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Public Act 103-0974 | ||||
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AN ACT concerning business. | ||||
Be it enacted by the People of the State of Illinois, | ||||
represented in the General Assembly: | ||||
Section 5. The Consumer Legal Funding Act is amended by | ||||
changing Sections 5, 25, 30, 55, 65, 135, 165, and 170 as | ||||
follows: | ||||
(815 ILCS 121/5) | ||||
Sec. 5. Definitions. | ||||
"Advertise" means publishing or disseminating any written, | ||||
electronic, or printed communication, or any communication by | ||||
means of recorded telephone messages or transmitted on radio, | ||||
television, the Internet, or similar communications media, | ||||
including film strips, motion pictures, and videos, published, | ||||
disseminated, circulated, or placed before the public, | ||||
directly or indirectly, for the purpose of inducing a consumer | ||||
to enter into a consumer legal funding. | ||||
"Charges" means the fees, as set forth in Section 25, to be | ||||
paid to the consumer legal funding company by or on behalf of | ||||
the consumer above the funded amount provided by or on behalf | ||||
of the company to an Illinois consumer pursuant to this Act. | ||||
"Consumer" means a natural person who has a pending legal | ||||
claim and who resides or is domiciled in Illinois. | ||||
"Consumer legal funding" or "funding" means a nonrecourse |
transaction in which a company purchases and a consumer | ||
transfers to the company an unvested, contingent future | ||
interest in the potential net proceeds of a settlement or | ||
judgment obtained from the consumer's legal claim; and in | ||
which, if no proceeds are obtained from the consumer's legal | ||
claim, the consumer is not required to repay the company the | ||
consumer legal funding amount or charges. | ||
"Consumer legal funding company" or "company" means a | ||
person or entity that enters into, purchases, or services a | ||
consumer legal funding transaction with an Illinois consumer. | ||
"Consumer legal funding company" does not include: | ||
(1) an immediate family member of the consumer; | ||
(2) a bank, lender, financing entity, or other special | ||
purpose entity: | ||
(A) that provides financing to a consumer legal | ||
funding company; or | ||
(B) to which a consumer legal funding company | ||
grants a security interest or transfers any rights or | ||
interest in a consumer legal funding; or | ||
(3) an attorney or accountant who provides services to | ||
a consumer. | ||
"Department" means the Department of Financial and | ||
Professional Regulation. | ||
"Funded amount" means the amount of moneys provided to, or | ||
on behalf of, the consumer in the consumer legal funding. | ||
"Funded amount" does not include charges except for charges |
that are deducted from the funded amount. | ||
"Funding date" means the date on which the funded amount | ||
is transferred to the consumer by the consumer legal funding | ||
company either by personal delivery; via wire, ACH, or other | ||
electronic means; or mailed by insured, certified, or | ||
registered United States mail. | ||
"Immediate family member" means a parent; sibling; child | ||
by blood, adoption, or marriage; spouse; grandparent; or | ||
grandchild. | ||
"Legal claim" means a bona fide civil claim or cause of | ||
action. | ||
"Resolution amount" means the funded amount plus the | ||
agreed-upon charges that are delivered to the consumer legal | ||
funding company on the resolution date. | ||
"Resolution date" means the date the resolution amount is | ||
delivered to the consumer legal funding company. | ||
"Secretary" means the Secretary of Financial and | ||
Professional Regulation or the Secretary's designee. | ||
(Source: P.A. 102-987, eff. 5-27-22.) | ||
(815 ILCS 121/25) | ||
Sec. 25. Fees. | ||
(a) The fee charged by a consumer legal funding company to | ||
the consumer shall be calculated as not more than 18% of the | ||
funded amount, assessed on the outset of every 6 months. | ||
(b) In addition, a consumer legal funding company may |
charge a document preparation fee not to exceed $75, which may | ||
be deducted from the funded amount. This fee is to be used to | ||
defray the ordinary cost of opening, administering, and | ||
terminating a consumer legal funding. | ||
(c) A consumer legal funding company shall not collect any | ||
additional fees unless otherwise specified in this Act. | ||
(d) No charges may accrue on a consumer legal funding for | ||
more than 42 months after the funding date of the consumer | ||
legal funding. No consumer legal funding may be refinanced | ||
