[ Search ] [ Legislation ] [ Bill Summary ]
[ Home ] [ Back ] [ Bottom ]
90_SB1677
205 ILCS 670/15 from Ch. 17, par. 5415
205 ILCS 675/4.5 new
815 ILCS 205/4 from Ch. 17, par. 6404
815 ILCS 205/4.3 from Ch. 17, par. 6409
815 ILCS 205/4a from Ch. 17, par. 6410
815 ILCS 375/6 from Ch. 121 1/2, par. 566
815 ILCS 405/6 from Ch. 121 1/2, par. 506
Amends the Consumer Installment Loan Act, the Illinois
Financial Services Development Act, the Interest Act, the
Motor Vehicle Retail Installment Sales Act, and the Retail
Installment Sales Act. Prohibits the charging of interest on
a precomputed basis.
LRB9009859JSsb
LRB9009859JSsb
1 AN ACT to prohibit the calculation of interest on a
2 precomputed basis, amending named Acts.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Consumer Installment Loan Act is amended
6 by changing Section 15 as follows:
7 (205 ILCS 670/15) (from Ch. 17, par. 5415)
8 Sec. 15. Charges permitted.
9 (a) Every licensee may lend a principal amount not
10 exceeding $25,000 and may charge, contract for and receive
11 thereon interest at the rate agreed upon by the licensee and
12 the borrower, subject to the provisions of this Act.
13 (b) For purpose of this Section, the following terms
14 shall have the meanings ascribed herein.
15 "Applicable interest" for a precomputed loan contract
16 means the amount of interest attributable to each monthly
17 installment period. It is computed as if each installment
18 period were one month and any interest charged for extending
19 the first installment period beyond one month is ignored.
20 The applicable interest for any monthly installment period is
21 that portion of the precomputed interest that bears the same
22 ratio to the total precomputed interest as the balances
23 scheduled to be outstanding during that month bear to the sum
24 of all scheduled monthly outstanding balances in the original
25 contract.
26 "Interest-bearing loan" means a loan in which the debt is
27 expressed as a principal amount plus interest charged on
28 actual unpaid principal balances for the time actually
29 outstanding.
30 "Precomputed loan" means a loan in which the debt is
31 expressed as the sum of the original principal amount plus
-2- LRB9009859JSsb
1 interest computed actuarially in advance, assuming all
2 payments will be made when scheduled.
3 (c) Loans may be interest-bearing. A loan agreement
4 entered into after the effective date of this amendatory Act
5 of 1998 may not provide for the charging of interest on a or
6 precomputed basis.
7 (d) To compute time for either interest-bearing or
8 precomputed loans for the calculation of interest and other
9 purposes, a month shall be a calendar month and a day shall
10 be considered 1/30th of a month when calculation is made for
11 a fraction of a month. A month shall be 1/12th of a year. A
12 calendar month is that period from a given date in one month
13 to the same numbered date in the following month, and if
14 there is no same numbered date, to the last day of the
15 following month. When a period of time includes a month and
16 a fraction of a month, the fraction of the month is
17 considered to follow the whole month. In the alternative,
18 for interest-bearing loans, the licensee may charge interest
19 at the rate of 1/365th of the agreed annual rate for each day
20 actually elapsed.
21 (e) With respect to interest-bearing loans:
22 (1) Interest shall be computed on unpaid principal
23 balances outstanding from time to time, for the time
24 outstanding, until fully paid. Each payment shall be
25 applied first to the accumulated interest and the
26 remainder of the payment applied to the unpaid principal
27 balance; provided however, that if the amount of the
28 payment is insufficient to pay the accumulated interest,
29 the unpaid interest continues to accumulate to be paid
30 from the proceeds of subsequent payments and is not added
31 to the principal balance.
32 (2) Interest shall not be payable in advance or
33 compounded. However, if part or all of the consideration
34 for a new loan contract is the unpaid principal balance
-3- LRB9009859JSsb
1 of a prior loan, then the principal amount payable under
2 the new loan contract may include any unpaid interest
3 which has accrued. The unpaid principal balance of a
4 precomputed loan is the balance due after refund or
5 credit of unearned interest as provided in paragraph (f),
6 clause (3). The resulting loan contract shall be deemed
7 a new and separate loan transaction for all purposes.
8 (3) Loans may be payable as agreed between the
9 parties, including payment at irregular times or in
10 unequal amounts and rates that may vary with an index
11 that is independently verifiable and beyond the control
12 of the licensee.
