State of Illinois
90th General Assembly
Legislation

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[ Introduced ][ Enrolled ][ Senate Amendment 001 ]

90_SB0209eng

      815 ILCS 180/17 new
          Amends the Collateral Protection Act.   Provides that the
      cost of collateral protection insurance must be  commercially
      reasonable.  Effective immediately.
                                                     LRB9002200JSmg
SB209 Engrossed                                LRB9002200JSmg
 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.

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