | security interest in any collateral in connection with an | 13 | | income share agreement. | 14 | | (110 ILCS 992/7-45 new) | 15 | | Sec. 7-45. Discharge of obligations. | 16 | | (a) All further obligations under an income share | 17 | | agreement, shall terminate if the consumer is deemed totally | 18 | | and permanently disabled by the applicable governmental | 19 | | agency. | 20 | | (b) All further obligations under the income share | 21 | | agreement, except those accruing before the consumer's death, | 22 | | shall terminate upon the death of the consumer. | 23 | | (110 ILCS 992/7-50 new) |
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| 1 | | Sec. 7-50. Prohibition on co-signers. No income share | 2 | | agreement shall include or permit the use of a co-signer in | 3 | | connection with any obligation related to an income share | 4 | | agreement. | 5 | | (110 ILCS 992/7-55 new) | 6 | | Sec. 7-55. Limitation on acceleration. | 7 | | (a) Income share agreement providers shall not attempt to | 8 | | accelerate or otherwise liquidate a future payment stream | 9 | | under an income share agreement. | 10 | | (b) Notwithstanding subsection (a), nothing in this | 11 | | Section shall prevent an income share agreement provider from | 12 | | collecting or pursuing any other remedy available to the | 13 | | income share agreement provider for the collection of amounts | 14 | | that were due from the consumer under an income share | 15 | | agreement that were not paid or properly remitted to the | 16 | | income share agreement provider. Nothing in this Section shall | 17 | | prevent an income share agreement provider from calculating a | 18 | | projected future income for a consumer and calculating a | 19 | | consumer's payment obligation using that projection if the | 20 | | consumer does not provide contractually obligated | 21 | | documentation of income. | 22 | | (c) Notwithstanding subsection (a), an income share | 23 | | agreement may contain a provision that allows a consumer to | 24 | | terminate his or her income share agreement before the events | 25 | | terminating further obligations under the income share |
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| 1 | | agreement. The early termination mechanisms, such as total | 2 | | caps on payments due to the income share agreement provider or | 3 | | other rights to partially or fully terminate further | 4 | | obligations under the income share agreement, must be optional | 5 | | to the consumer and within the consumer's control. In such | 6 | | circumstances, such mechanisms will not be deemed a form of | 7 | | acceleration, early termination penalty, or prepayment | 8 | | penalty. | 9 | | (110 ILCS 992/7-60 new) | 10 | | Sec. 7-60. No assignment of wages. | 11 | | (a) An income share agreement provider may not take an | 12 | | assignment of earnings of the consumer for payment or as | 13 | | security for payment of a debt arising out of an income share | 14 | | agreement. An assignment of earnings in violation of this | 15 | | Section is unenforceable by the assignee of the earnings and | 16 | | revocable by the consumer. This Section does not prohibit a | 17 | | consumer from authorizing deductions from his or her earnings | 18 | | in favor of a licensee if the authorization complies with the | 19 | | Illinois Wage Assignment Act. | 20 | | (b) A sale of unpaid earnings made in consideration of the | 21 | | payment of money to or for the account of the seller of the | 22 | | earnings is deemed to be a loan to the seller secured by an | 23 | | assignment of earnings. | 24 | | (110 ILCS 992/7-65 new) |
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| 1 | | Sec. 7-65. Limitations on garnishment. Before entry of | 2 | | judgment in an action against a consumer for a payment arising | 3 | | from an income share agreement, a licensee may not attach | 4 | | unpaid earnings of the consumer by garnishment or like | 5 | | proceedings. | 6 | | (110 ILCS 992/7-70 new) | 7 | | Sec. 7-70. Use of multiple agreements. An income share | 8 | | agreement provider shall not use multiple agreements with | 9 | | respect to a single income share agreement with intent to | 10 | | violate any limitations of this Act. | 11 | | (110 ILCS 992/7-75 new) | 12 | | Sec. 7-75. Required disclosures. | 13 | | (a) An income share agreement provider shall disclose the | 14 | | following information to each consumer, clearly and | 15 | | conspicuously, in a form that the consumer can keep at the time | 16 | | the transaction is consummated: | 17 | | (1) The date of the income share agreement. | 18 | | (2) The dollar amount of the amount financed. | 19 | | (3) The sales price of the transaction if different | 20 | | from the amount financed; | 21 | | (4) The ISA payment calculation method. Any | 22 | | percentages used in the ISA payment calculation method | 23 | | shall be rounded to the nearest one-hundredth of 1% if the | 24 | | percentage is not a whole number. |