13 (4) The lender or creditor may, if the contract
14 provides, collect a delinquency or collection charge on
15 each installment in default for a period of not less than
16 10 days in an amount not exceeding 5% of the installment
17 on installments in excess of $200, or $10 on installments
18 of $200 or less, but only one delinquency and collection
19 charge may be collected on any installment regardless of
20 the period during which it remains in default.
21 (f) With respect to precomputed loans:
22 (1) Loans shall be repayable in substantially equal
23 and consecutive monthly installments of principal and
24 interest combined, except that the first installment
25 period may be longer than one month by not more than 15
26 days, and the first installment payment amount may be
27 larger than the remaining payments by the amount of
28 interest charged for the extra days; and provided further
29 that monthly installment payment dates may be omitted to
30 accommodate borrowers with seasonal income.
31 (2) Payments may be applied to the combined total
32 of principal and precomputed interest until the loan is
33 fully paid. Payments shall be applied in the order in
34 which they become due, except that any insurance proceeds
-4- LRB9009859JSsb
1 received as a result of any claim made on any insurance,
2 unless sufficient to prepay the contract in full, may be
3 applied to the unpaid installments of the total of
4 payments in inverse order.
5 (3) When any loan contract is paid in full by cash,
6 renewal or refinancing, or a new loan, one month or more
7 before the final installment due date, a licensee shall
8 refund or credit the obligor with the total of the
9 applicable interest for all fully unexpired installment
10 periods, as originally scheduled or as deferred, which
11 follow the day of prepayment; provided, if the prepayment
12 occurs prior to the first installment due date, the
13 licensee may retain 1/30 of the applicable interest for a
14 first installment period of one month for each day from
15 the date of the loan to the date of prepayment, and shall
16 refund or credit the obligor with the balance of the
17 total interest contracted for. If the maturity of the
18 loan is accelerated for any reason and judgment is
19 entered, the licensee shall credit the borrower with the
20 same refund as if prepayment in full had been made on the
21 date the judgement is entered.
22 (4) The lender or creditor may, if the contract
23 provides, collect a delinquency or collection charge on
24 each installment in default for a period of not less than
25 10 days in an amount not exceeding 5% of the installment
26 on installments in excess of $200, or $10 on installments
27 of $200 or less, but only one delinquency or collection
28 charge may be collected on any installment regardless of
29 the period during which it remains in default.
30 (5) If the parties agree in writing, either in the
31 loan contract or in a subsequent agreement, to a
32 deferment of wholly unpaid installments, a licensee may
33 grant a deferment and may collect a deferment charge as
34 provided in this Section. A deferment postpones the
-5- LRB9009859JSsb
1 scheduled due date of the earliest unpaid installment and
2 all subsequent installments as originally scheduled, or
3 as previously deferred, for a period equal to the
4 deferment period. The deferment period is that period
5 during which no installment is scheduled to be paid by
6 reason of the deferment. The deferment charge for a one
7 month period may not exceed the applicable interest for
8 the installment period immediately following the due date
9 of the last undeferred payment. A proportionate charge
10 may be made for deferment for periods of more or less
11 than one month. A deferment charge is earned pro rata
12 during the deferment period and is fully earned on the
13 last day of the deferment period. Should a loan be
14 prepaid in full during a deferment period, the licensee
15 shall credit to the obligor a refund of the unearned
16 deferment charge in addition to any other refund or
17 credit made for prepayment of the loan in full.
18 (6) If two or more installments are delinquent one
19 full month or more on any due date, and if the contract
20 so provides, the licensee may reduce the unpaid balance
21 by the refund credit which would be required for
22 prepayment in full on the due date of the most recent
23 maturing installment in default. Thereafter, and in lieu
24 of any other default or deferment charges, the agreed
25 rate of interest may be charged on the unpaid balance
26 until fully paid.
27 (7) Fifteen days after the final installment as
28 originally scheduled or deferred, the licensee, for any
29 loan contract which has not previously been converted to
30 interest-bearing under paragraph (f), clause (6), may
31 compute and charge interest on any balance remaining
32 unpaid, including unpaid default or deferment charges, at
33 the agreed rate of interest until fully paid. At the
34 time of payment of said final installment, the licensee
-6- LRB9009859JSsb
1 shall give notice to the obligor stating any amounts
2 unpaid.
3 (Source: P.A. 90-437, eff. 1-1-98.)
