State of Illinois
92nd General Assembly

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HB2249 Engrossed                               LRB9208043JSpc

 1        AN ACT concerning certain lending practices.

 2        Be  it  enacted  by  the People of the State of Illinois,
 3    represented in the General Assembly:

 4        Section 5.  The Consumer Installment Loan Act is  amended
 5    by  adding  Sections  1.5, 15f, 17.1, 17.2, 17.3, 17.4, 17.5,
 6    17.6, 17.7, 17.8, 17.9, 17.10, 17.11,  17.12,  17.13,  17.14,
 7    17.15,  17.16,  17.17,  17.18, 17.19, 17.20, 17.21, 17.22 and
 8    17.23 as follows:

 9        (205 ILCS 670/1.5 new)
10        Sec. 1.5.  Definitions.
11        "Check"  means  a  personal  check,   draft,   or   other
12    negotiable instrument signed by the borrower and made payable
13    to a licensee.
14        "Short-term  loan"  means  a  transaction  pursuant  to a
15    written agreement between a licensee and the borrower whereby
16    the licensee:
17             (1)  accepts a check from the borrower dated on  the
18        date it was written;
19             (2)  agrees  to  hold the check for a period of time
20        prior to negotiation or presentment of the check; and
21             (3)  pays to the borrower the amount of  the  check,
22        less  the  finance  charge  permitted by Section 17.11 of
23        this Act.
24        "Title-secured   loan"   means   a   loan   wherein,   at
25    consummation,  a  borrower  provides  to  the  licensee,   as
26    security  for the loan, physical possession of the borrower's
27    title to a motor vehicle.

28        (205 ILCS 670/15f new)
29        Sec.  15f.  Simple  interest.  A  licensee  must  compute
30    interest on  all  short-term  loans  as  simple  interest  as
HB2249 Engrossed            -2-                LRB9208043JSpc
 1    defined in 38 Ill. Adm. Code 110.80.

 2        (205 ILCS 670/17.1 new)
 3        Sec. 17.1.  Release of lien.
 4        (a)  A licensee that secures a short-term loan by a title
 5    to  a  motor  vehicle  must  immediately take into possession
 6    evidence of the borrower's ownership  in  the  motor  vehicle
 7    that has been registered with the Illinois Secretary of State
 8    or  the  appropriate  state  agency of any other state of the
 9    United States  and  shall  note  on  the  face  of  the  loan
10    agreement the vehicle's make, model, year of manufacture, and
11    vehicle identification number.
12        (b)  Within  24 hours after payment in full of the amount
13    due under the agreement, the licensee must release any  filed
14    or recorded liens, provide evidence of the release of lien to
15    the  borrower  and  return the title to the borrower or cause
16    the title to be returned to the borrower. If payment has been
17    made by a personal or business check, the licensee may  delay
18    the release of lien or return of title by 5 business days for
19    the purpose of confirming availability of funds.

20        (205 ILCS 370/17.2 new)
21        Sec. 17.2. Availability of debt management services.
22        (a)  Before  entering into a short-term loan agreement, a
23    licensee must give to the borrower a  pamphlet,  approved  by
24    the  Director, describing the availability of debt management
25    services and the borrower's rights  and  responsibilities  in
26    the transaction.
27        (b)  Each   short-term  loan  agreement  and  refinancing
28    agreement executed by a licensee shall include  a  statement,
29    which  shall  be  initialed  by the borrower, as follows:  "I
30    have received from (name of licensee) a toll free number  for
31    the  Department of Financial Institutions that I can call for
32    information regarding debt management services.".
HB2249 Engrossed            -3-                LRB9208043JSpc
 1        (c)  At the time a licensee conveys  any  written  notice
 2    with  respect  to  a short-term loan to a borrower indicating
 3    that the borrower is in arrears or that the  borrower  is  in
 4    default,  the licensee must include with the notice a listing
 5    of telephone numbers for debt  management  service  providers
 6    licensed  by  the  Department  of  Financial  Institutions to
 7    provide consumer debt counseling.

 8        (205 ILCS 670/17.3 new)
 9        Sec. 17.3.  Collection practices notification.  The  loan
10    agreement  shall  advise  the borrower that matters involving
11    improprieties in the making of the loan or in loan collection
12    practices  may  be  referred  to  the  Department  and  shall
13    prominently disclose the Department's address  and  telephone
14    number.

15        (205 ILCS 670/17.4 new)
16        Sec.  17.4.  Defaults;  second  notice.  At  the  time  a
17    licensee conveys a second notice with respect to a short-term
18    loan to a borrower indicating that the borrower is in arrears
19    or that the borrower is in default, the licensee must include
20    with  the  notice  a  listing  of  telephone numbers for debt
21    management service providers licensed by  the  Department  of
22    Financial Institutions to provide consumer debt counseling.

