101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB1758

 

Introduced 2/15/2019, by Sen. Antonio Muņoz

 

SYNOPSIS AS INTRODUCED:
 
205 ILCS 670/15  from Ch. 17, par. 5415
815 ILCS 122/2-5

    Amends the Consumer Installment Loan Act and the Payday Loan Reform Act. Provides that "substantially equal installment" includes a last regularly scheduled payment that is no more than 5% as large as the previous scheduled payment according to a disclosed payment schedule agreed to by the parties. Effective immediately.


LRB101 10278 AMC 55383 b

 

 

A BILL FOR

 

SB1758LRB101 10278 AMC 55383 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Consumer Installment Loan Act is amended by
5changing Section 15 as follows:
 
6    (205 ILCS 670/15)  (from Ch. 17, par. 5415)
7    Sec. 15. Charges permitted.
8    (a) Every licensee may lend a principal amount not
9exceeding $40,000 and, except as to small consumer loans as
10defined in this Section, may charge, contract for and receive
11thereon interest at an annual percentage rate of no more than
1236%, subject to the provisions of this Act; provided, however,
13that the limitation on the annual percentage rate contained in
14this subsection (a) does not apply to title-secured loans,
15which are loans upon which interest is charged at an annual
16percentage rate exceeding 36%, in which, at commencement, an
17obligor provides to the licensee, as security for the loan,
18physical possession of the obligor's title to a motor vehicle,
19and upon which a licensee may charge, contract for, and receive
20thereon interest at the rate agreed upon by the licensee and
21borrower. For purposes of this Section, the annual percentage
22rate shall be calculated in accordance with the federal Truth
23in Lending Act.

 

 

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1    (b) For purpose of this Section, the following terms shall
2have the meanings ascribed herein.
3    "Applicable interest" for a precomputed loan contract
4means the amount of interest attributable to each monthly
5installment period. It is computed as if each installment
6period were one month and any interest charged for extending
7the first installment period beyond one month is ignored. The
8applicable interest for any monthly installment period is, for
9loans other than small consumer loans as defined in this
10Section, that portion of the precomputed interest that bears
11the same ratio to the total precomputed interest as the
12balances scheduled to be outstanding during that month bear to
13the sum of all scheduled monthly outstanding balances in the
14original contract. With respect to a small consumer loan, the
15applicable interest for any installment period is that portion
16of the precomputed monthly installment account handling charge
17attributable to the installment period calculated based on a
18method at least as favorable to the consumer as the actuarial
19method, as defined by the federal Truth in Lending Act.
20    "Interest-bearing loan" means a loan in which the debt is
21expressed as a principal amount plus interest charged on actual
22unpaid principal balances for the time actually outstanding.
23    "Precomputed loan" means a loan in which the debt is
24expressed as the sum of the original principal amount plus
25interest computed actuarially in advance, assuming all
26payments will be made when scheduled.

 

 

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1    "Small consumer loan" means a loan upon which interest is
2charged at an annual percentage rate exceeding 36% and with an
3amount financed of $4,000 or less. "Small consumer loan" does
4not include a title-secured loan as defined by subsection (a)
5of this Section or a payday loan as defined by the Payday Loan
6Reform Act.
7    "Substantially equal installment" includes a last
8regularly scheduled payment that is no more than 5% as large as
9the previous scheduled payment according to a disclosed payment
10schedule agreed to by the parties.
11    (c) Loans may be interest-bearing or precomputed.
12    (d) To compute time for either interest-bearing or
13precomputed loans for the calculation of interest and other
14purposes, a month shall be a calendar month and a day shall be
15considered 1/30th of a month when calculation is made for a
16fraction of a month. A month shall be 1/12th of a year. A
17calendar month is that period from a given date in one month to
18the same numbered date in the following month, and if there is
19no same numbered date, to the last day of the following month.
20When a period of time includes a month and a fraction of a
21month, the fraction of the month is considered to follow the
22whole month. In the alternative, for interest-bearing loans,
23the licensee may charge interest at the rate of 1/365th of the
24agreed annual rate for each day actually elapsed.
25    (d-5) No licensee or other person may condition an
26extension of credit to a consumer on the consumer's repayment