4 Section 10. The Illinois Financial Services Development
5 Act is amended by adding Section 4.5 as follows:
6 (205 ILCS 675/4.5 new)
7 Sec. 4.5. Precomputed interest charges prohibited. A
8 revolving credit plan entered into after the effective date
9 of this amendatory Act of 1998 may not provide for the
10 charging of interest on a precomputed basis. A revolving
11 credit plan renewed after the effective date of this
12 amendatory Act of 1998 may not provide for the charging of
13 interest on a precomputed basis with respect to any debt
14 incurred after the renewal. As used in this Section,
15 "renewed" means that the debtor has incurred new debt.
16 Section 15. The Interest Act is amended by changing
17 Sections 4, 4.3, and 4a as follows:
18 (815 ILCS 205/4) (from Ch. 17, par. 6404)
19 Sec. 4. General interest rate.
20 (1) In all written contracts it shall be lawful for the
21 parties to stipulate or agree that 9% per annum, or any less
22 sum of interest, shall be taken and paid upon every $100 of
23 money loaned or in any manner due and owing from any person
24 to any other person or corporation in this state, and after
25 that rate for a greater or less sum, or for a longer or
26 shorter time, except as herein provided.
27 The maximum rate of interest that may lawfully be
28 contracted for is determined by the law applicable thereto at
29 the time the contract is made. Any provision in any
30 contract, whether made before or after July 1, 1969, which
-7- LRB9009859JSsb
1 provides for or purports to authorize, contingent upon a
2 change in the Illinois law after the contract is made, any
3 rate of interest greater than the maximum lawful rate at the
4 time the contract is made, is void. A contract entered into
5 after the effective date of this amendatory Act of 1998 may
6 not provide for the charging of interest on a precomputed
7 basis.
8 It is lawful for a state bank or a branch of an
9 out-of-state bank, as those terms are defined in Section 2 of
10 the Illinois Banking Act, to receive or to contract to
11 receive and collect interest and charges at any rate or rates
12 agreed upon by the bank or branch and the borrower.
13 It is lawful to receive or to contract to receive and
14 collect interest and charges as authorized by this Act and as
15 authorized by the Consumer Installment Loan Act and by the
16 "Consumer Finance Act", approved July 10, 1935, as now or
17 hereafter amended. It is lawful to charge, contract for, and
18 receive any rate or amount of interest or compensation with
19 respect to the following transactions:
20 (a) Any loan made to a corporation;
21 (b) Advances of money, repayable on demand, to an
22 amount not less than $5,000, which are made upon
23 warehouse receipts, bills of lading, certificates of
24 stock, certificates of deposit, bills of exchange, bonds
25 or other negotiable instruments pledged as collateral
26 security for such repayment, if evidenced by a writing;
27 (c) Any credit transaction between a merchandise
28 wholesaler and retailer; any business loan to a business
29 association or copartnership or to a person owning and
30 operating a business as sole proprietor or to any persons
31 owning and operating a business as joint venturers, joint
32 tenants or tenants in common, or to any limited
33 partnership, or to any trustee owning and operating a
34 business or whose beneficiaries own and operate a
-8- LRB9009859JSsb
1 business, except that any loan which is secured (1) by an
2 assignment of an individual obligor's salary, wages,
3 commissions or other compensation for services, or (2) by
4 his household furniture or other goods used for his
5 personal, family or household purposes shall be deemed
6 not to be a loan within the meaning of this subsection;
7 and provided further that a loan which otherwise
8 qualifies as a business loan within the meaning of this
9 subsection shall not be deemed as not so qualifying
10 because of the inclusion, with other security consisting
11 of business assets of any such obligor, of real estate
12 occupied by an individual obligor solely as his
13 residence. The term "business" shall be deemed to mean a
14 commercial, agricultural or industrial enterprise which
15 is carried on for the purpose of investment or profit,
16 but shall not be deemed to mean the ownership or
17 maintenance of real estate occupied by an individual
18 obligor solely as his residence;
19 (d) Any loan made in accordance with the provisions
20 of Subchapter I of Chapter 13 of Title 12 of the United
21 States Code, which is designated as "Housing Renovation
22 and Modernization";
23 (e) Any mortgage loan insured or upon which a
24 commitment to insure has been issued under the provisions
