HB4781 96TH GENERAL ASSEMBLY

LRB096 16778 MJR 32078 b

96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
HB4781

Introduced 1/12/2010, by Rep. Marlow H. Colvin - Karen A. Yarbrough - Deborah L. Graham

SYNOPSIS AS INTRODUCED:

See Index

Creates the Debt Settlement Consumer Protection Act. Provides that it shall be unlawful for any person to operate as a debt settlement provider or engage in debt settlement service except as authorized by the Act and without first having obtained a license under the Act. Contains provisions concerning the (1) application for a license, (2) qualifications for licensure, (3) renewal of a license, (4) display requirements for a license, (5) temporary licensed locations, (6) denial of a license, (7) revocation or suspension of a license, (8) maintenance of records by a licensee, (9) examination of a licensee, (10) maintenance of trust funds by a licensee, and (11) other licensee businesses. With respect to the Director of Financial Institutions, contains provisions concerning the (1) adoption of rules by the Director, (2) penalties for violations of the Act, (3) procedure the Director may take to obtain an injunction, (4) review of decisions, (5) issuance of cease and desist orders. Contains provisions concerning (1) advertising practices, (2) individualized financial analysis, (3) required disclosures, (4) debt settlement contracts, (5) fees, (6) consumer settlement accounts, (7) cancellation of contracts, (8) obligations of good faith, (9) prohibited practices and noncompliance with the Act, and (10) civil remedies. Amends the Debt Management Service Act to exclude "debt settlement service" and attorneys engaged in specific practices from the Act. Amends the State Finance Act to provide that moneys collected under the Debt Settlement Consumer Protection Act shall be deposited into the Financial Institution Fund. Contains a severability clause. Amends the Consumer Fraud and Deceptive Business Practices Act to specify that a violation of the Debt Settlement Consumer Protection Act is a violation of the Act. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning debt settlement.

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

Section 1. Short title. This Act may be cited as the Debt Settlement Consumer Protection Act.

Section 5. Purpose and construction. The purpose of this Act is to protect consumers who enter into agreements with debt settlement providers and to regulate debt settlement providers. This Act shall be construed as a consumer protection law for all purposes. This Act shall be liberally construed to effectuate its purpose.

Section 10. Definitions. As used in this Act:

"Consumer" means any person who purchases or contracts for the purchase of debt settlement services.

"Consumer settlement account" means any account or other means or device in which payments, deposits, or other transfers from a consumer are arranged, held, or transferred by or to a debt settlement provider for the accumulation of the consumer's funds in anticipation of proffering an adjustment or settlement of a debt or obligation of the consumer to a creditor on behalf of the consumer.

"Debt settlement provider" means any person or entity engaging in, or holding itself out as engaging in, the business of providing debt settlement service in exchange for any fee or compensation, or any person who solicits for or acts on behalf of any person or entity engaging in, or holding itself out as engaging in, the business of providing debt settlement service in exchange for any fee or compensation. "Debt settlement provider" does not include:

(1) attorneys licensed to practice in Illinois when acting in the ordinary practice of their professions and through the entity used in the ordinary practice of their profession, and not holding themselves out as debt settlement providers, and not providing debt settlement service, except as incidental to other legal representation;

(2) escrow agents, accountants, broker dealers in securities, or investment advisors in securities, when acting in the ordinary practice of their professions and through the entity used in the ordinary practice of their profession;

(3) any bank, agent of a bank, trust company, savings and loan association, savings bank, credit union, crop credit association, development credit corporation, industrial development corporation, title insurance company, or insurance company operating or organized under the laws of a state or the United States, or any other person authorized to make loans under State law while acting in the ordinary practice of that business;

(4) any person who performs credit services for his employer while receiving a regular salary or wage when the employer is not engaged in the business of offering or providing debt settlement service;

(5) an organization that is described in Section 501(c)(3) and subject to Section 501(q) of Title 26 of the United States Code and exempt from tax under Section 501(a) of Title 26 of the United States Code and governed by the Debt Management Service Act;

(6) public officers while acting in their official capacities and persons acting under court order; or

(7) any person while performing services incidental to the dissolution, winding up, or liquidating of a partnership, corporation, or other business enterprise.

"Debt settlement service" means:

(1) offering to provide advice or service, or acting as an intermediary between or on behalf of a consumer and one or more of a consumer's creditors, where the primary purpose of the advice, service, or action is to obtain a settlement, adjustment, or satisfaction of the consumer's debt to a creditor in an amount less than the full amount of the principal amount of the debt or in an amount less than the current outstanding balance of the debt; or

(2) offering to provide services related to or providing services advising, encouraging, assisting, or counseling a consumer to accumulate funds for the primary purpose of proposing or obtaining or seeking to obtain a settlement, adjustment, or satisfaction of the consumer's debt to a creditor in an amount less than the full amount of the principal amount of the debt or in an amount less than the current outstanding balance of the debt. "Debt settlement service" does not include (A) services of an attorney in providing information, advice, or legal representation with respect to filing a case or proceeding under Title 11 of the United States Code or (B) debt management service as defined in the Debt Management Service Act.