 

 

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1by preauthorized electronic fund transfers. Payment options,
2including, but not limited to, electronic fund transfers and
3Automatic Clearing House (ACH) transactions may be offered to
4consumers as a choice and method of payment chosen by the
5consumer.
6    (e) With respect to interest-bearing loans:
7        (1) Interest shall be computed on unpaid principal
8    balances outstanding from time to time, for the time
9    outstanding, until fully paid. Each payment shall be
10    applied first to the accumulated interest and the remainder
11    of the payment applied to the unpaid principal balance;
12    provided however, that if the amount of the payment is
13    insufficient to pay the accumulated interest, the unpaid
14    interest continues to accumulate to be paid from the
15    proceeds of subsequent payments and is not added to the
16    principal balance.
17        (2) Interest shall not be payable in advance or
18    compounded. However, if part or all of the consideration
19    for a new loan contract is the unpaid principal balance of
20    a prior loan, then the principal amount payable under the
21    new loan contract may include any unpaid interest which has
22    accrued. The unpaid principal balance of a precomputed loan
23    is the balance due after refund or credit of unearned
24    interest as provided in paragraph (f), clause (3). The
25    resulting loan contract shall be deemed a new and separate
26    loan transaction for all purposes.

 

 

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1        (3) Loans must be fully amortizing and be repayable in
2    substantially equal and consecutive weekly, biweekly,
3    semimonthly, or monthly installments. Notwithstanding this
4    requirement, rates may vary according to an index that is
5    independently verifiable and beyond the control of the
6    licensee.
7        (4) The lender or creditor may, if the contract
8    provides, collect a delinquency or collection charge on
9    each installment in default for a period of not less than
10    10 days in an amount not exceeding 5% of the installment on
11    installments in excess of $200, or $10 on installments of
12    $200 or less, but only one delinquency and collection
13    charge may be collected on any installment regardless of
14    the period during which it remains in default.
15    (f) With respect to precomputed loans:
16        (1) Loans shall be repayable in substantially equal and
17    consecutive weekly, biweekly, semimonthly, or monthly
18    installments of principal and interest combined, except
19    that the first installment period may be longer than one
20    month by not more than 15 days, and the first installment
21    payment amount may be larger than the remaining payments by
22    the amount of interest charged for the extra days; and
23    provided further that monthly installment payment dates
24    may be omitted to accommodate borrowers with seasonal
25    income.
26        (2) Payments may be applied to the combined total of

 

 

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1    principal and precomputed interest until the loan is fully
2    paid. Payments shall be applied in the order in which they
3    become due, except that any insurance proceeds received as
4    a result of any claim made on any insurance, unless
5    sufficient to prepay the contract in full, may be applied
6    to the unpaid installments of the total of payments in
7    inverse order.
8        (3) When any loan contract is paid in full by cash,
9    renewal or refinancing, or a new loan, one month or more
10    before the final installment due date, a licensee shall
11    refund or credit the obligor with the total of the
12    applicable interest for all fully unexpired installment
13    periods, as originally scheduled or as deferred, which
14    follow the day of prepayment; provided, if the prepayment
15    occurs prior to the first installment due date, the
16    licensee may retain 1/30 of the applicable interest for a
17    first installment period of one month for each day from the
18    date of the loan to the date of prepayment, and shall
19    refund or credit the obligor with the balance of the total
20    interest contracted for. If the maturity of the loan is
21    accelerated for any reason and judgment is entered, the
22    licensee shall credit the borrower with the same refund as
23    if prepayment in full had been made on the date the
24    judgement is entered.
25        (4) The lender or creditor may, if the contract
26    provides, collect a delinquency or collection charge on

 

 