23        (205 ILCS 670/17.5 new)
24        Sec. 17.5.  Possession of vehicle.
25        (a)  Unless otherwise provided for in the loan agreement,
26    a  licensee  shall  not take or retain possession of the keys
27    (or a copy thereof) to a  motor  vehicle  used  to  secure  a
28    title-secured loan.
29        (b)  A  licensee  may  not  take  possession of a vehicle
30    under a short-term loan transaction without first:
31             (1)  giving notice to the borrower;
HB2249 Engrossed            -4-                LRB9208043JSpc
 1             (2)  affording the borrower the opportunity to  make
 2        the  vehicle  available to the licensee at a place, date,
 3        and  time  reasonably  convenient  to  the  licensee  and
 4        borrower; and
 5             (3)  permitting the borrower to remove any  personal
 6        belongings  from the vehicle without charge or additional
 7        cost to the borrower.
 8        (c)  A licensee may not dispose of a vehicle  repossessed
 9    under  a  short-term loan transaction without first giving at
10    least 10 days written notice to the  borrower  prior  to  the
11    sale  and  giving to the borrower the opportunity to cure the
12    default. The notice shall disclose the date, time, and  place
13    of   the  sale  and  provide  the  borrower  with  a  written
14    accounting of the amount owed on the loan.
15        (d)  A licensee  may  not  take  possession  of  a  motor
16    vehicle  because  of  a  loan default under a short-term loan
17    transaction and lease the vehicle back to the borrower.

18        (205 ILCS 670/17.6 new)
19        Sec. 17.6.  Dispersal of loan proceeds. A  licensee  must
20    issue  the  proceeds  of  a  short-term loan in the form of a
21    check drawn on the licensee's bank account, in  cash,  or  by
22    money  order.  When  the proceeds are issued in the form of a
23    check drawn on the licensee's bank account or by money order,
24    the licensee may not charge a fee for cashing  the  check  or
25    money  order  if  cashing service is offered at the location.
26    When the proceeds are  issued  in  cash,  the  licensee  must
27    provide  the borrower with a written verification of the cash
28    transaction and shall maintain a record of the transaction.

29        (205 ILCS 670/17.7 new)
30        Sec. 17.7.  Security interest. A licensee may not take  a
31    security interest with respect to a short-term loan in any of
32    the  borrower's  property  other than the borrower's check or
HB2249 Engrossed            -5-                LRB9208043JSpc
 1    motor vehicle title tendered to the licensee at the  time  of
 2    the making of the loan.

 3        (205 ILCS 670/17.8 new)
 4        Sec.   17.8.  Written   agreement.   A   short-term  loan
 5    transaction must be documented by a written agreement  signed
 6    by  both  the  borrower and the licensee accepting the check.
 7    The written agreement must contain the name of the  licensee,
 8    the  transaction  date,  the  amount  of  the  check,  and  a
 9    statement of the total amount of fees charged, expressed both
10    as  a  dollar  amount and as an annual percentage rate (APR).
11    The written agreement must authorize the  licensee  to  defer
12    presentment  or  negotiation  of  the  check until a specific
13    date, which date may not  be  later  than  31  calendar  days
14    following the date of the transaction.

15        (205 ILCS 670/17.9 new)
16        Sec.  17.9.  Notice  to  borrower. A licensee providing a
17    short-term loan shall provide a notice in a  prominent  place
18    on  each  short-term loan agreement in at least 10-point type
19    in substantially the following form:
20             "(1) A SHORT-TERM  LOAN  IS  NOT  INTENDED  TO  MEET
26        FULL WHEN DUE.".

27        (205 ILCS 670/17.10 new)
28        Sec.  17.10.  Borrower's right to rescind. A borrower may
29    rescind a short-term  loan  agreement,  at  no  cost  if  the
30    borrower  returns the full amount of the loan by the close of
31    business on the day following the transaction.
HB2249 Engrossed            -6-                LRB9208043JSpc
 1        (205 ILCS 670/17.11 new)
 2        Sec. 17.11.  Authorized finance charge.  A  licensee  may
 3    charge a finance charge for each short-term loan transaction.
 4    No  other fees or charges may be charged or collected for the
 5    short-term loan transaction.

 6        (205 ILCS 670/17.12 new)
 7        Sec.  17.12.  Maximum  transaction  amount.  The  maximum
 8    amount a licensee may pay to a borrower  under  a  short-term
 9    loan  transaction  is  $2,000. No check held by a licensee in
10    connection with a short-term  loan  may  exceed  the  sum  of
11    $2,000 plus the finance charge authorized by Section 17.11 of
12    this Act.