"Director" means the Director of the Division of the Financial Institutions.

"Enrollment or set up fee" means any fee, obligation, or compensation paid or to be paid by the consumer to a debt settlement provider in consideration of or in connection with establishing a contract or other agreement with a consumer related to the provision of debt settlement service.

"Maintenance fee" means any fee, obligation, or compensation paid or to be paid by the consumer on a periodic basis to a debt settlement provider in consideration of maintaining the relationship and services to be provided by a debt settlement provider in accordance with a contract with a consumer related to the provision of debt settlement service.

"Principal amount of the debt" means the total amount or outstanding balance owed by a consumer to one or more creditors for a debt that is included in a contract for debt settlement service at the time when the consumer enters into a contract for debt settlement service.

"Savings" means the difference between the principal amount of the debt and the amount paid by the debt settlement provider to the creditor or negotiated by the debt settlement provider and paid by the consumer to the creditor pursuant to a settlement negotiated by the debt settlement provider on behalf of the consumer as full and complete satisfaction of the creditor's claim with regard to that debt.

"Settlement fee" means any fee, obligation, or compensation paid or to be paid by the consumer to a debt settlement provider in consideration of or in connection with a completed agreement or other arrangement on the part of a creditor to accept less than the principal amount of the debt as satisfaction of the creditor's claim against the consumer.

Section 15. Requirement of license. It shall be unlawful for any person to operate as a debt settlement provider or engage in debt settlement service except as authorized by this Act and without first having obtained a license under this Act.

Section 20. Application for license. An application for a license to operate as a debt settlement provider in this State shall be made to the Director and shall be in writing, under oath, and in the form prescribed by the Director.

Each applicant, at the time of making such application, shall pay to the Director the sum of $30 as a fee for investigation of the applicant, and the additional sum of $100 as a license fee.

Every applicant shall submit to the Director, at the time of the application for a license, a bond to be approved by the Director in which the applicant shall be the obligor, in the sum of $1,000,000 or an additional amount as required by the Director based on the amount of disbursements made by the licensee in the previous year, and in which an insurance company, which is duly authorized by the State of Illinois, to transact the business of fidelity and surety insurance shall be a surety.

The bond shall run to the Director for the use of the Division or of any person or persons who may have a cause of action against the obligor in said bond arising out of any violation of this Act or rules by a license. Such bond shall be conditioned that the obligor must faithfully conform to and abide by the provisions of this Act and of all rules and directions lawfully made by the Director and pay to the Director or to any person or persons any and all money that may become due or owing to the State or to such person or persons, from the obligor under and by virtue of the provisions of this Act.

Section 25. Qualifications for license. Upon the filing of the application and the approval of the bond and the payment of the specified fees, the Director shall issue a license if he or she finds all of the following:

(1) The financial responsibility, experience, character, and general fitness of the applicant, the managers, if the applicant is a limited liability company, the partners, if the applicant is a partnership, and the officers and directors, if the applicant is a corporation or a not for profit corporation, are such as to command the confidence of the community and to warrant belief that the business will be operated fairly, honestly, and efficiently within the purposes of this Act.

(2) The applicant, if an individual, the managers, if the applicant is a limited liability company, the partners, if the applicant is a partnership, and the officers and directors, if the applicant is a corporation, have not been convicted of a felony or a misdemeanor or disciplined with respect to a license or are not currently the subject of a license disciplinary proceeding concerning allegations involving dishonesty or untrustworthiness.

(3) The person or persons have not had a record of having defaulted in the payment of money collected for others, including the discharge of those debts through bankruptcy proceedings.

(4) The applicant, or any officers, directors, partners, or managers have not previously violated any provision of this Act or any rule lawfully made by the Director.

(5) The applicant has not made any false statement or representation to the Director in applying for a license under this Section.

The Director shall deliver a license to the applicant to operate as a debt settlement provider in accordance with the provisions of this Act at the location specified in the application. The license shall remain in full force and effect until it is surrendered by the licensee or revoked by the Director as provided in this Act; provided, however, that each license shall expire by its terms on January 1 next following its issuance unless it is renewed as provided in this Act. A license, however, may not be surrendered without the approval of the Director.

More than one license may be issued to the same person for separate places of business, but separate applications shall be made for each place of business.