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1    each installment in default for a period of not less than
2    10 days in an amount not exceeding 5% of the installment on
3    installments in excess of $200, or $10 on installments of
4    $200 or less, but only one delinquency or collection charge
5    may be collected on any installment regardless of the
6    period during which it remains in default.
7        (5) If the parties agree in writing, either in the loan
8    contract or in a subsequent agreement, to a deferment of
9    wholly unpaid installments, a licensee may grant a
10    deferment and may collect a deferment charge as provided in
11    this Section. A deferment postpones the scheduled due date
12    of the earliest unpaid installment and all subsequent
13    installments as originally scheduled, or as previously
14    deferred, for a period equal to the deferment period. The
15    deferment period is that period during which no installment
16    is scheduled to be paid by reason of the deferment. The
17    deferment charge for a one month period may not exceed the
18    applicable interest for the installment period immediately
19    following the due date of the last undeferred payment. A
20    proportionate charge may be made for deferment for periods
21    of more or less than one month. A deferment charge is
22    earned pro rata during the deferment period and is fully
23    earned on the last day of the deferment period. Should a
24    loan be prepaid in full during a deferment period, the
25    licensee shall credit to the obligor a refund of the
26    unearned deferment charge in addition to any other refund

 

 

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1    or credit made for prepayment of the loan in full.
2        (6) If two or more installments are delinquent one full
3    month or more on any due date, and if the contract so
4    provides, the licensee may reduce the unpaid balance by the
5    refund credit which would be required for prepayment in
6    full on the due date of the most recent maturing
7    installment in default. Thereafter, and in lieu of any
8    other default or deferment charges, the agreed rate of
9    interest or, in the case of small consumer loans, interest
10    at the rate of 18% per annum, may be charged on the unpaid
11    balance until fully paid.
12        (7) Fifteen days after the final installment as
13    originally scheduled or deferred, the licensee, for any
14    loan contract which has not previously been converted to
15    interest-bearing under paragraph (f), clause (6), may
16    compute and charge interest on any balance remaining
17    unpaid, including unpaid default or deferment charges, at
18    the agreed rate of interest or, in the case of small
19    consumer loans, interest at the rate of 18% per annum,
20    until fully paid. At the time of payment of said final
21    installment, the licensee shall give notice to the obligor
22    stating any amounts unpaid.
23(Source: P.A. 96-936, eff. 3-21-11.)
 
24    Section 10. The Payday Loan Reform Act is amended by
25changing Section 2-5 as follows:
 

 

 

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1    (815 ILCS 122/2-5)
2    Sec. 2-5. Loan terms.
3    (a) Without affecting the right of a consumer to prepay at
4any time without cost or penalty, no payday loan may have a
5minimum term of less than 13 days.
6    (b) Except for an installment payday loan as defined in
7this Section, no payday loan may be made to a consumer if the
8loan would result in the consumer being indebted to one or more
9payday lenders for a period in excess of 45 consecutive days.
10Except as provided under subsection (c) of this Section and
11Section 2-40, if a consumer has or has had loans outstanding
12for a period in excess of 45 consecutive days, no payday lender
13may offer or make a loan to the consumer for at least 7
14calendar days after the date on which the outstanding balance
15of all payday loans made during the 45 consecutive day period
16is paid in full. For purposes of this subsection, the term
17"consecutive days" means a series of continuous calendar days
18in which the consumer has an outstanding balance on one or more
19payday loans; however, if a payday loan is made to a consumer
20within 6 days or less after the outstanding balance of all
21loans is paid in full, those days are counted as "consecutive
22days" for purposes of this subsection.
23    (c) Notwithstanding anything in this Act to the contrary, a
24payday loan shall also include any installment loan otherwise
25meeting the definition of payday loan contained in Section

 

 

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11-10, but that has a term agreed by the parties of not less
2than 112 days and not exceeding 180 days; hereinafter an
3"installment payday loan". The following provisions shall
4apply:
5        (i) Any installment payday loan must be fully
6    amortizing, with a finance charge calculated on the
7    principal balances scheduled to be outstanding and be
8    repayable in substantially equal and consecutive
9    installments, according to a payment schedule agreed by the
10    parties with not less than 13 days and not more than one
11    month between payments; except that the first installment
12    period may be longer than the remaining installment periods
13    by not more than 15 days, and the first installment payment
14    may be larger than the remaining installment payments by
15    the amount of finance charges applicable to the extra days.
16    In calculating finance charges under this subsection, when
17    the first installment period is longer than the remaining
18    installment periods, the amount of the finance charges
19    applicable to the extra days shall not be greater than
20    $15.50 per $100 of the original principal balance divided
21    by the number of days in a regularly scheduled installment
22    period and multiplied by the number of extra days
23    determined by subtracting the number of days in a regularly
24    scheduled installment period from the number of days in the
25    first installment period.
26        (ii) An installment payday loan may be refinanced by a