except as authorized by rule. Notwithstanding the foregoing, a | ||
consumer legal funding company may assess charges on any | ||
additional amounts provided after the funding date for 42 | ||
months after the additional funding date. | ||
(e) Notwithstanding any other law, a consumer legal | ||
funding may be refinanced as authorized by rule. The | ||
Department shall publish first notice of a rule concerning the | ||
refinancing of consumer legal fundings in the Illinois | ||
Register in accordance with the Illinois Administrative | ||
Procedure Act within 120 days after the effective date of this | ||
amendatory Act of the 103rd General Assembly. | ||
(Source: P.A. 102-987, eff. 5-27-22.) | ||
(815 ILCS 121/30) | ||
Sec. 30. Disclosures. All consumer legal funding contracts | ||
shall contain the disclosures specified in this Section, which | ||
shall constitute material terms of the contract. Unless |
otherwise specified, the disclosures shall be typed in at | ||
least 12-point bold-type font and be placed clearly and | ||
conspicuously within the contract as follows: | ||
(1) On the front page under appropriate headings, | ||
language specifying: | ||
(A) the funded amount to be paid to the consumer or | ||
on the consumer's behalf by the consumer legal funding | ||
company; | ||
(B) an itemization of charges; | ||
(C) the maximum total amount to be paid by the | ||
consumer to the company, including the funded amount | ||
and all fees; and | ||
(D) a payment schedule to include the resolution | ||
amount, listing dates, and the amount due at the end of | ||
each 6-month period from the funding date, until the | ||
date the maximum amount is due to the company by the | ||
consumer to satisfy the amount due pursuant to the | ||
contract. | ||
(2) Pursuant to the provisions set forth in paragraph | ||
(2) of subsection (a) of Section 10, within the body of the | ||
contract: "CONSUMER'S RIGHT TO CANCELLATION: You may | ||
cancel this contract without penalty or further obligation | ||
within 14 business days after the funding date if you | ||
either: | ||
(A) return to the consumer legal funding company | ||
the full amount of the funds disbursed to you or on |
your behalf by delivering the company's uncashed check | ||
to the company's office in person; or | ||
(B) place in the mail, by mail service materially | ||
equivalent to United States Postal Service certified | ||
mail, addressed to the company at the address | ||
specified in the contract, a notice of cancellation | ||
and include in such mailing a return of the full amount | ||
of funds disbursed to you or on your behalf in the form | ||
of the company's uncashed check or a registered or | ||
certified check or money order." | ||
(3) Within the body of the contract: "The consumer | ||
legal funding company shall have no role in deciding | ||
whether, when, and how much the legal claim is settled | ||
for, however, the consumer and consumer's attorney must | ||
notify the company of the outcome of the legal claim by | ||
settlement or adjudication before the resolution date. The | ||
company may seek updated information about the status of | ||
the legal claim but in no event shall the company | ||
interfere with the independent professional judgment of | ||
the attorney in the handling of the legal claim or any | ||
settlement thereof." | ||
(4) Within the body of the contract, in all capital | ||
letters in at least 12-point bold-type font contained | ||
within a box: "THE FUNDED AMOUNT AND AGREED-UPON CHARGES | ||
SHALL BE PAID ONLY FROM THE PROCEEDS OF YOUR LEGAL CLAIM, | ||
AND SHALL BE PAID ONLY TO THE EXTENT THAT THERE ARE |
AVAILABLE PROCEEDS FROM YOUR LEGAL CLAIM. YOU WILL NOT OWE | ||
[INSERT NAME OF THE CONSUMER LEGAL FUNDING COMPANY] | ||
ANYTHING IF THERE ARE NO REMAINING PROCEEDS AVAILABLE FROM | ||
YOUR LEGAL CLAIM, UNLESS YOU OR YOUR ATTORNEY HAVE | ||
COMMITTED FRAUD AGAINST THE CONSUMER LEGAL FUNDING | ||
COMPANY. NOTWITHSTANDING ANYTHING TO THE CONTRARY, YOU MAY | ||
REFINANCE THE FUNDED AMOUNT AND AGREED UPON CHARGES AS | ||
AUTHORIZED BY RULE. " | ||
(5) Located immediately above the place on the | ||
contract where the consumer's signature is required, in | ||
12-point font: "Do not sign this contract before you read | ||
it completely or if it contains any blank spaces. You are | ||
entitled to a completely filled-in copy of the contract. | ||
Before you sign this contract, you should obtain the | ||
advice of an attorney. Depending on the circumstances, you | ||
may want to consult a tax, public or private benefits | ||
planning, or financial professional. You acknowledge that | ||