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| 1 | | (5) The maximum number of payments expressed as a | 2 | | whole number. | 3 | | (6) The maximum duration expressed as a whole number | 4 | | of the period of time. | 5 | | (7) The income threshold expressed as a dollar amount | 6 | | and a statement that payments will only be required during | 7 | | periods when the consumer's income is equal to or exceeds | 8 | | the income threshold. | 9 | | (8) An itemization of the amount financed; if the ISA | 10 | | provider is a seller of goods or services, then the amount | 11 | | of any down payment and any additional fees or costs shall | 12 | | be itemized. | 13 | | (9) The definition of income to be used for the | 14 | | purposes of calculating the consumer's obligations under | 15 | | the income share agreement. | 16 | | (10) A description of the terms under which the | 17 | | obligations of the consumer under the income share | 18 | | agreement will be extinguished before the full ISA | 19 | | duration. | 20 | | (11) A payment schedule that shows the date on which | 21 | | the first payment will be due and reflecting each date | 22 | | thereafter during the ISA duration that a payment may be | 23 | | due. | 24 | | (12) An itemization of any permissible fees associated | 25 | | with the ISA. | 26 | | (13) A description of the methods used by the ISA |
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| 1 | | provider to engage in a process of reconciliation and | 2 | | verification to determine if the consumer's payments are | 3 | | more than, equal to, or less than the payments owed by the | 4 | | consumer under his or her income share agreement; this | 5 | | description shall include the following: | 6 | | (i) a description of the frequency or triggers for | 7 | | the commencement of the income verification process; | 8 | | (ii) a description of the requirements and timing | 9 | | of the process in which the consumer must participate | 10 | | in order for the ISA provider to verify the consumer's | 11 | | income; and | 12 | | (iii) a description of any records or forms, | 13 | | including tax records, that the consumer may be | 14 | | required to execute or submit. | 15 | | (14) The name and address of the ISA provider. | 16 | | (15) A table displaying the dollar amounts of each | 17 | | payment, the number of payments, the effective annual | 18 | | percentage rate, and the total of all payments that a | 19 | | consumer would be required to pay under the income share | 20 | | agreement at a range of annual income levels based on the | 21 | | ISA duration. The comparison table shall include a | 22 | | statement that "This comparison table is for illustrative | 23 | | purposes only and may not reflect the amounts that you are | 24 | | likely to pay under this income share agreement. This | 25 | | table assumes you have the same income over the entire | 26 | | term of your income share agreement. It does not take into |
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| 1 | | account changes in income. Your income will likely change | 2 | | over time. This table does not represent the income or | 3 | | range of incomes that you are likely to earn in the | 4 | | future.". In computing the APR, the ISA provider shall use | 5 | | the amount financed and may assume that the income share | 6 | | agreement will be disbursed in the amount and with the | 7 | | disbursement schedule that it reasonably expects to follow | 8 | | for such income share agreement and that payments would | 9 | | commence on the date set forth in the income share | 10 | | agreement. The income used in this disclosure shall | 11 | | include, at minimum, the obligations at the following | 12 | | incomes: | 13 | | (i) no income; | 14 | | (ii) income equal to the annual equivalent of the | 15 | | income threshold; | 16 | | (iii) various income scenarios with at least | 17 | | calculations at annual incomes of $40,000, $60,000, | 18 | | $80,000, $100,000, $125,000, $150,000, $175,000, and | 19 | | $200,000; and | 20 | | (iv) if known by the ISA provider, the consumer's | 21 | | current income. | 22 | | (16) A statement that the income share agreement is | 23 | | not a fixed payment installment loan and that the amount | 24 | | the consumer will be required to pay under the income | 25 | | share agreement: | 26 | | (i) may be more or less than the amount financed by |