25 of the National Housing Act, Chapter 13 of Title 12 of
26 the United States Code;
27 (f) Any mortgage loan guaranteed or upon which a
28 commitment to guaranty has been issued under the
29 provisions of the Veterans' Benefits Act, Subchapter II
30 of Chapter 37 of Title 38 of the United States Code;
31 (g) Interest charged by a broker or dealer
32 registered under the Securities Exchange Act of 1934, as
33 amended, or registered under the Illinois Securities Law
34 of 1953, approved July 13, 1953, as now or hereafter
-9- LRB9009859JSsb
1 amended, on a debit balance in an account for a customer
2 if such debit balance is payable at will without penalty
3 and is secured by securities as defined in Uniform
4 Commercial Code-Investment Securities;
5 (h) Any loan made by a participating bank as part
6 of any loan guarantee program which provides for loans
7 and for the refinancing of such loans to medical
8 students, interns and residents and which are guaranteed
9 by the American Medical Association Education and
10 Research Foundation;
11 (i) Any loan made, guaranteed, or insured in
12 accordance with the provisions of the Housing Act of
13 1949, Subchapter III of Chapter 8A of Title 42 of the
14 United States Code and the Consolidated Farm and Rural
15 Development Act, Subchapters I, II, and III of Chapter 50
16 of Title 7 of the United States Code;
17 (j) Any loan by an employee pension benefit plan,
18 as defined in Section 3 (2) of the Employee Retirement
19 Income Security Act of 1974 (29 U.S.C.A. Sec. 1002), to
20 an individual participating in such plan, provided that
21 such loan satisfies the prohibited transaction exemption
22 requirements of Section 408 (b) (1) (29 U.S.C.A. Sec.
23 1108 (b) (1)) or Section 2003 (a) (26 U.S.C.A. Sec. 4975
24 (d) (1)) of the Employee Retirement Income Security Act
25 of 1974;
26 (k) Written contracts, agreements or bonds for deed
27 providing for installment purchase of real estate;
28 (1) Loans secured by a mortgage on real estate;
29 (m) Loans made by a sole proprietorship,
30 partnership, or corporation to an employee or to a person
31 who has been offered employment by such sole
32 proprietorship, partnership, or corporation made for the
33 sole purpose of transferring an employee or person who
34 has been offered employment to another office maintained
-10- LRB9009859JSsb
1 and operated by the same sole proprietorship,
2 partnership, or corporation;
3 (n) Loans to or for the benefit of students made by
4 an institution of higher education.
5 (2) Except for loans described in subparagraph (a), (c),
6 (d), (e), (f) or (i) of subsection (1) of this Section, and
7 except to the extent permitted by the applicable statute for
8 loans made pursuant to Section 4a or pursuant to the Consumer
9 Installment Loan Act:
10 (a) Whenever the rate of interest exceeds 8% per
11 annum on any written contract, agreement or bond for deed
12 providing for the installment purchase of residential
13 real estate, or on any loan secured by a mortgage on
14 residential real estate, it shall be unlawful to provide
15 for a prepayment penalty or other charge for prepayment.
16 (b) No agreement, note or other instrument
17 evidencing a loan secured by a mortgage on residential
18 real estate, or written contract, agreement or bond for
19 deed providing for the installment purchase of
20 residential real estate, may provide for any change in
21 the contract rate of interest during the term thereof.
22 However, if the Congress of the United States or any
23 federal agency authorizes any class of lender to enter,
24 within limitations, into mortgage contracts or written
25 contracts, agreements or bonds for deed in which the rate
26 of interest may be changed during the term of the
27 contract, any person, firm, corporation or other entity
28 not otherwise prohibited from entering into mortgage
29 contracts or written contracts, agreements or bonds for
30 deed in Illinois may enter into mortgage contracts or
31 written contracts, agreements or bonds for deed in which
32 the rate of interest may be changed during the term of
33 the contract, within the same limitations.
34 (3) In any contract or loan which is secured by a
-11- LRB9009859JSsb
1 mortgage, deed of trust, or conveyance in the nature of a
2 mortgage, on residential real estate, the interest which is
3 computed, calculated, charged, or collected pursuant to such
4 contract or loan, or pursuant to any regulation or rule
5 promulgated pursuant to this Act, may not be computed,
6 calculated, charged or collected for any period of time
7 occurring after the date on which the total indebtedness,
8 with the exception of late payment penalties, is paid in
9 full.