your attorney in the legal claim has provided no tax, | ||
public or private benefit planning, or financial advice | ||
regarding this transaction." | ||
(6) The consumer legal funding company shall provide | ||
the consumer with information on accessing a financial | ||
coaching program no later than the funding date. | ||
(Source: P.A. 102-987, eff. 5-27-22.) | ||
(815 ILCS 121/55) |
Sec. 55. Consumer legal funding license scope. | ||
(a) It shall be unlawful for any person or entity to | ||
operate as a consumer legal funding company provider in this | ||
State except as authorized by this Act and without first | ||
having obtained a license in accordance with this Act. No | ||
person or entity may engage in any device, subterfuge, or | ||
pretense to evade the requirements of this Act. However, any | ||
company that has a license in good standing under the Consumer | ||
Installment Loan Act on the effective date of this Act shall be | ||
entitled to make consumer legal fundings under the terms of | ||
this Act upon the effective date of this Act if that company | ||
files an application for a consumer legal funding license | ||
within 60 days after the Department issues forms for the | ||
filing of that application and until the Department approves | ||
or denies the application for a funding license. Any consumer | ||
legal funding contract made by any person or entity in | ||
violation of this subsection shall be null and void and the | ||
person or entity who entered into the consumer legal funding | ||
transaction shall have no right to collect, attempt to | ||
collect, receive, or retain any principal, interest, or | ||
charges related to the consumer legal funding transaction. | ||
(b) The provisions of this Act do not apply to a bank, | ||
savings bank, savings association, or credit union organized | ||
under the laws of this State, any other state, or under the | ||
laws of the United States. | ||
(c) Any consumer legal funding made by a person not |
licensed under this Act, including a person holding an | ||
inactive license, and not exempt under this Act shall be null | ||
and void, and no person or entity shall have any right to | ||
collect, attempt to collect, receive, or retain any principal, | ||
fee, interest, or charges related to the funding. | ||
(Source: P.A. 102-987, eff. 5-27-22.) | ||
(815 ILCS 121/65) | ||
Sec. 65. License application process; investigation. | ||
(a) The Secretary may issue a license upon completion of | ||
all of the following: | ||
(1) the filing of an application for a license with | ||
the Secretary or the Nationwide Multistate Licensing | ||
System and Registry as required by the Secretary; | ||
(2) the filing with the Secretary of a listing of | ||
judgments entered against and bankruptcy petitions by the | ||
license applicant for the preceding 10 years; | ||
(3) the filing of an audited balance sheet, including | ||
all footnotes prepared by a certified public accountant in | ||
accordance with generally accepted accounting principles | ||
and generally accepted auditing standards; notwithstanding | ||
the requirements of this subsection, an applicant that is | ||
a subsidiary may submit audited consolidated financial | ||
statements of its parent, intermediary parent, or ultimate | ||
parent if the consolidated statements are supported by | ||
consolidating statements that include the applicant's |
financial statement; if the consolidating statements are | ||
unaudited, the applicant's chief financial officer shall | ||
attest to the applicant's financial statements disclosed | ||
in the consolidating statements; and | ||
(4) an investigation of the averments required by | ||
Section 80, which investigation must allow the Secretary | ||
to issue positive findings stating that the financial | ||
responsibility, experience, character, and general fitness | ||
of the license applicant; of the members thereof if the | ||
license applicant is a partnership or association; of the | ||
officers and directors thereof if the license applicant is | ||
a corporation; and of the managers and members that retain | ||
any authority or responsibility under the operating | ||
agreement if the license applicant is a limited liability | ||
company are such as to command the confidence of the | ||
community and to warrant belief that the business will be | ||
operated honestly, fairly, and efficiently within the | ||
purpose of this Act; if the Secretary does not so find, he | ||
or she shall not issue the license and shall notify the | ||
license applicant of the denial. The Secretary may impose | ||