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| 1 | | the ISA provider; and | 2 | | (ii) will vary in proportion with the consumer's | 3 | | income. | 4 | | (b) The disclosures required by this Section shall be | 5 | | grouped together and segregated from all other information. | 6 | | (c) The disclosures required by this Section may be | 7 | | provided to a consumer in electronic form, subject to | 8 | | compliance with the consumer's consent and other applicable | 9 | | provisions of the Electronic Signatures in Global and National | 10 | | Commerce Act, 15 U.S.C. 7001 et seq., and applicable State | 11 | | law. | 12 | | (d) If model documents are established pursuant to any | 13 | | federal law covering income share agreements, compliance with | 14 | | those forms shall be considered compliance with this Act with | 15 | | respect to the disclosure requirements contained in this Act. | 16 | | (110 ILCS 992/7-80 new) | 17 | | Sec. 7-80. Early completion. An income share agreement | 18 | | shall specify the terms and conditions by which the consumer | 19 | | may extinguish his or her obligations under the income share | 20 | | agreement before the end of the income share agreement's | 21 | | duration. An income share agreement may include any method to | 22 | | determine the early completion payment; however, a consumer | 23 | | may always cancel an income share agreement by making | 24 | | aggregate payments, excluding payments to fees, equal to the | 25 | | ISA payment cap. The consumer is entitled to this early |
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| 1 | | completion regardless of whether the consumer makes this early | 2 | | completion payment by making regularly scheduled payments or | 3 | | by making a single lump sum payment in the amount of the early | 4 | | completion payment. | 5 | | (110 ILCS 992/7-85 new) | 6 | | Sec. 7-85. Assumption of increase in future income. | 7 | | (a) If a consumer fails to provide income documentation as | 8 | | reasonably required by an income share agreement, an income | 9 | | share agreement provider may assign an amount of income to the | 10 | | consumer and compute the consumer's monthly payment amount by | 11 | | any of the following methods, to the extent disclosed in the | 12 | | income share agreement: | 13 | | (1) assigning an income amount obtained from a | 14 | | reasonably reliable third party or a credit reporting | 15 | | agency; | 16 | | (2) if the consumer previously provided income | 17 | | documentation or has had an income assigned in the prior | 18 | | 12-month period that has increased by an amount not to | 19 | | exceed 10%, but such increase may not be applied more than | 20 | | once per 12-month period; | 21 | | (3) contacting the consumer's employer, or any person | 22 | | or entity reasonably believed to represent the consumer's | 23 | | employer, to obtain, verify, or update the consumer's | 24 | | income information; | 25 | | (4) contacting the Department of Revenue or the |
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| 1 | | Internal Revenue Service to obtain the most recent | 2 | | information available about the student's income; or | 3 | | (5) for income share agreement providers providing | 4 | | educational income share agreements, assigning a | 5 | | reasonable qualified income based on the incomes of: | 6 | | (A) the nearest reasonably relevant quantile of | 7 | | income for individuals working in the profession for | 8 | | which the consumer's educational program was intended | 9 | | to prepare the participant, as determined by | 10 | | information published by the Bureau of Labor | 11 | | Statistics or other reasonably reliable publicly | 12 | | available data sources; or | 13 | | (B) the nearest reasonably relevant quantile of | 14 | | income of consumers who attended the same or a | 15 | | reasonably comparable covered educational program or | 16 | | course of study, as determined by information | 17 | | published by the Bureau of Labor Statistics or other | 18 | | reasonably reliable publicly available data sources. | 19 | | (b) If an income share agreement provider assigns an | 20 | | income to a consumer's income share agreement, then it shall | 21 | | notify the consumer in the monthly billing statement, and in | 22 | | each billing statement thereafter while the assigned income | 23 | | remains applicable to the consumer's income share agreement, | 24 | | that income has been assigned and of the consumer's rights | 25 | | under this Section. | 26 | | (c) If the consumer does provide income information as |