Section 30. Renewal of license.

(a) Each licensee under the provisions of this Act may make application to the Director for renewal of its license, which application for renewal shall be on the form prescribed by the Director and shall be accompanied by a fee of $100 together with a bond or other surety as required, in a minimum amount of $1,000,000 or an amount as required by the Director based on the amount of disbursements made by the licensee in the previous year. The application must be received by the Division no later than December 1 of the year preceding the year for which the application applies.

Section 33. Annual report; licensee disclosure of statistical information; Director to report statistical information.

(a) A licensee must file an annual report with the Director that must include all of the following:

(1) the total amount of debt for all consumers for whom a licensee is providing debt settlement services as of December 31;

(2) the total principal amount of debt of all consumers that entered into agreements;

(3) the total number of consumers that entered into agreements;

(4) the total number of consumers with outstanding debt settlement service agreements in this State;

(5) the total number of consumers who terminated, withdrew, abandoned, or were terminated from an agreement;

(6) the total number of who consumers who completed a program;

(7) the total number of debts settled by the provider;

(8) the total dollar amount of debts settled by the provider per each Illinois consumer, as follows:

(A) the dollar amount of the settled debt, as of the establishment of the program;

(B) the dollar amount of the settled debt at the time of settlement, with the concessions measured by the difference between the principal debt and the settlement amount;

(C) the dollar amount of the settled debt with debtor concessions measured by the difference between the principal debt and the settlement amount;

(D) for persons completing the program during the reporting period, the median percentage of the original principal amount of the debt that was settled and the median of fees paid;

(E) for persons who cancelled, became inactive in, or terminated the program during the reporting period, the median percentage of the original principal amount of the debt which was settled and the median in fees paid; and

(F) the percentage of consumers who cancelled, terminated, became inactive, or completed the program without the settlement of all of the enrolled debt; and

(9) the total amount of fees collected from consumers in this State.

The annual report must contain a declaration executed by an official authorized by the licensee under penalty of perjury that states that the report complies with this Section.

(b) The Director shall prepare and make available to the public an annual consolidated report of all the data licensees are required to report pursuant to subsection (a) of this Section.

Section 35. License, display, and location of license. Each license issued shall be kept conspicuously posted in the place of business of the licensee. The business location may be changed by any licensee upon 10 days prior written notice to the Director. A licensee must operate under the name as stated in its original application.

Section 40. Temporary location. The Director may approve a temporary additional business location for the purpose of allowing a licensee to conduct business outside the licensed location.

Section 45. Denial of license. Any application for a license shall be approved or denied within 60 days after the filing of an application with the Director.

Section 50. Revocation or suspension of license.

(a) The Director may revoke or suspend any license if he or she finds that:

(1) any licensee has failed to pay the annual license fee or to maintain in effect the bond required under the provisions of this Act;

(2) the licensee has violated any provisions of this Act or any rule lawfully made by the Director under the authority of this Act;

(3) any fact or condition exists that, if it had existed at the time of the original application for a license, would have warranted the Director in refusing its issuance; or

(4) any applicant has made any false statement or representation to the Director in applying for a license under this Act.

(b) 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 Director shall serve notice of his or her action, including a statement of the reasons for his or her actions, either personally or by certified mail, return receipt requested. Service by mail shall be deemed completed if the notice is deposited in the U.S. Mail.

(c) In the case of a denial of an application or renewal of a license, the applicant or licensee may request, in writing, a hearing within 30 days after the date of service. In the case of a denial of a renewal of a license, the license shall be deemed to continue in force until 30 days after the service of the notice of denial, or if a hearing is requested during that period, until a final administrative order is entered.

(d) An order of revocation or suspension of a license shall take effect upon service of the order unless the licensee requests, in writing, a hearing within 10 days after the date of service. In the event a hearing is requested, the order shall be stayed until a final administrative order is entered.

(e) If the licensee requests a hearing, the Director shall schedule the hearing within 30 days after the request for a hearing unless otherwise agreed to by the parties.

(f) The hearing shall be held at the time and place designated by the Director. The Director and any administrative law judge designated by the Director 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 the Director considers relevant or material to the injury.

(g) The costs for the administrative hearing shall be set by rule.

(h) The Director shall have the authority to adopt rules for the administration of this Section.

Section 55. Contracts, books, records, and contract cancellation. Each licensee shall furnish to the Director, when requested, a copy of the contract entered into between the licensee and the debtor. The licensee shall furnish the debtor with a copy of the written contract at the time of execution, which shall set forth the charges, if any, agreed upon for the services of the licensee.