10 For purposes of this Section, a prepayment shall mean the
11 payment of the total indebtedness, with the exception of late
12 payment penalties if incurred or charged, on any date before
13 the date specified in the contract or loan agreement on which
14 the total indebtedness shall be paid in full, or before the
15 date on which all payments, if timely made, shall have been
16 made. In the event of a prepayment of the indebtedness which
17 is made on a date after the date on which interest on the
18 indebtedness was last computed, calculated, charged, or
19 collected but before the next date on which interest on the
20 indebtedness was to be calculated, computed, charged, or
21 collected, the lender may calculate, charge and collect
22 interest on the indebtedness for the period which elapsed
23 between the date on which the prepayment is made and the date
24 on which interest on the indebtedness was last computed,
25 calculated, charged or collected at a rate equal to 1/360 of
26 the annual rate for each day which so elapsed, which rate
27 shall be applied to the indebtedness outstanding as of the
28 date of prepayment. The lender shall refund to the borrower
29 any interest charged or collected which exceeds that which
30 the lender may charge or collect pursuant to the preceding
31 sentence. The provisions of this amendatory Act of 1985 shall
32 apply only to contracts or loans entered into on or after the
33 effective date of this amendatory Act, but shall not apply to
34 contracts or loans entered into on or after that date that
-12- LRB9009859JSsb
1 are subject to Section 4a of this Act, the Consumer
2 Installment Loan Act, or the Retail Installment Sales Act, or
3 that provide for the refund of precomputed interest on
4 prepayment in the manner provided by such Act.
5 (Source: P.A. 89-208, eff. 9-29-95.)
6 (815 ILCS 205/4.3) (from Ch. 17, par. 6409)
7 Sec. 4.3. Whenever interest received or contracted to be
8 received by the lender on a revolving credit as defined in
9 Section 4.1 hereof is lawful only under the provisions of
10 Section 4.2 hereof, no provision contained in any contract or
11 agreement respecting a revolving credit or in any draft,
12 item, order for the payment of money, evidence of debt or
13 similar written instruments which is used in connection with
14 such revolving credit shall be enforceable, which
15 (i) provides that in the absence of debtor's breach or
16 default the lender may arbitrarily and without reasonable
17 cause accelerate the maturity of any amount or part owing
18 thereunder;
19 (ii) purports to waive any provisions of this Act; or
20 (iii) provides for any amount to be added to the account
21 each month for the privilege of having the revolving credit
22 account provided there is no unpaid balance at that time; or.
23 (iv) provides for the charging of interest on a
24 precomputed basis.
25 (Source: P.A. 83-944.)
26 (815 ILCS 205/4a) (from Ch. 17, par. 6410)
27 Sec. 4a. Installment loan rate.
28 (a) On money loaned to or in any manner owing from any
29 person, whether secured or unsecured, except where the money
30 loaned or in any manner owing is directly or indirectly for
31 the purchase price of real estate or an interest therein and
32 is secured by a lien on or retention of title to that real
-13- LRB9009859JSsb
1 estate or interest therein, to an amount not more than
2 $25,000 (excluding interest) which is evidenced by a written
3 instrument providing for the payment thereof in 2 or more
4 periodic installments over a period of not more than 181
5 months from the date of the execution of the written
6 instrument, it is lawful to receive or to contract to receive
7 and collect either:
8 (i) interest in an amount equivalent to interest
9 computed at a rate not exceeding 9% per year on the
10 entire principal amount of the money loaned or in any
11 manner owing for the period from the date of the making
12 of the loan or the incurring of the obligation for the
13 amount owing evidenced by the written instrument until
14 the date of the maturity of the last installment thereof,
15 and to add that amount to the principal, except that
16 there shall be no limit on the rate of interest which may
17 be received or contracted to be received and collected by
18 (1) any bank that has its main office or, after May 31,
19 1997, a branch in this State; (2) a savings and loan
20 association chartered under the Illinois Savings and Loan
21 Act of 1985 or a federal savings and loan association
22 established under the laws of the United States and
23 having its main office in this State; or (3) any lender
24 licensed under either the Consumer Finance Act or the
25 Consumer Installment Loan Act, but in any case in which
26 interest is received, contracted for or collected on the
27 basis of this clause (i), the debtor may satisfy in full
28 at any time before maturity the debt evidenced by the
29 written instrument, and in so satisfying must receive a
30 refund credit against the total amount of interest added
31 to the principal computed in the manner provided under
32 Section 15(f)(3) of the Consumer Installment Loan Act for
33 refunds or credits of applicable interest on payment in
34 full of precomputed loans before the final installment
-14- LRB9009859JSsb
1 due date; or
2 (ii) interest accrued on the principal balance from
3 time to time remaining unpaid, from the date of making of
4 the loan or the incurring of the obligation to the date
5 of the payment of the debt in full, at a rate not
6 exceeding the annual percentage rate equivalent of the
7 rate permitted to be charged under clause (i) above, but
8 in any such case the debtor may, provided that the debtor
9 shall have paid in full all interest and other charges
10 accrued to the date of such prepayment, prepay the
11 principal balance in full or in part at any time, and
12 interest shall, upon any such prepayment, cease to accrue
13 on the principal amount which has been prepaid.