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| 1 | | reasonably required by the income share agreement within one | 2 | | year of the date on which the income share agreement provider | 3 | | notified the consumer that assigned income will be applied to | 4 | | the income share agreement, then, within 15 days after the | 5 | | income share agreement provider's receipt of such information, | 6 | | the income share agreement provider shall update each prior | 7 | | instance in which assigned income was applied using the income | 8 | | information provided by the consumer; if the consumer provides | 9 | | income information more than one year after the income share | 10 | | agreement provider first assigned income to the consumer's | 11 | | income share agreement, then the income share agreement | 12 | | provider may, but is not obligated to, update each prior | 13 | | instance in which assigned income was applied using the income | 14 | | information provided by the consumer. | 15 | | (d) An income share agreement provider that assigns income | 16 | | to an income share agreement shall retain all applicable | 17 | | records relating to the method and data sources used to make | 18 | | such estimation for 3 years after the end of that income share | 19 | | agreement. | 20 | | (110 ILCS 992/7-90 new) | 21 | | Sec. 7-90. Receipts; statements of account; evidence of | 22 | | payment. | 23 | | (a) The income share agreement provider shall deliver or | 24 | | mail to the consumer, without request, a written receipt for | 25 | | each payment made pursuant to an income share agreement. A |
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| 1 | | periodic statement showing a payment received by mail complies | 2 | | with this subsection. | 3 | | (b) Upon written request of a consumer, the income share | 4 | | agreement provider shall provide a written statement of the | 5 | | dates and amounts of payments made within the 12 months | 6 | | preceding the month in which the request is received. The | 7 | | statement shall be provided without charge once during each | 8 | | year of the term of the obligation. If additional statements | 9 | | are requested, the income share agreement provider may charge | 10 | | an amount not to exceed $5.00 for each additional statement. | 11 | | (c) After a consumer has fulfilled all obligations with | 12 | | respect to an income share agreement, the income share | 13 | | agreement provider, upon request of the consumer, shall | 14 | | deliver or mail to the consumer written evidence acknowledging | 15 | | termination of all obligations with respect to the income | 16 | | share agreement. | 17 | | (110 ILCS 992/7-95 new) | 18 | | Sec. 7-95. Adjustment of dollar amounts. | 19 | | (a) From time to time the dollar amounts in this Act | 20 | | designated as subject to change shall change, as provided in | 21 | | this Section, according to and to the extent of changes in the | 22 | | index. | 23 | | (b) The index for December of the year preceding the year | 24 | | in which this Act becomes effective is the reference base | 25 | | index. |
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| 1 | | (c) The designated dollar amounts shall change on July 1 | 2 | | of each even-numbered year if the percentage of change, | 3 | | calculated to the nearest whole percentage point, between the | 4 | | index and the end of the preceding year and the reference base | 5 | | index is 10% or more, but: | 6 | | (1) the portion of the percentage change in the index | 7 | | in excess of a multiple of 10% shall be disregarded and the | 8 | | dollar amounts shall change only in multiples of 10% of | 9 | | the amounts provided in this Act on the date of enactment; | 10 | | and | 11 | | (2) the dollar amounts shall not change if the amounts | 12 | | required by this Section are those currently in effect | 13 | | pursuant to this Act as a result of earlier application of | 14 | | this Section. | 15 | | (d) If the index is revised, the percentage of change | 16 | | pursuant to this Section shall be calculated on the basis of | 17 | | the revised index. If a revision of the index changes the | 18 | | reference base index, a revised reference base index shall be | 19 | | determined by multiplying the reference base index then | 20 | | applicable by the rebasing factor furnished by the Bureau of | 21 | | Labor Statistics. If the index is superseded, the index | 22 | | referred to in this Section is the one represented by the | 23 | | Bureau of Labor Statistics as reflecting most accurately | 24 | | changes in the purchasing power of the dollar for consumers. | 25 | | (e) The Department shall adopt a rule setting forth, on or | 26 | | before April 30 of each year in which dollar amounts are to |