Each licensee shall maintain records and accounts that will enable any debtor contracting with the licensee, at any reasonable time, to ascertain the amounts paid to creditors of the debtor. A statement showing the total amount received and the total disbursements to each creditor shall be furnished by the licensee to any individual within 7 days after a request therefor by the said debtor. Each licensee shall issue a receipt for each payment made by the debtor at a licensee's office. Each licensee shall prepare and retain in the file of each debtor a written analysis of debtor's income and expenses to substantiate that the plan of payment is feasible and practical.

Section 60. Examination of licensee; duty to disclose a post-license event.

(a) The Director at any time, either in person or through an appointed representative, may examine the condition and affairs of a licensee. In connection with any examination, the Director may examine on oath any licensee and any director, officer, employee, customer, manager, partner, member, creditor, or stockholder of a licensee concerning the affairs and business of the licensee. The Director shall ascertain whether the licensee transacts its business in the manner prescribed by law and the rules issued thereunder. The licensee shall pay the cost of the examination as determined by the Director by administrative rule. Failure to pay the examination fee within 30 days after receipt of demand from the Director may result in the suspension of the license until the fee is paid. The Director shall have the right to investigate and examine any person, whether licensed or not, who is engaged in the debt settlement service business. The Director shall have the power to subpoena the production of any books and records pertinent to any investigation.

(b) Each licensee shall disclose promptly to the Director, but in no event more than 30 days after the occurrence of the event, any change in any of the criteria listed in Section 25 of this Act for the issuance of a license.

Section 65. Trust funds; requirements and restrictions.

(a) All funds received by a licensee or his agent from and for the purpose of paying bills, invoices, or accounts of a debtor shall constitute trust funds owned by and belonging to the debtor from whom they were received. All such funds received by a licensee shall be separated from the funds of the licensee not later than the end of the business day following receipt by the licensee. All such funds shall be kept separate and apart at all times from funds belonging to the licensee or any of its officers, employees, or agents and may be used for no purpose other than paying bills, invoices, or accounts of the debtor. All such trust funds received at the main or branch offices of a licensee shall be deposited in a bank in an account in the name of the licensee-designated trust account, or by some other appropriate name indicating that the funds are not the funds of the licensee or its officers, employees, or agents, on or before the close of the business day following receipt.

(b) Prior to separation and deposit by the licensee, such funds may be used by the licensee only for the making of change or the cashing of checks in the normal course of its business. Such funds are not subject to attachment, lien, levy of execution, or sequestration by order of court except by a debtor for whom a licensee is acting as an agent in paying bills, invoices, or accounts.

(c) Each licensee shall make remittances within 30 days after initial receipt of funds, and thereafter remittances shall be made within 15 days after receipt, less fees and costs, unless the reasonable payment of one or more of the debtor's obligations requires that the funds be held for a longer period so as to accumulate a sum certain.

(d) At least once every month, the licensee shall render an accounting to the debtor that shall itemize the total amount received from the debtor, the total amount paid each creditor, the amount of charges deducted, and any amount held in reserve. A licensee shall, in addition, provide such an accounting to a debtor within 7 days after written demand, but not more than 3 times per 6-month period.

(e) Nothing in this Act requires the establishment of a trust account if no consumer funds other than earned settlement fees are held or controlled by a debt settlement provider.

Section 70. Other business. Upon application by the licensee, and approval by the Director, the Director may approve the conduct of other businesses in the licensee's place of business. The approval shall be in writing and shall describe the other businesses that may be conducted in the licensed office. The Director shall make and enforce reasonable rules to prevent evasions or violations of this Act. The Director may investigate any business conducted in the licensed office to determine whether any evasion or violation of this Act has occurred.

Section 75. Rules. The Director shall adopt and enforce all reasonable rules necessary or appropriate for the administration of this Act. The rulemaking shall be subject to the provisions of the Illinois Administrative Procedure Act.

Section 80. Penalties.

(a) Any person who operates as a debt settlement provider without a license shall be guilty of a Class 4 felony.

(b) Any contract of debt settlement service as defined in this Act made by an unlicensed person shall be null and void and of no legal effect.

(c) The Director may set by rule monetary penalties for violation of this Act.

Section 85. Injunction. To engage in debt settlement service, render financial service, or accept debtors' funds, as defined in this Act, without a valid license so to do, is hereby declared to be inimical to the public welfare and to constitute a public nuisance. The Director may, in the name of the people of the State of Illinois, through the Attorney General of the State of Illinois, file a complaint for an injunction in the circuit court to enjoin such person, from engaging in that business. An injunction proceeding shall be in addition to, and not in lieu of, penalties and remedies otherwise in this Act provided.

Section 90. Review. All final administrative decisions of the Director under this Act shall be subject to judicial review pursuant to the provisions of the Administrative Review Law, including all amendments, modifications, and adopted rules.

