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| [ Introduced ] | [ Engrossed ] | [ Senate Amendment 001 ] |
90_SB0209enr
815 ILCS 180/17 new
Amends the Collateral Protection Act. Provides that the
cost of collateral protection insurance must be commercially
reasonable. Effective immediately.
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1 AN ACT to amend the Collateral Protection Act by changing
2 Sections 5, 15, and 40.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Collateral Protection Act is amended by
6 changing Sections 5, 15, and 40 as follows:
7 (815 ILCS 180/5)
8 Sec. 5. Definitions. In this Act, unless the context
9 otherwise requires, the following words and phrases shall
10 have the following meanings:
11 "Collateral" means any or all property pledged or
12 otherwise used to secure payment, repayment, or performance
13 under a credit or lease agreement, whether personal property,
14 real property, fixtures, inventory, receivables, rights,
15 privileges, or otherwise.
16 "Collateral protection insurance" means:
17 Insurance coverage that: (1) is purchased unilaterally by
18 a creditor subsequent to the date of a credit agreement; (2)
19 provides monetary protection against loss of or damage to the
20 collateral or against liability arising out of the ownership
21 or use of the collateral; and (3) is purchased according to
22 the terms of a credit agreement as a result of a debtor's
23 failure to provide evidence of insurance or failure to
24 maintain adequate insurance covering the collateral, with the
25 costs of the collateral protection insurance, including
26 interest and any other charges imposed by the creditor in
27 connection with the placement of the collateral protection
28 insurance, payable by the debtor. Collateral protection
29 insurance includes insurance coverage that is purchased to
30 protect only the interest of the creditor and insurance
31 coverage that is purchased to protect both the interest of
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1 the creditor and some or all of the interest of the debtor.
2 The term of a collateral protection insurance policy may, but
3 need not, extend to the full term of the credit transaction.
4 Collateral protection insurance does not include
5 insurance coverage that is: (1) purchased by the creditor for
6 which the debtor is not charged; (2) purchased at the
7 inception of a credit transaction to which the debtor is a
8 party or agrees, whether or not the costs are included in any
9 payment plan under the credit transaction; (3) purchased by
10 the creditor following foreclosure, repossession, or a
11 similar event wherein the creditor gains possession or
12 control over the collateral; (4) maintained by the creditor
13 for the protection of any or all collateral which may come
14 into the possession or control of the creditor through
15 foreclosure, repossession, or a similar event; (5) credit
16 insurance, mortgage protection insurance, insurance issued to
17 cover the life or health of the debtor, or any other
18 insurance maintained to cover the inability or failure of the
19 debtor to make payment under the credit agreement; (6) title
20 insurance; or (7) flood insurance required to be placed by
21 creditors by 42 U.S.C. 4012(a), as amended, pursuant to the
22 National Flood Insurance Reform Act of 1994.
23 "Credit agreement" means the written document or
24 documents that set forth the terms of the credit transaction.
25 "Credit transaction" means any transaction the terms of
26 which require the payment or repayment of money, goods,
27 services, property, rights, or privileges, which is to be
28 made on one or more future dates, where such obligation is
29 secured by collateral.
30 "Creditor" means any person, corporation, partnership,
31 association, or other venture, which is a lender of money or
32 the vendor or lessor of goods, services, property, rights, or
33 privileges, for which repayment is arranged through a credit
34 transaction, and includes any successor to the rights, title,
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1 interest, or liens of such lender, vendor, or lessor.
2 "Debtor" means a borrower of money or a purchaser or
3 lessee of goods, services, property, rights, or privileges,
4 for which payment or repayment is arranged through a credit
5 agreement. Debtor does not include any person who is not the
6 primary obligor under a credit transaction and who is not
7 jointly liable or jointly and severally liable with the
8 debtor for the obligation.
9 (Source: P.A. 89-623, eff. 8-9-96.)
10 (815 ILCS 180/15)
11 Sec. 15. Notice of purchase placement of collateral
12 protection insurance; repayment terms.
13 (a) Within 30 calendar days following the purchase
14 placement of collateral protection insurance, the creditor
15 shall mail to the debtor and to any cosigner, guarantor, or
16 other person liable with the debtor for the obligation, at
17 the last known address on file with the creditor for of any
18 such person, a notice entitled "Notice of Placement of
19 Insurance" in a form substantially similar to the following:
20 "NOTICE OF PLACEMENT OF INSURANCE
21 Your credit agreement with us requires you to maintain
22 adequate insurance on your collateral until you pay off your
23 loan. You have not given us proof that you have adequate
24 insurance on your collateral. Under the terms of your credit
25 agreement, we have purchased insurance at your expense to
26 protect our interests in your collateral.
27 The insurance we purchased will pay claims made by us as
28 the creditor. The insurance we purchased may not pay any
29 claims made by you or against you in connection with your
30 collateral.
31 You are responsible for the costs of this insurance,
32 including any interest and any other charges that we may
33 impose in connection with the purchase of this insurance.
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1 The initial premium payment for this insurance will be
2 (amount), which may or may not include any interest or other
3 charges that we may impose. The costs of this insurance will
4 be added to your payment obligations and may be more than for
5 insurance you can buy on your own.
6 You still may obtain insurance of your own choosing on
7 the collateral. If you provide us with proof that you have
8 obtained adequate insurance on your collateral, we will
9 cancel the insurance that we purchased and refund or credit
10 any unearned premiums to you.
11 If, within 30 days after the date this notice was sent to
12 you, you provide us with proof that you had adequate
13 insurance on your collateral as of the date we also purchased
14 insurance and that you continue to have the insurance that
15 you purchased yourself, we will cancel the insurance that we
16 purchased without charging you any costs, interest, or other
17 charges in connection with the insurance that we purchased."
18 (b) The terms for repayment of the costs of the
19 collateral protection insurance, which shall include interest
20 and any other charges imposed by the creditor in connection
21 with the placement of the collateral protection insurance,
22 shall include one or more of the following:
23 (1) full payment within 30 days after the date of
24 the Notice of Placement of Insurance;
25 (2) a final balloon payment within 30 days after
26 the last scheduled payment required by the credit
27 agreement; or
28 (3) full amortization over the term of the credit
29 transaction, the term of the collateral protection
30 insurance policy, or the term for which amortization is
31 used by the creditor.
32 (Source: P.A. 89-623, eff. 8-9-96.)
33 (815 ILCS 180/40)
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1 Sec. 40. Substantial compliance. A creditor that places
2 collateral protection insurance in substantial compliance
3 with the terms of this Act shall not be directly or
4 indirectly liable in any manner to a debtor, co-signor,
5 guarantor, or any other person, in connection with the
6 placement of the collateral protection insurance. Notices
7 and coupon books required to be mailed to a debtor under this
8 Act are not required to be mailed to any person other than to
9 the debtor and shall be mailed by United States Mail, first
10 class, postage prepaid, to the debtor's last known address on
11 file with the creditor.
12 (Source: P.A. 89-623, eff. 8-9-96.)
13 Section 99. Effective date. This Act takes effect upon
14 becoming law.