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| 1 | | change, the changes in dollar amounts required by this | 2 | | Section. As soon as practical after the changes occur, the | 3 | | Department shall adopt a rule setting forth the changes in the | 4 | | index required by subsection (d), including, if applicable, | 5 | | the numerical equivalent of the reference base index under a | 6 | | revised reference base index and the designation or title of | 7 | | any index superseding the index. | 8 | | (f) A person does not violate this Act with respect to a | 9 | | transaction otherwise complying with this Act if he or she | 10 | | relies on dollar amounts either determined according to | 11 | | subsection (c) or appearing in the last rule of the Department | 12 | | announcing the then-current dollar amounts. | 13 | | (110 ILCS 992/7-100 new) | 14 | | Sec. 7-100. Construction against implicit authority. This | 15 | | Act is a general Act intended as a unified coverage of its | 16 | | subject matter; no part of this Act shall be construed to be | 17 | | impliedly repealed by subsequent legislation if that | 18 | | construction can reasonably be avoided. | 19 | | (110 ILCS 992/7-105 new) | 20 | | Sec. 7-105. Application of other Acts. Income share | 21 | | agreements and income share agreement providers are subject to | 22 | | other Articles of this Act, the Know Before You Owe Private | 23 | | Education Loan Act, and the Predatory Loan Prevention Act and | 24 | | shall comply with their requirements and any rules adopted by |
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| 1 | | the Department of Financial and Professional Regulation | 2 | | pursuant to those Acts. Nothing herein is intended to imply | 3 | | that an education ISA: (i) is not a credit transaction or (ii) | 4 | | that, upon an obligation accruing, does not create a debt. | 5 | | (110 ILCS 992/25-5)
| 6 | | Sec. 25-5. Enforcement; Consumer Fraud and Deceptive | 7 | | Business Practices Act. The Attorney General may enforce a | 8 | | violation of Article 5 or 7 of this Act as an unlawful practice | 9 | | under the Consumer Fraud and Deceptive Business Practices Act.
| 10 | | (Source: P.A. 100-540, eff. 12-31-18 .) | 11 | | Section 10. The Consumer Installment Loan Act is amended | 12 | | by changing Section 1 as follows:
| 13 | | (205 ILCS 670/1) (from Ch. 17, par. 5401)
| 14 | | Sec. 1. License required to engage in business. No person, | 15 | | partnership, association, limited liability
company, or | 16 | | corporation shall engage in
the business of making loans of | 17 | | money and charge, contract for, or receive on any
such loan a
| 18 | | greater annual percentage rate than 9% except as authorized by | 19 | | this Act after first obtaining a license
from the Director of | 20 | | Financial Institutions (hereinafter called the Director). No | 21 | | licensee, or employee or affiliate thereof, that is licensed | 22 | | under the Payday Loan Reform Act shall obtain a license under | 23 | | this Act except that a licensee under the Payday Loan Reform |
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| 1 | | Act may obtain a license under this Act for the exclusive | 2 | | purpose and use of making title-secured loans, as defined in | 3 | | subsection (a) of Section 15 of this Act and governed by Title | 4 | | 38, Section 110.300 of the Illinois Administrative Code. For | 5 | | the purpose of this Section, "affiliate" means any person or | 6 | | entity that directly or indirectly controls, is controlled by, | 7 | | or shares control with another person or entity. A person or | 8 | | entity has control over another if the person or entity has an | 9 | | ownership interest of 25% or more in the other. A person or | 10 | | entity licensed as an Income Share Agreement provider is | 11 | | exempt from the requirements of this Act to the extent of their | 12 | | operation as an Income Share Agreement under Article 7 of the | 13 | | Student Loan Servicing Rights Act. In addition, Educational | 14 | | Income Share Agreements as provided under Article 7 of the | 15 | | Student Loan Servicing Rights Act are not subject to the | 16 | | requirements of this Act.
| 17 | | In this Act, "Director" means the Director of Financial | 18 | | Institutions of the Department of Financial and Professional | 19 | | Regulation. | 20 | | (Source: P.A. 101-658, eff. 3-23-21.)