Section 95. Cease and desist orders.

(a) The Director may issue a cease and desist order to any licensee or other person doing business without the required license when, in the opinion of the Director, the licensee or other person is violating or is about to violate any provision of the Act or any rule or condition imposed in writing by the Division.

(b) The Director may issue a cease and desist order prior to a hearing.

(c) The Director shall serve notice of his or her action, including a statement of the reasons for his or her action either personally or by certified mail, return receipt requested. Service by mail shall be deemed completed if the notice is deposited in the U.S. Mail.

(d) Within 10 days after service of the cease and desist order, the licensee or other person may request, in writing, a hearing.

(e) The Director shall schedule a hearing within 30 days after the request for a hearing unless otherwise agreed to by the parties.

(f) The Director shall have the authority to adopt rules for the administration of this Section.

(g) If it is determined that the Director had the authority to issue the cease and desist order, then he or she may issue such orders as may be reasonably necessary to correct, eliminate, or remedy that conduct.

(h) The powers vested in the Director by this Section are additional to any and all other powers and remedies vested in the Director by law, and nothing in this Section shall be construed as requiring that the Director shall employ the power conferred in this Section instead of or as a condition precedent to the exercise of any other power or remedy vested in the Director.

(i) The cost for the administrative hearing shall be set by rule.

Section 100. Moneys received; Financial Institution Fund. All moneys received by the Division of Financial Institutions under this Act shall be deposited in the Financial Institution Fund created under Section 6z-26 of the State Finance Act.

Section 105. Advertising and marketing practices.

(a) A debt settlement provider shall not represent, expressly or by implication, any results or outcomes of its debt settlement services in any advertising, marketing, or other communication to consumers.

(b) A debt settlement provider shall not, expressly or by implication, make any unfair or deceptive representations, or any omissions of material facts, in any of its advertising or marketing communications concerning debt settlement services.

(c) All advertising and marketing communications concerning debt settlement services shall disclose the following material information clearly and conspicuously:

(1) that not all creditors or debt collectors will accept a reduction in the balance, interest rate, or fees a consumer owes the creditor or debt collector;

(2) that, during the time period of debt settlement services, the consumer's creditors or debt collectors may pursue collection efforts, including filing lawsuits against the consumer;

(3) that the use of debt settlement service may harm the consumer's credit rating and may result in increased balances on the consumer's debts due to fees and interest charges; and

(4) that any savings the consumer realizes from the debt settlement service may be taxable income.

Section 110. Individualized financial analysis.

(a) Prior to entering into a written contract with a consumer, a debt settlement provider shall prepare and provide to the consumer in writing and retain a copy of:

(1) an individualized financial analysis, including the individual's income, expenses, and debts; and

(2) a statement containing a good faith estimate of the length of time it will take to complete the debt settlement program, the total amount of debt owed to each creditor included in the debt settlement program, the total savings estimated to be necessary to complete the debt settlement program, and the monthly targeted savings amount necessary to complete the debt settlement program.

(b) A debt settlement provider shall not enter into a written contract with a consumer unless it makes written determinations, supported by the financial analysis, that:

(1) the consumer can reasonably meet the requirements of the proposed debt settlement program, including the fees and the periodic savings amounts set forth in the savings goals;

(2) there is a net tangible financial benefit to the consumer of entering into the proposed debt settlement program; and

(3) the debt settlement program is suitable for the consumer at the time the contract is to be signed.

Section 115. Required pre-sale consumer disclosures and warnings.

(a) Before the consumer signs a contract, the debt settlement provider shall provide an oral and written notice to the consumer that clearly and conspicuously discloses all of the following:

(1) Debt settlement services may not be suitable for all consumers.

(2) Using a debt settlement service likely will harm the consumer's credit history and credit score.

(3) Using a debt settlement service does not stop creditor collection activity, including creditor lawsuits and garnishments

(4) Not all creditors will accept a reduction in the balance, interest rate, or fees a consumer owes.

(5) The consumer may inquire about other means of dealing with debt, including, but not limited to, nonprofit credit counseling and bankruptcy.

(6) The consumer remains legally obligated to make periodic or scheduled payments to creditors while participating in a debt settlement plan, and that the debt settlement provider will not make any periodic or scheduled payments to creditors on behalf of the consumer.

(7) The failure to make periodic or scheduled payments to a creditor is likely to:

(A) harm the consumer's credit history, credit rating, or credit score;

(B) lead the creditor to increase lawful collection activity, including litigation, garnishment of the consumer's wages, and judgment liens on the consumer's property; and

(C) lead to the imposition by the creditor of interest charges, late fees, and other penalty fees, increasing the principal amount of the debt.