 

 

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1    new installment payday loan one time during the term of the
2    initial loan; provided that the total duration of
3    indebtedness on the initial installment payday loan
4    combined with the total term of indebtedness of the new
5    loan refinancing that initial loan, shall not exceed 180
6    days. For purposes of this Act, a refinancing occurs when
7    an existing installment payday loan is paid from the
8    proceeds of a new installment payday loan.
9        (iii) In the event an installment payday loan is paid
10    in full prior to the date on which the last scheduled
11    installment payment before maturity is due, other than
12    through a refinancing, no licensee may offer or make a
13    payday loan to the consumer for at least 2 calendar days
14    thereafter.
15        (iv) No installment payday loan may be made to a
16    consumer if the loan would result in the consumer being
17    indebted to one or more payday lenders for a period in
18    excess of 180 consecutive days. The term "consecutive days"
19    does not include the date on which a consumer makes the
20    final installment payment.
21    (d) (Blank).
22    (e) No lender may make a payday loan to a consumer if the
23total of all payday loan payments coming due within the first
24calendar month of the loan, when combined with the payment
25amount of all of the consumer's other outstanding payday loans
26coming due within the same month, exceeds the lesser of:

 

 

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1        (1) $1,000; or
2        (2) in the case of one or more payday loans, 25% of the
3    consumer's gross monthly income; or
4        (3) in the case of one or more installment payday
5    loans, 22.5% of the consumer's gross monthly income; or
6        (4) in the case of a payday loan and an installment
7    payday loan, 22.5% of the consumer's gross monthly income.
8    No loan shall be made to a consumer who has an outstanding
9balance on 2 payday loans, except that, for a period of 12
10months after March 21, 2011 (the effective date of Public Act
1196-936), consumers with an existing CILA loan may be issued an
12installment loan issued under this Act from the company from
13which their CILA loan was issued.
14    (e-5) Except as provided in subsection (c)(i), no lender
15may charge more than $15.50 per $100 loaned on any payday loan,
16or more than $15.50 per $100 on the initial principal balance
17and on the principal balances scheduled to be outstanding
18during any installment period on any installment payday loan.
19Except for installment payday loans and except as provided in
20Section 2-25, this charge is considered fully earned as of the
21date on which the loan is made. For purposes of determining the
22finance charge earned on an installment payday loan, the
23disclosed annual percentage rate shall be applied to the
24principal balances outstanding from time to time until the loan
25is paid in full, or until the maturity date, whichever occurs
26first. No finance charge may be imposed after the final

 

 

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1scheduled maturity date.
2    When any loan contract is paid in full, the licensee shall
3refund any unearned finance charge. The unearned finance charge
4that is refunded shall be calculated based on a method that is
5at least as favorable to the consumer as the actuarial method,
6as defined by the federal Truth in Lending Act. The sum of the
7digits or rule of 78ths method of calculating prepaid interest
8refunds is prohibited.
9    (f) A lender may not take or attempt to take an interest in
10any of the consumer's personal property to secure a payday
11loan.
12    (g) A consumer has the right to redeem a check or any other
13item described in the definition of payday loan under Section
141-10 issued in connection with a payday loan from the lender
15holding the check or other item at any time before the payday
16loan becomes payable by paying the full amount of the check or
17other item.
18    (h) For the purpose of this Section, "substantially equal
19installment" includes a last regularly scheduled payment that
20is no more than 5% as large as the previous scheduled payment
21according to a disclosed payment schedule agreed to by the
22parties.
23(Source: P.A. 100-201, eff. 8-18-17.)
 
24    Section 99. Effective date. This Act takes effect upon
25becoming law.