| 21 | | Section 15. The Interest Act is amended by changing | 22 | | Section 4 as follows: | 23 | | (815 ILCS 205/4) (from Ch. 17, par. 6404) | 24 | | Sec. 4. General interest rate. |
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| 1 | | (1) Except as otherwise provided in Section 4.05, in all | 2 | | written contracts it shall be lawful for the parties to
| 3 | | stipulate or agree that an annual percentage rate of 9%, or any | 4 | | less sum, shall be
taken and paid upon every $100 of money | 5 | | loaned or in any manner due and
owing from any person to any | 6 | | other person or corporation in this state, and
after that rate | 7 | | for a greater or less sum, or for a longer or shorter time,
| 8 | | except as herein provided. | 9 | | The maximum rate of interest that may lawfully be | 10 | | contracted for is
determined by the law applicable thereto at | 11 | | the time the contract is
made. Any provision in any contract, | 12 | | whether made before or after July
1, 1969, which provides for | 13 | | or purports to authorize, contingent upon a
change in the | 14 | | Illinois law after the contract is made, any rate of
interest | 15 | | greater than the maximum lawful rate at the time the contract
| 16 | | is made, is void. | 17 | | It is lawful for a state bank or a branch of an | 18 | | out-of-state bank, as those
terms are defined in Section 2 of | 19 | | the Illinois Banking Act, to receive or to
contract to receive
| 20 | | and collect interest and charges at any rate or rates agreed | 21 | | upon by
the bank or branch and the borrower.
It is lawful for a | 22 | | savings bank chartered under the Savings Bank Act or a
savings | 23 | | association chartered under the Illinois Savings and Loan Act | 24 | | of 1985
to receive or contract to receive and collect interest | 25 | | and charges at any rate
agreed upon by the savings bank or | 26 | | savings association and the borrower. |
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| 1 | | It is lawful to receive or to contract to receive and | 2 | | collect
interest and charges as authorized by this Act and as | 3 | | authorized by the
Consumer Installment Loan Act, the Payday | 4 | | Loan Reform Act, the Retail Installment Sales Act, the | 5 | | Illinois Financial Services Development Act, the Motor Vehicle | 6 | | Retail Installment Sales Act, or the Consumer Legal Funding | 7 | | Act , or the Student Loan Servicing Rights Act . It is lawful to | 8 | | charge, contract
for, and receive any rate or amount of | 9 | | interest or compensation, except as otherwise provided in the | 10 | | Predatory Loan Prevention Act, with
respect to the following | 11 | | transactions: | 12 | | (a) Any loan made to a corporation; | 13 | | (b) Advances of money, repayable on demand, to an | 14 | | amount not less
than $5,000, which are made upon warehouse | 15 | | receipts, bills of lading,
certificates of stock, | 16 | | certificates of deposit, bills of exchange, bonds
or other | 17 | | negotiable instruments pledged as collateral security for | 18 | | such
repayment, if evidenced by a writing; | 19 | | (c) Any credit transaction between a merchandise | 20 | | wholesaler and
retailer; any business loan to a business | 21 | | association or copartnership
or to a person owning and | 22 | | operating a business as sole proprietor or to
any persons | 23 | | owning and operating a business as joint venturers, joint
| 24 | | tenants or tenants in common, or to any limited | 25 | | partnership, or to any
trustee owning and operating a | 26 | | business or whose beneficiaries own and
operate a |
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| 1 | | business, except that any loan which is secured (1) by an
| 2 | | assignment of an individual obligor's salary, wages, | 3 | | commissions or
other compensation for services, or (2) by | 4 | | his household furniture or
other goods used for his | 5 | | personal, family or household purposes shall be
deemed not | 6 | | to be a loan within the meaning of this subsection; and
| 7 | | provided further that a loan which otherwise qualifies as | 8 | | a business
loan within the meaning of this subsection | 9 | | shall not be deemed as not so
qualifying because of the | 10 | | inclusion, with other security consisting of
business | 11 | | assets of any such obligor, of real estate occupied by an
| 12 | | individual obligor solely as his residence. The term | 13 | | "business" shall
be deemed to mean a commercial, | 14 | | agricultural or industrial enterprise
which is carried on | 15 | | for the purpose of investment or profit, but shall
not be | 16 | | deemed to mean the ownership or maintenance of real estate