(8) The amount of time necessary to achieve the represented results.

(9) The amount of money or the percentage of debt the consumer must accumulate before a settlement offer will be made to each of the consumer's creditors.

(b) The consumer shall sign and date an acknowledgment form entitled "Consumer Notice and Rights Form" that states: "I, the debtor, have received from the debt settlement provider a copy of the form entitled "Consumer Notice and Rights Form"." The debt settlement provider or its representative shall also sign and date the acknowledgment form, which includes the name and address of the debt settlement services provider. The acknowledgment form shall be in duplicate and incorporated into the "Consumer Notice and Rights Form". The original acknowledgment form shall be retained by the debt settlement provider, and the duplicate copy shall be retained within the form by the consumer.

(c) The requirements of this Section are satisfied if the provider provides the following warning verbatim, both orally and in writing, with the caption "CONSUMER NOTICE AND RIGHTS FORM" in at least 28-point font and the remaining portion in at least 14-point font, to a consumer before the consumer signs a contract for the debt settlement provider's services:

"CONSUMER NOTICE AND RIGHTS FORM

CAUTION

We CANNOT GUARANTEE that you successfully will reduce or eliminate your debt.

If you stop paying your creditors, there is a strong likelihood some or all of the following may happen:

- CREDITORS MAY STILL CONTACT YOU AND TRY TO COLLECT.

- CREDITORS MAY STILL SUE YOU FOR THE MONEY YOU OWE.

- YOUR WAGES OR BANK ACCOUNT MAY STILL BE GARNISHED.

- YOUR CREDIT RATING AND CREDIT SCORE LIKELY WILL BE HARMED.

- NOT ALL CREDITORS WILL AGREE TO ACCEPT A BALANCE REDUCTION.

- YOU SHOULD CONSIDER ALL YOUR OPTIONS FOR ADDRESSING YOUR DEBT, SUCH AS CREDIT COUNSELING AND BANKRUPTCY FILING.

- FEES, INTEREST, AND OTHER CHARGES WILL CONTINUE TO MOUNT UP DURING THE (INSERT NUMBER) MONTHS THIS PLAN IS IN EFFECT.

- EVEN IF WE DO SETTLE YOUR DEBT, YOU MAY STILL BE REQUIRED TO PAY TAXES ON THE AMOUNT FORGIVEN.

YOUR RIGHT TO CANCEL

If you sign a contract with a Debt Settlement Provider, you have the right to cancel at any time and receive a full refund of all unearned fees you have paid to the provider and all funds placed in your settlement fund that have not been paid to any creditors.

IF YOU THINK YOU HAVE BEEN DEFRAUDED

OR YOU HAVE QUESTIONS

If you think you have been defrauded by a debt settlement provider or have any questions, please bring it to the attention of the Illinois Attorney General's Office. Attorney General Toll-Free Numbers:

Carbondale [phone]

Springfield [phone]

Chicago [phone] I, the debtor, have received from the debt settlement provider a copy of the form entitled Consumer Notice and Rights Form.".

Section 120. Debt settlement contract.

(a) A debt settlement provider shall not provide debt settlement service to a consumer without a written contract signed and dated by both the consumer and the debt settlement provider.

(b) Any contract for the provision of debt settlement service entered into in violation of the provisions of this Section is void.

(c) A contract between a debt settlement provider and a consumer for the provision of debt settlement service shall disclose all of the following clearly and conspicuously:

(1) The name and address of the consumer.

(2) The date of execution of the contract.

(3) The legal name of the debt settlement provider, including any other business names used by the debt settlement provider.

(4) The corporate address and regular business address, including a street address, of the debt settlement provider.

(5) The telephone number at which the consumer may speak with a representative of the debt settlement provider during normal business hours.

(6) A complete list of the consumer's accounts, debts, and obligations to be included in the provision of debt settlement service, including the name of each creditor and principal amount of each debt.

(7) A description of the services to be provided by the debt settlement provider, including the expected time frame for settlement for each account, debt, or obligation included in item (6) of this subsection (c).

(8) An itemized list of all fees to be paid by the consumer to the debt settlement provider, and the date, approximate date, or circumstances under which each fee will become due.

(9) A good faith estimate of the total amount of all fees and compensation, not to exceed the amounts specified in Section 125 of this Act, to be collected by the debt settlement provider from the consumer for the provision of debt settlement service contemplated by the contract.

(10) A statement of the proposed savings goals for the consumer, stating the amount to be saved per month or other period, time period over which savings goal extends, and the total amount of the savings expected to be paid by the consumer pursuant to the terms of the contract.

(11) The amount of money or the percentage of debt the consumer must accumulate before a settlement offer will be made to each of the consumer's creditors.