14 A contract entered into after the effective date of this
15 amendatory Act of 1998 may not provide for the charging of
16 interest on a precomputed basis.
17 (b) Whenever the principal amount of an installment loan
18 is $300 or more and the repayment period is 6 months or more,
19 a minimum charge of $15 may be collected instead of interest,
20 but only one minimum charge may be collected from the same
21 person during one year. When the principal amount of the loan
22 (excluding interest) is $800 or less, the lender or creditor
23 may contract for and receive a service charge not to exceed
24 $5 in addition to interest; and that service charge may be
25 collected when the loan is made, but only one service charge
26 may be contracted for, received, or collected from the same
27 person during one year.
28 (c) Credit life insurance and credit accident and health
29 insurance, and any charge therefor which is deducted from the
30 loan or paid by the obligor, must comply with Article IX 1/2
31 of the Illinois Insurance Code and all lawful requirements of
32 the Director of Insurance related thereto. When there are 2
33 or more obligors on the loan contract, only one charge for
34 credit life insurance and credit accident and health
-15- LRB9009859JSsb
1 insurance may be made and only one of the obligors may be
2 required to be insured. Insurance obtained from, by or
3 through the lender or creditor must be in effect when the
4 loan is transacted. The purchase of that insurance from an
5 agent, broker or insurer specified by the lender or creditor
6 may not be a condition precedent to the granting of the loan.
7 (d) The lender or creditor may require the obligor to
8 provide property insurance on security other than household
9 goods, furniture and personal effects. The amount and term of
10 the insurance must be reasonable in relation to the amount
11 and term of the loan contract and the type and value of the
12 security, and the insurance must be procured in accordance
13 with the insurance laws of this State. The purchase of that
14 insurance from an agent, broker or insurer specified by the
15 lender or creditor may not be a condition precedent to the
16 granting of the loan.
17 (e) The lender or creditor may, if the contract
18 provides, collect a delinquency and collection charge on each
19 installment in default for a period of not less than 10 days
20 in an amount not exceeding 5% of the installment on
21 installments in excess of $200 or $10 on installments of $200
22 or less, but only one delinquency and collection charge may
23 be collected on any installment regardless of the period
24 during which it remains in default. In addition, the contract
25 may provide for the payment by the borrower or debtor of
26 attorney's fees incurred by the lender or creditor. The
27 lender or creditor may enforce such a provision to the extent
28 of the reasonable attorney's fees incurred by him in the
29 collection or enforcement of the contract or obligation.
30 Whenever interest is contracted for or received under this
31 Section, no amount in addition to the charges authorized by
32 this Section may be directly or indirectly charged,
33 contracted for or received, except lawful fees paid to a
34 public officer or agency to record, file or release security,
-16- LRB9009859JSsb
1 and except costs and disbursements including reasonable
2 attorney's fees, incurred in legal proceedings to collect a
3 loan or to realize on a security after default. This Section
4 does not prohibit the receipt of any commission, dividend or
5 other benefit by the creditor or an employee, affiliate or
6 associate of the creditor from the insurance authorized by
7 this Section.
8 (f) When interest is contracted for or received under
9 this Section, the lender must disclose the following items to
10 the obligor in a written statement before the loan is
11 consummated:
12 (1) the amount and date of the loan contract;
13 (2) the amount of loan credit using the term
14 "amount financed";
15 (3) every deduction from the amount financed or
16 payment made by the obligor for insurance and the type of
17 insurance for which each deduction or payment was made;
18 (4) every other deduction from the loan or payment
19 made by the obligor in connection with obtaining the
20 loan;
21 (5) the date on which the finance charge begins to
22 accrue if different from the date of the transaction;
23 (6) the total amount of the loan charge for the
24 scheduled term of the loan contract with a description of
25 each amount included using the term "finance charge";
26 (7) the finance charge expressed as an annual
27 percentage rate using the term "annual percentage rate".