13        (205 ILCS 670/17.13 new)
14        Sec. 17.13.  Multiple outstanding transactions.
15        (a)  A  licensee  may  not  have  more than 2 outstanding
16    short-term loans with any one borrower at the same time.  The
17    aggregate  face value of all outstanding checks in connection
18    with a short-term loan  held  by  a  licensee  from  any  one
19    borrower  may  not  exceed  $2,000,  exclusive of the finance
20    charge authorized by Section 17.11 of this Act.
21        (b)  A licensee providing a short-term loan must  provide
22    a  notice  in  a  prominent  place  on  each  short-term loan
23    agreement in at least  10-point  type  in  substantially  the
24    following form:
29    FAMILY.".

30        (205 ILCS 670/17.14 new)
31        Sec.  17.14.  Renewals.  A short-term loan may be renewed
HB2249 Engrossed            -7-                LRB9208043JSpc
 1    no more than 3 consecutive times, after which time either the
 2    borrower must pay off the short-term  loan  in  cash  or  its
 3    equivalent or the licensee must deposit the borrower's check.
 4    Once  the  borrower  has  completed  a short-term loan with a
 5    licensee, the borrower may enter into a new agreement  for  a
 6    short-term   loan  with  that  licensee.   A  transaction  is
 7    completed when a check is presented for  payment,  deposited,
 8    or  redeemed by the borrower by paying the full amount of the
 9    check to the licensee holding the check,  less  the  unearned
10    portion  of  the  finance  charge  calculated pursuant to the
11    simple interest method.

12        (205 ILCS 670/17.15 new)
13        Sec. 17.15.  Form of transaction proceeds. A licensee may
14    pay the proceeds from a short-term loan to  the  borrower  in
15    the  form  of  the licensee's business check, money order, or
16    cash.  A licensee may  not  charge  a  fee  for  cashing  the
17    licensee's business check.

18        (205 ILCS 670/17.16 new)
19        Sec.  17.16.  Endorsement of check. Before a licensee may
20    negotiate or present  for  payment  a  check  relating  to  a
21    short-term  loan transaction, the check must be endorsed with
22    the actual name under which the licensee is doing business.

23        (205 ILCS 670/17.17 new)
24        Sec. 17.17.  Redemption of  check.  A  borrower  has  the
25    right   to  redeem  a  check  issued  in  connection  with  a
26    short-term loan transaction from  the  licensee  holding  the
27    check  at  any  time before the negotiation or presentment of
28    the check by paying the full amount of the  check,  less  the
29    unearned portion of the finance charge calculated pursuant to
30    the  simple  interest  method,  in  the  form  of cash or its
31    equivalent.
HB2249 Engrossed            -8-                LRB9208043JSpc
 1        (205 ILCS 670/17.18 new)
 2        Sec. 17.18.  Electronic funds transfer.  A  licensee  may
 3    offer  electronic funds transfer services to borrowers.  Loan
 4    proceeds may be electronically credited and  debited  to  the
 5    borrower's   account.   No  electronic  transfers  may  occur
 6    without the prior written approval of the borrower.

 7        (205 ILCS 670/17.19 new)
 8        Sec. 17.19.  Authorized fee for dishonored  check.  If  a
 9    check  written  in  connection  with  a  short-term  loan  is
10    returned  to  a person from a payor financial institution due
11    to insufficient funds, a closed account, or  a  stop  payment
12    order, the licensee has the right to exercise all civil means
13    available  and  allowable by law to collect the face value of
14    the check. Additionally, the licensee may  contract  for  and
15    collect  a  returned  check charge not to exceed $25 plus any
16    court costs, including reasonable attorney fees, incurred  as
17    a  result  of  the  returned  check.   No  other  fees may be
18    collected as a result of a returned check or the  default  by
19    the maker under a short-term loan agreement.

20        (205 ILCS 670/17.20 new)
21        Sec.  17.20.  Posting  of  charges.  A  licensee offering
22    short-term loans must post at the point-of-sale a  notice  of
23    the charges imposed for a short-term loan transaction.

24        (205 ILCS 670/17.21 new)
25        Sec.  17.21.  No  criminal  culpability.  A  borrower who
26    enters into a short-term loan agreement may not be subject to
27    any criminal penalty for entering into that agreement and may
28    not be subject to any  criminal  penalty  in  the  event  the
29    borrower's  check  is dishonored, unless the account on which
30    the  check  was  written  was  closed  on  the  date  of  the
31    transaction or before the agreed upon negotiation date.
HB2249 Engrossed            -9-                LRB9208043JSpc
 1        (205 ILCS 670/17.22 new)
 2        Sec. 17.22.  Other types of businesses.  A  licensee  may
 3    conduct  other  types  of  business  at  a  location where it
 4    engages in short-term loan transactions, unless the  licensee
 5    carries  on  those other types of business for the purpose of
 6    evading or violating this Act.

 7        (205 ILCS 670/17.23 new)
 8        Sec. 17.23.  Unfair or deceptive  practices.  A  licensee
 9    may  not  engage  in  unfair or deceptive acts, practices, or
10    advertising in connection with a short-term loan transaction.

11        Section 99.  Effective date.  This Act takes effect  upon
12    becoming law.

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