(12) The written individualized financial analysis required by Section 110 of this Act.

(13) The contents of the "Consumer Notice and Rights Form" provided in Section 115.

(14) A written notice to the consumer that the consumer may cancel the contract at any time until after the debt settlement provider has fully performed each service the debt settlement provider contracted to perform or represented he or she would perform, and upon that event:

(A) the consumer shall be entitled to a full refund of all fees and compensation paid by the consumer to the debt settlement provider, and a full refund of all funds provided by the consumer to the debt settlement provider for a consumer settlement account, except for funds actually paid to a creditor on behalf of the consumer, under the terms of the contract for debt settlement service; and

(B) all powers of attorney granted to the debt settlement provider by the consumer shall be considered revoked and voided.

(15) A form the consumer may use to cancel the contract pursuant to the provisions of Section 135 of this Act. The form shall include the name and mailing address of the debt settlement provider and shall disclose clearly and conspicuously how the consumer can cancel the contract, including applicable addresses, telephone numbers, facsimile numbers, and electronic mail addresses the consumer can use to cancel the contract.

(f) If a debt settlement provider communicates with a consumer primarily in a language other than English, then the debt settlement provider shall furnish to the consumer a translation of all the disclosures and documents required by this Act in that other language.

Section 125. Fees.

(a) A debt settlement provider shall not charge fees of any type or receive compensation from a consumer in a type, amount, or timing other than fees or compensation permitted in this Section.

(b) A debt settlement provider shall not charge or receive from a consumer any enrollment fee, set up fee, up front fee of any kind, or any maintenance fee.

(c) A settlement fee shall not exceed an amount greater than 5% of the savings. If the amount paid by the debt settlement provider to the creditor or negotiated by the debt settlement provider and paid by the consumer to the creditor pursuant to a settlement negotiated by the debt settlement provider on behalf of the consumer as full and complete satisfaction of the creditor's claim with regard to that debt is greater than the principal amount of the debt, then the debt settlement provider shall not be entitled to any settlement fee.

(d) A debt settlement provider shall not collect any settlement fee from a consumer until a creditor enters into a legally enforceable agreement to accept funds in a specific dollar amount as full and complete satisfaction of the creditor's claim with regard to that debt and those funds are provided by the debt settlement provider on behalf of the consumer or are provided directly by the consumer to the creditor pursuant to a settlement negotiated by the debt settlement provider

Section 130. Consumer settlement accounts and monthly accounting.

(a) A debt settlement provider who receives funds from a consumer shall hold all funds received for a consumer settlement account in a properly designated trust account in a federally insured depository institution. The funds shall remain the property of the consumer until the debt settlement provider disburses the funds to a creditor on behalf of the consumer as full or partial satisfaction of the consumer's debt to the creditor or the creditor's claim against the consumer.

(b) A debt settlement provider shall not be named on a consumer's bank account, take a power of attorney in a consumer's bank account, create a demand draft on a consumer's bank account, exercise any control over any bank account held by or on behalf of the consumer, or obtain any information about a consumer's bank account from any person other than the consumer.

(c) A debt settlement provider shall, no less than monthly, provide each consumer with which it has a contract for the provision of debt settlement service a statement of account balances, fees paid, settlements completed, and remaining debts.

Section 135. Cancellation of contract and right to fee and settlement fund refunds.

(a) A consumer may cancel a contract with a debt settlement provider at any time before the debt settlement provider has fully performed each service the debt settlement provider contracted to perform or represented it would perform.

(b) If a consumer cancels a contract with a debt settlement provider, or at any time upon a material violation of this Act on the part of the debt settlement provider, then the debt settlement provider shall refund all fees and compensation, with the exception of any earned settlement fee, as well as all funds paid by the consumer to the debt settlement provider that have accumulated in a consumer settlement account and that the debt settlement provider has not disbursed to creditors. Upon cancellation, all powers of attorney and direct debit authorizations granted to the debt settlement provider by the consumer shall be considered revoked and voided.

(c) A debt settlement provider shall make any refund required under this Section within 5 business days after the notice of cancellation, and shall include with the refund a full statement of account showing fees received, fees refunded, savings held, payments to creditors, settlement fees earned if any, and savings refunded.

(d) Upon the cancellation of a contract under this Section, the debt settlement provider shall provide timely notice of the cancellation of the contract to each of the creditors with whom the debt settlement provider has had any prior communication on behalf of the consumer in connection with the provision of any debt settlement service.

Section 140. Obligation of good faith. A debt settlement provider shall act in good faith in all matters under this Act.