conditions on a license if the Secretary determines that | ||
those conditions are necessary or appropriate. These | ||
conditions shall be imposed in writing and shall continue | ||
in effect for a period prescribed by the Secretary. | ||
(b) All licenses shall be issued to the license applicant. | ||
Upon receipt of the license, a consumer legal funding licensee |
shall be authorized to engage in the business regulated by | ||
this Act. The license shall remain in full force and effect | ||
until it expires, it is surrendered by the licensee, or it is | ||
revoked or suspended as provided by this Act. | ||
(c) The Secretary may, for good cause shown, waive, in | ||
part, any of the requirements of this Section. | ||
(Source: P.A. 102-987, eff. 5-27-22.) | ||
(815 ILCS 121/135) | ||
Sec. 135. Suspension; revocation of licenses; fines. | ||
(a) Upon written notice to a licensee, the Secretary may | ||
suspend or revoke any license issued pursuant to this Act if, | ||
in the notice, he or she makes a finding of one or more of the | ||
following: | ||
(1) that through separate acts or an act or a course of | ||
conduct, the licensee has violated any provisions of this | ||
Act, any rule adopted by the Department, or any other law, | ||
rule, or regulation of this State or the United States; | ||
(2) that any fact or condition exists that, if it had | ||
existed at the time of the original application for the | ||
license, would have warranted the Secretary in refusing | ||
originally to issue the license; or | ||
(3) that if a licensee is other than an individual, | ||
any ultimate equitable owner, officer, director, or member | ||
of the licensed partnership, association, corporation, or | ||
other entity has acted or failed to act in a way that would |
be cause for suspending or revoking a license to that | ||
party as an individual. | ||
(b) No license shall be suspended or revoked, except as | ||
provided in this Section, nor shall any licensee be fined | ||
without notice of his or her right to a hearing as provided in | ||
subsection (n). | ||
(c) The Secretary, on good cause shown that an emergency | ||
exists, may suspend any license for a period not exceeding 180 | ||
days, pending investigation. | ||
(d) The provisions of subsection (d) of Section 95 shall | ||
not affect a licensee's civil or criminal liability for acts | ||
committed before surrender of a license. | ||
(e) No revocation, suspension, or surrender of any license | ||
shall impair or affect the obligation of any preexisting | ||
lawful contract between the licensee and any person. | ||
(f) Every license issued under this Act shall remain in | ||
force and effect until the license expires without renewal, is | ||
surrendered, is revoked, or is suspended in accordance with | ||
the provisions of this Act, but the Secretary shall have | ||
authority to reinstate a suspended license or to issue a new | ||
license to a licensee whose license has been revoked if no fact | ||
or condition then exists which would have warranted the | ||
Secretary in refusing originally to issue that license under | ||
this Act. | ||
(g) Whenever the Secretary revokes or suspends a license | ||
issued pursuant to this Act or fines a licensee under this Act, |
he or she shall execute a written order to that effect. The | ||
Secretary shall serve a copy of the order upon the licensee. | ||
Any such order may be reviewed in the manner provided by | ||
Section 170. | ||
(h) If the Secretary finds any person in violation of the | ||
grounds set forth in subsection (p), he or she may enter an | ||
order imposing one or more of the following penalties: | ||
(1) revocation of license; | ||
(2) suspension of a license subject to reinstatement | ||
upon satisfying all reasonable conditions the Secretary | ||
may specify; | ||
(3) placement of the licensee or applicant on | ||
probation for a period of time and subject to all | ||
reasonable conditions as the Secretary may specify; | ||
(4) issuance of a reprimand; | ||
(5) imposition of a fine not to exceed $25,000 for | ||
each count of separate offense; except that a fine may be | ||
imposed that shall not exceed $75,000 for each separate | ||
count of offense in violation of paragraph (2) or (14) of | ||
subsection (p) (i) ; | ||
(6) denial of a license; or | ||
(7) restitution for the benefit of consumers. | ||
(i) (Blank). The Secretary may, after 10 days' notice by | ||
certified mail to the licensee at the address set forth in the | ||
license stating the contemplated action and in general the | ||
grounds therefor, fine the licensee an amount not exceeding |