| 17 | | occupied by an individual obligor solely as his residence; | 18 | | (d) Any loan made in accordance with the provisions of | 19 | | Subchapter I
of Chapter 13 of Title 12 of the United States | 20 | | Code, which is designated
as "Housing Renovation and | 21 | | Modernization"; | 22 | | (e) Any mortgage loan insured or upon which a | 23 | | commitment to insure
has been issued under the provisions | 24 | | of the National Housing Act,
Chapter 13 of Title 12 of the | 25 | | United States Code; | 26 | | (f) Any mortgage loan guaranteed or upon which a |
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| 1 | | commitment to
guaranty has been issued under the | 2 | | provisions of the Veterans' Benefits
Act, Subchapter II of | 3 | | Chapter 37 of Title 38 of the United States Code; | 4 | | (g) Interest charged by a broker or dealer registered | 5 | | under the
Securities Exchange Act of 1934, as amended, or | 6 | | registered under the
Illinois Securities Law of 1953, | 7 | | approved July 13, 1953, as now or
hereafter amended, on a | 8 | | debit balance in an account for a customer if
such debit | 9 | | balance is payable at will without penalty and is secured | 10 | | by
securities as defined in Uniform Commercial | 11 | | Code-Investment Securities; | 12 | | (h) Any loan made by a participating bank as part of | 13 | | any loan
guarantee program which provides for loans and | 14 | | for the refinancing of
such loans to medical students, | 15 | | interns and residents and which are
guaranteed by the | 16 | | American Medical Association Education and Research
| 17 | | Foundation; | 18 | | (i) Any loan made, guaranteed, or insured in | 19 | | accordance with the
provisions of the Housing Act of 1949, | 20 | | Subchapter III of Chapter 8A of
Title 42 of the United | 21 | | States Code and the Consolidated Farm and Rural
| 22 | | Development Act, Subchapters I, II, and III of Chapter 50 | 23 | | of Title 7 of
the United States Code; | 24 | | (j) Any loan by an employee pension benefit plan, as | 25 | | defined in Section
3 (2) of the Employee Retirement Income | 26 | | Security Act of 1974 (29 U.S.C.A.
Sec. 1002), to an |
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| 1 | | individual participating in such plan, provided that such
| 2 | | loan satisfies the prohibited transaction exemption | 3 | | requirements of Section
408 (b) (1) (29 U.S.C.A. Sec. 1108 | 4 | | (b) (1)) or Section 2003 (a) (26 U.S.C.A.
Sec. 4975 (d) | 5 | | (1)) of the Employee Retirement Income Security Act of | 6 | | 1974; | 7 | | (k) Written contracts, agreements or bonds for deed | 8 | | providing for
installment purchase of real estate, | 9 | | including a manufactured home as defined in subdivision | 10 | | (53) of Section 9-102 of the Uniform Commercial Code that | 11 | | is real property as defined in the Conveyance and | 12 | | Encumbrance of Manufactured Homes as Real Property and | 13 | | Severance Act; | 14 | | (l) Loans secured by a mortgage on real estate, | 15 | | including a manufactured home as defined in subdivision | 16 | | (53) of Section 9-102 of the Uniform Commercial Code that | 17 | | is real property as defined in the Conveyance and | 18 | | Encumbrance of Manufactured Homes as Real Property and | 19 | | Severance Act; | 20 | | (m) Loans made by a sole proprietorship, partnership, | 21 | | or corporation to
an employee or to a person who has been | 22 | | offered employment by such sole
proprietorship, | 23 | | partnership, or corporation made for the sole purpose of
| 24 | | transferring an employee or person who has been offered | 25 | | employment to another
office maintained and operated by | 26 | | the same sole proprietorship, partnership,
or corporation; |
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| 1 | | (n) Loans to or for the benefit of students made by an | 2 | | institution of
higher education. | 3 | | (2) Except for loans described in subparagraph (a), (c), | 4 | | (d),
(e), (f) or (i) of subsection (1) of this Section, and | 5 | | except to the
extent permitted by the applicable statute for | 6 | | loans made pursuant to
Section 4a or pursuant to the Consumer | 7 | | Installment Loan Act: | 8 | | (a) Whenever the rate of interest exceeds an annual | 9 | | percentage rate of 8% on any
written contract, agreement | 10 | | or bond for deed providing for the installment
purchase of | 11 | | residential real estate, or on any loan secured by a | 12 | | mortgage
on residential real estate, it shall be unlawful | 13 | | to provide for a
prepayment penalty or other charge for | 14 | | prepayment. | 15 | | (b) No agreement, note or other instrument evidencing | 16 | | a loan
secured by a mortgage on residential real estate, | 17 | | or written contract,
agreement or bond for deed providing | 18 | | for the installment purchase of