28 "Annual percentage rate" means the nominal annual
29 percentage rate of finance charge determined in
30 accordance with the actuarial method of computation with
31 an accuracy at least to the nearest 1/4 of 1%; or at the
32 option of the lender by application of the United States
33 rule so that it may be disclosed with an accuracy at
34 least to the nearest 1/4 of 1%;
-17- LRB9009859JSsb
1 (8) the number, amount and due dates or periods of
2 payments scheduled to repay the loan and the sum of such
3 payments using the term "total of payments";
4 (9) the amount, or method of computing the amount
5 of any default, delinquency or similar charges payable in
6 the event of late payments;
7 (10) the right of the obligor to prepay the loan
8 and the fact that such prepayment will reduce the charge
9 for the loan;
10 (11) a description or identification of the type of
11 any security interest held or to be retained or acquired
12 by the lender in connection with the loan and a clear
13 identification of the property to which the security
14 interest relates. If after-acquired property will be
15 subject to the security interest, or if other or future
16 indebtedness is or may be secured by any such property,
17 this fact shall be clearly set forth in conjunction with
18 the description or identification of the type of security
19 interest held, retained or acquired;
20 (12) a description of any penalty charge that may
21 be imposed by the lender for prepayment of the principal
22 of the obligation with an explanation of the method of
23 computation of such penalty and the conditions under
24 which it may be imposed;
25 (13) unless the contract provides for the accrual
26 and payment of the finance charge on the balance of the
27 amount financed from time to time remaining unpaid, an
28 identification of the method of computing any unearned
29 portion of the finance charge in the event of prepayment
30 of the loan.
31 The terms "finance charge" and "annual percentage rate"
32 shall be printed more conspicuously than other terminology
33 required by this Section.
34 (g) At the time disclosures are made, the lender shall
-18- LRB9009859JSsb
1 deliver to the obligor a duplicate of the instrument or
2 statement by which the required disclosures are made and on
3 which the lender and obligor are identified and their
4 addresses stated. All of the disclosures shall be made
5 clearly, conspicuously and in meaningful sequence and made
6 together on either:
7 (i) the note or other instrument evidencing the
8 obligation on the same side of the page and above or
9 adjacent to the place for the obligor's signature;
10 however, where a creditor elects to combine disclosures
11 with the contract, security agreement, and evidence of a
12 transaction in a single document, the disclosures
13 required under this Section shall be made on the face of
14 the document, on the reverse side, or on both sides,
15 provided that the amount of the finance charge and the
16 annual percentage rate shall appear on the face of the
17 document, and, if the reverse side is used, the printing
18 on both sides of the document shall be equally clear and
19 conspicuous, both sides shall contain the statement,
20 "NOTICE: See other side for important information", and
21 the place for the customer's signature shall be provided
22 following the full content of the document; or
23 (ii) one side of a separate statement which
24 identifies the transaction.
25 The amount of the finance charge shall be determined as
26 the sum of all charges, payable directly or indirectly by the
27 obligor and imposed directly or indirectly by the lender as
28 an incident to or as a condition to the extension of credit,
29 whether paid or payable by the obligor, any other person on
30 behalf of the obligor, to the lender or to a third party,
31 including any of the following types of charges:
32 (1) Interest, time price differential, and any
33 amount payable under a discount or other system of
34 additional charges.
-19- LRB9009859JSsb
1 (2) Service, transaction, activity, or carrying
2 charge.
3 (3) Loan fee, points, finder's fee, or similar
4 charge.
5 (4) Fee for an appraisal, investigation, or credit
6 report.
7 (5) Charges or premiums for credit life, accident,
8 health, or loss of income insurance, written in
9 connection with any credit transaction unless (a) the
10 insurance coverage is not required by the lender and this
11 fact is clearly and conspicuously disclosed in writing to
12 the obligor; and (b) any obligor desiring such insurance
13 coverage gives specific dated and separately signed
14 affirmative written indication of such desire after
15 receiving written disclosure to him of the cost of such
16 insurance.
17 (6) Charges or premiums for insurance, written in
18 connection with any credit transaction, against loss of
19 or damage to property or against liability arising out of
20 the ownership or use of property, unless a clear,
21 conspicuous, and specific statement in writing is
22 furnished by the lender to the obligor setting forth the
23 cost of the insurance if obtained from or through the
24 lender and stating that the obligor may choose the person
25 through which the insurance is to be obtained.