$10,000 per violation or revoke or suspend any license issued | ||
under this Act if he or she finds that: | ||
(1) the licensee has failed to comply with any | ||
provision of this Act, any rule adopted pursuant to this | ||
Act, or any order, decision, finding, or direction of the | ||
Secretary lawfully made pursuant to the authority of this | ||
Act; or | ||
(2) any fact or condition exists which, if it had | ||
existed at the time of the original application for the | ||
license, clearly would have warranted the Secretary in | ||
refusing to issue the license. | ||
(j) The Secretary may fine, suspend, or revoke only the | ||
particular license with respect to which grounds for the fine, | ||
revocation, or suspension occur or exist, but if the Secretary | ||
finds that grounds for revocation are of general application | ||
to all offices or to more than one office of the licensee, the | ||
Secretary shall fine, suspend, or revoke every license to | ||
which the grounds apply. | ||
(k) No revocation, suspension, or surrender of any license | ||
shall impair or affect the obligation of any preexisting | ||
lawful contract between the licensee and any obligor. | ||
(l) The Secretary may issue a new license to a licensee | ||
whose license has been revoked when facts or conditions which | ||
clearly would have warranted the Secretary in refusing | ||
originally to issue the license no longer exist. | ||
(m) In every case in which a license is suspended or |
revoked or an application for a license or renewal of a license | ||
is denied, the Secretary shall serve the licensee with notice | ||
of his or her action, including a statement of the reasons for | ||
his or her actions, either personally or by certified mail. | ||
Service by certified mail shall be deemed completed when the | ||
notice is deposited in the U.S. mail. | ||
(n) An order assessing a fine, an order revoking or | ||
suspending a license, or an order denying renewal of a license | ||
shall take effect upon service of the order unless the | ||
licensee requests a hearing, in writing, within 10 days after | ||
the date of service. If a hearing is requested, the order shall | ||
be stayed until a final administrative order is entered. | ||
(1) If the licensee requests a hearing, the Secretary | ||
shall schedule a hearing within 30 days after the request | ||
for a hearing unless otherwise agreed to by the parties. | ||
(2) The hearing shall be held at the time and place | ||
designated by the Secretary. The Secretary and any | ||
administrative law judge designated by him or her shall | ||
have the power to administer oaths and affirmations, | ||
subpoena witnesses and compel their attendance, take | ||
evidence, and require the production of books, papers, | ||
correspondence, and other records or information that he | ||
or she considers relevant or material to the inquiry. | ||
(o) The costs of administrative hearings conducted | ||
pursuant to this Section shall be paid by the licensee. | ||
(p) The following acts shall constitute grounds for which |
the disciplinary actions specified in subsection (h) may be | ||
taken: | ||
(1) being convicted or found guilty, regardless of | ||
pendency of an appeal, of a crime in any jurisdiction that | ||
involves fraud, dishonest dealing, or any other act of | ||
moral turpitude; | ||
(2) fraud, misrepresentation, deceit, or negligence in | ||
any relation to any consumer legal funding; | ||
(3) a material or intentional misstatement of fact on | ||
an initial or renewal application; | ||
(3.5) any fact or condition exists that, if it had | ||
existed at the time of the original application for the | ||
license, would have warranted the Secretary in refusing to | ||
originally issue the license; | ||
(4) insolvency or filing under any provision of the | ||
United States Bankruptcy Code as a debtor; | ||
(5) failure to account or deliver to any person any | ||
property, such as any money, fund, deposit, check, draft, | ||
or other document or thing of value, that has come into his | ||
or her hands and that is not his or her property or that he | ||
or she is not in law or equity entitled to retain, under | ||
the circumstances and at the time which has been agreed | ||
upon or is required by law, or, in the absence of a fixed | ||
time, upon demand of the person entitled to such | ||
accounting and delivery; | ||
(6) failure to disburse funds in accordance with |
agreements; | ||
(7) having a license, or the equivalent, to practice | ||
any profession or occupation revoked, suspended, or | ||
otherwise acted against, including the denial of licensure | ||