residential real estate, | 19 | | may provide for any change in the contract rate of
| 20 | | interest during the term thereof. However, if the Congress | 21 | | of the United
States or any federal agency authorizes any | 22 | | class of lender to enter, within
limitations, into | 23 | | mortgage contracts or written contracts, agreements or
| 24 | | bonds for deed in which the rate of interest may be changed | 25 | | during the
term of the contract, any person, firm, | 26 | | corporation or other entity
not otherwise prohibited from |
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| 1 | | entering into mortgage contracts or
written contracts, | 2 | | agreements or bonds for deed in Illinois may enter
into | 3 | | mortgage contracts or written contracts, agreements or | 4 | | bonds
for deed in which the rate of interest may be changed | 5 | | during the term
of the contract, within the same | 6 | | limitations. | 7 | | (3) In any contract or loan which is secured by a mortgage, | 8 | | deed of
trust, or conveyance in the nature of a mortgage, on | 9 | | residential real
estate, the interest which is computed, | 10 | | calculated, charged, or collected
pursuant to such contract or | 11 | | loan, or pursuant to any regulation or rule
promulgated | 12 | | pursuant to this Act, may not be computed, calculated, charged
| 13 | | or collected for any period of time occurring after the date on | 14 | | which the
total indebtedness, with the exception of late | 15 | | payment penalties, is paid
in full. | 16 | | (4) For purposes of this Section, a prepayment shall mean | 17 | | the payment of the
total indebtedness, with the exception of | 18 | | late payment penalties if
incurred or charged, on any date | 19 | | before the date specified in the contract
or loan agreement on | 20 | | which the total indebtedness shall be paid in full, or
before | 21 | | the date on which all payments, if timely made, shall have been
| 22 | | made. In the event of a prepayment of the indebtedness which is | 23 | | made on a
date after the date on which interest on the | 24 | | indebtedness was last
computed, calculated, charged, or | 25 | | collected but before the next date on
which interest on the | 26 | | indebtedness was to be calculated, computed, charged,
or |
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| 1 | | collected, the lender may calculate, charge and collect | 2 | | interest on the
indebtedness for the period which elapsed | 3 | | between the date on which the
prepayment is made and the date | 4 | | on which interest on the indebtedness was
last computed, | 5 | | calculated, charged or collected at a rate equal to 1/360 of
| 6 | | the annual rate for each day which so elapsed, which rate shall | 7 | | be applied
to the indebtedness outstanding as of the date of | 8 | | prepayment. The lender
shall refund to the borrower any | 9 | | interest charged or collected which
exceeds that which the | 10 | | lender may charge or collect pursuant to the
preceding | 11 | | sentence. The provisions of this amendatory Act of 1985 shall
| 12 | | apply only to contracts or loans entered into on or after the | 13 | | effective
date of this amendatory Act, but shall not apply to | 14 | | contracts or loans
entered into on or after that date that are | 15 | | subject to Section 4a of this
Act, the Consumer Installment | 16 | | Loan Act, the Payday Loan Reform Act, the Predatory Loan | 17 | | Prevention Act, or the Retail Installment Sales
Act, or that | 18 | | provide for the refund of precomputed interest on prepayment
| 19 | | in the manner provided by such Act. | 20 | | (5) For purposes of items (a) and (c) of subsection (1) of | 21 | | this Section, a rate or amount of interest may be lawfully | 22 | | computed when applying the ratio of the annual interest rate | 23 | | over a year based on 360 days. The provisions of this | 24 | | amendatory Act of the 96th General Assembly are declarative of | 25 | | existing law. | 26 | | (6) For purposes of this Section, "real estate" and "real |
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| 1 | | property" include a manufactured home, as defined in | 2 | | subdivision (53) of Section 9-102 of the Uniform Commercial | 3 | | Code that is real property as defined in the Conveyance and | 4 | | Encumbrance of Manufactured Homes as Real Property and | 5 | | Severance Act. | 6 | | (Source: P.A. 101-658, eff. 3-23-21; 102-987, eff. 5-27-22.)
| 7 | | Section 97. Severability. The provisions of this Act are | 8 | | severable under Section 1.31 of the Statute on Statutes. | 9 | | Section 99. Effective date. This Act takes effect upon | 10 | | becoming law. |
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