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Public Act 103-0974


 

Public Act 0974 103RD GENERAL ASSEMBLY

 


 
Public Act 103-0974
 
SB3314 EnrolledLRB103 39360 SPS 69523 b

    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.)

Effective Date: 1/1/2025