by a licensing authority of this State or another state, | ||
territory, or country, for fraud, dishonest dealing, or | ||
any other act of moral turpitude; | ||
(8) failure to comply with an order of the Secretary | ||
or rule adopted under the provisions of this Act; | ||
(9) engaging in activities regulated by this Act | ||
without a current, active license unless specifically | ||
exempted by this Act; | ||
(10) failure to pay in a timely manner any fee, | ||
charge, or fine under this Act; | ||
(11) failure to maintain, preserve, and keep available | ||
for examination all books, accounts, or other documents | ||
required by the provisions of this Act and the rules of the | ||
Department; | ||
(12) refusing, obstructing, evading, or unreasonably | ||
delaying an investigation, information request, or | ||
examination authorized under this Act, or refusing, | ||
obstructing, evading, or unreasonably delaying compliance | ||
with the Secretary's subpoena or subpoena duces tecum; | ||
(13) failure to comply with or a violation of any | ||
provision of this Act; and | ||
(14) any unfair, deceptive, or abusive business |
practice. | ||
(q) A licensee shall be subject to the disciplinary | ||
actions specified in this Act for violations of subsection (i) | ||
by any officer, director, shareholder, joint venture, partner, | ||
ultimate equitable owner, or employee of the licensee. | ||
(r) A licensee shall be subject to suspension or | ||
revocation for unauthorized employee actions only if there is | ||
a pattern of repeated violations by employees, the licensee | ||
has knowledge of the violations, or there is substantial harm | ||
to a consumer. A licensee may be subject to fine for employee | ||
actions, whether authorized or unauthorized, whether there is | ||
a pattern of repeated violations or no pattern of repeated | ||
violations. | ||
(s) Any licensee may submit an application to surrender a | ||
license, but, upon the Secretary approving the surrender, it | ||
shall not affect the licensee's civil or criminal liability | ||
for acts committed before surrender or entitle the licensee to | ||
a return of any part of the license fee. | ||
(Source: P.A. 102-987, eff. 5-27-22.) | ||
(815 ILCS 121/165) | ||
Sec. 165. Rules of the Department. | ||
(a) In addition to such powers as may be prescribed by this | ||
Act, the Department is hereby authorized and empowered to | ||
adopt rules consistent with the purposes of this Act, | ||
including, but not limited to: |
(1) rules in connection with the activities of | ||
licensees or unlicensed consumer legal funding companies | ||
as may be necessary and appropriate for the protection of | ||
consumers in this State; | ||
(2) rules as may be necessary and appropriate to | ||
define improper or fraudulent business practices in | ||
connection with the activities of licensees in servicing | ||
consumer legal fundings; | ||
(3) rules that define the terms used in this Act and as | ||
may be necessary and appropriate to interpret and | ||
implement the provisions of this Act; and | ||
(4) rules as may be necessary for the enforcement and | ||
administration of this Act ; and . | ||
(5) rules to permit the refinancing of consumer legal | ||
fundings. | ||
(b) The Secretary is hereby authorized and empowered to | ||
make specific rulings, demands, and findings that he or she | ||
deems necessary for the proper conduct of the consumer legal | ||
funding company industry. | ||
(Source: P.A. 102-987, eff. 5-27-22.) | ||
(815 ILCS 121/170) | ||
Sec. 170. Appeal and review. | ||
(a) The Department may, in accordance with the Illinois | ||
Administrative Procedure Act, adopt rules to provide for | ||
review within the Department of the Secretary's decisions |
affecting the rights of persons or entities under this Act. | ||
The review shall provide for, at a minimum: | ||
(1) appointment of a hearing officer other than a | ||
regular employee of the Division of Financial Institutions | ||
Department ; | ||
(2) appropriate procedural rules, specific deadlines | ||
for filings, and standards of evidence and of proof; and | ||
(3) provision for apportioning costs among parties to | ||
the appeal. | ||
(b) All final agency determinations of appeals to | ||
decisions of the Secretary may be reviewed in accordance with | ||
and under the provisions of the Administrative Review Law. | ||
Appeals from all final orders and judgments entered by a court | ||
in review of any final administrative decision of the | ||
Secretary or of any final agency review of a decision of the | ||
Secretary may be taken as in other civil cases. | ||
(Source: P.A. 102-987, eff. 5-27-22.) |