26 (7) Premium or other charges for any other
27 guarantee or insurance protecting the lender against the
28 obligor's default or other credit loss.
29 (8) Any charge imposed by a lender upon another
30 lender for purchasing or accepting an obligation of an
31 obligor if the obligor is required to pay any part of
32 that charge in cash, as an addition to the obligation, or
33 as a deduction from the proceeds of the obligation.
34 A late payment, delinquency, default, reinstatement or
-20- LRB9009859JSsb
1 other such charge is not a finance charge if imposed for
2 actual unanticipated late payment, delinquency, default or
3 other occurrence.
4 (h) Advertising for loans transacted under this Section
5 may not be false, misleading, or deceptive. That advertising,
6 if it states a rate or amount of interest, must state that
7 rate as an annual percentage rate of interest charged. In
8 addition, if charges other than for interest are made in
9 connection with those loans, those charges must be separately
10 stated. No advertising may indicate or imply that the rates
11 or charges for loans are in any way "recommended",
12 "approved", "set" or "established" by the State government or
13 by this Act.
14 (i) A lender or creditor who complies with the federal
15 Truth in Lending Act, amendments thereto, and any regulations
16 issued or which may be issued thereunder, shall be deemed to
17 be in compliance with the provisions of subsections (f), (g)
18 and (h) of this Section.
19 (Source: P.A. 89-208, eff. 9-29-95; 90-437, eff. 1-1-98.)
20 Section 20. The Motor Vehicle Retail Installment Sales
21 Act is amended by changing Section 6 as follows:
22 (815 ILCS 375/6) (from Ch. 121 1/2, par. 566)
23 Sec. 6. (a) Except as provided under subsections (b) and
24 (c), every retail installment contract must provide for a
25 schedule of periodic installment payments from the due date
26 of the first installment payment to the date of the final
27 maturity of the contract.
28 (b) Retail installment contracts may provide for
29 balloon-note financing. For the purpose of this Section,
30 balloon-note financing shall mean the manner of purchase
31 whereby a consumer agrees to select and perform, at the
32 conclusion of a pre-determined schedule of installment
-21- LRB9009859JSsb
1 payments made in periodic or monthly amounts, one of the
2 following options:
3 (1) satisfy the balance of the contractual amount
4 owing;
5 (2) refinance any balance owing, on the terms
6 previously agreed upon at the time of executing the
7 retail installment contract; or
8 (3) surrender the vehicle at such time and manner
9 agreed upon at the time of executing the retail
10 installment contract.
11 (c) Retail installment contracts may provide for
12 deferred payment of a down payment provided any deferred
13 portion of a down payment is payable not later than 10 days
14 prior to the due date of the first regularly scheduled
15 payment and is not subject to a finance charge.
16 (d) Retail installment contracts may be precomputed or
17 interest bearing. A retail installment contract entered into
18 after the effective date of this amendatory Act of 1998 may
19 not provide for the charging of interest on a precomputed
20 basis.
21 (Source: P.A. 90-437, eff. 1-1-98.)
22 Section 25. The Retail Installment Sales Act is amended
23 by changing Section 6 as follows:
24 (815 ILCS 405/6) (from Ch. 121 1/2, par. 506)
25 Sec. 6. (a) Every retail installment contract must
26 provide for a schedule of periodic installment payments from
27 the due date of the first installment payment to the date of
28 the final maturity of the contract.
29 (b) Retail installment contracts may provide for
30 balloon-note financing. For the purpose of this Section,
31 "balloon-note financing" means the manner of purchase whereby
32 a consumer agrees to select and perform, at the conclusion of
-22- LRB9009859JSsb
1 a predetermined schedule of installment payments made in
2 periodic or monthly amounts, one of the following options:
3 (1) satisfy the balance of the contractual amount
4 owing; or
5 (2) refinance any balance owing, on the terms
6 previously agreed upon at the time of executing the
7 retail installment contract.
8 (c) Retail installment contracts may provide for
9 deferred payment of a down payment provided any deferred
10 portion of a down payment is payable not later than 10 days
11 prior to the due date of the first regularly scheduled
12 payment and is not subject to a finance charge.
13 (d) Retail installment sales contracts may be
14 precomputed or interest bearing. A retail installment sales
15 contract entered into after the effective date of this
16 amendatory Act of 1998 may not provide for the charging of
17 interest on a precomputed basis.
18 (Source: P.A. 90-437, eff. 1-1-98.)