Section 145. Prohibited practices. A debt settlement provider shall not do any of the following:

(1) Charge or collect from a consumer any fee not permitted by, in an amount in excess of the maximum amount permitted by, or at a time earlier than permitted by Section 125 of this Act.

(2) Advise or represent, expressly or by implication, that consumers should stop making payments to their creditors.

(3) Change the mailing address on any of a consumer's creditor's statements.

(4) Make loans or offer credit or solicit or accept any note, mortgage, or negotiable instrument other than a check signed by the consumer and dated no later than the date of signature.

(5) Take any confession of judgment or power of attorney to confess judgment against the consumer or appear as the consumer or on behalf of the consumer in any judicial proceedings.

(6) Take any release or waiver of any obligation to be performed on the part of the debt settlement provider or any right of the consumer.

(7) Advertise, display, distribute, broadcast, or televise services or permit services to be displayed, advertised, distributed, broadcasted, or televised, in any manner whatsoever, that contains any false, misleading, or deceptive statements or representations with regard to any matter, including services to be performed, the fees to be charged by the debt settlement provider, or the effect those services will have on a consumer's credit rating or on creditor collection efforts.

(8) Receive any cash, fee, gift, bonus, premium, reward, or other compensation from any person other than the consumer explicitly for the provision of debt settlement service to that consumer.

(9) Offer or provide gifts or bonuses to consumers for signing a debt settlement service contract or for referring another potential customer or customer.

(10) Disclose to anyone the name or any personal information of a consumer for whom the debt settlement provider has provided or is providing debt settlement service other than to a consumer's own creditors or the debt settlement provider's agents, affiliates, or contractors for the purpose of providing debt settlement service without the prior consent of the consumer.

(11) Enter into a contract with a consumer without first providing the disclosures and financial analysis and making the determinations required by this Section.

(12) Misrepresent any material fact, make a material omission, or make a false promise directed to one or more consumers in connection with the solicitation, offering, contracting, or provision of debt settlement service.

(13) Violate the provisions of applicable do not call statutes.

(14) Purchase debts or engage in the practice or business of debt collection.

(15) Include in a debt settlement agreement any secured debt.

(16) Employ an unfair, unconscionable, or deceptive act or practice, including the knowing omission of any material information.

(17) Engage in any practice that prohibits or limits the consumer or any creditor from communication directly with one another.

(18) Represent or imply to a person participating in or considering debt settlement that purchase of any ancillary goods or services is required.

Section 150. Noncompliance with the Act.

(a) Any waiver by any consumer of any protection provided by or any right of the consumer under this Act:

(1) shall be treated as void; and

(2) may not be enforced by any federal or State court or any other person.

(b) Any attempt by any person to obtain a waiver from any consumer of any protection provided by or any right or protection of the consumer or any obligation or requirement of the debt settlement provider under this Act shall be a violation of this Act.

(c) Any contract for debt settlement service that does not comply with the applicable provisions of this Act:

(1) shall be treated as void; and

(2) may not be enforced by any federal or State court or any other person; and

Upon notice of a void contract, a refund by the debt settlement provider to the consumer shall be made as if the contract had been cancelled as provided in Section 135 of this Act.

Section 155. Civil remedies.

(a) A violation of Section 105, 110, 115, 120, 125, 130, 135, 140, 145, or 150 of this Act constitutes an unlawful practice under the Consumer Fraud and Deceptive Business Practices Act. All remedies, penalties, and authority granted to the Attorney General or State's Attorney by the Consumer Fraud and Deceptive Business Practices Act shall be available to him or her for the enforcement of this Act.

(b) A consumer who suffers loss by reason of a violation of Section 20, 25, 30, 35, 40, 45, 50, 55, 60, or 65 of this Act may bring a civil action in accordance with the Consumer Fraud and Deceptive Business Practices Act to enforce that provision. All remedies and rights granted to a consumer by the Consumer Fraud and Deceptive Business Practices Act shall be available to the consumer bringing such an action. The remedies and rights provided for in this Act are not exclusive, but cumulative, and all other applicable claims are specifically preserved.

Section 900. The State Finance Act is amended by changing Section 6z-26 as follows:

(30 ILCS 105/6z-26)

Sec. 6z-26. The Financial Institution Fund. All moneys received by the Department of Financial and Professional Regulation under the Safety Deposit License Act, the Foreign Exchange License Act, the Pawners Societies Act, the Sale of Exchange Act, the Currency Exchange Act, the Sales Finance Agency Act, the Debt Management Service Act, the Consumer Installment Loan Act, the Illinois Development Credit Corporation Act, the Title Insurance Act, the Debt Settlement Consumer Protection Act, and any other Act administered by the Department of Financial and Professional Regulation as the successor of the Department of Financial Institutions now or in the future (unless an Act specifically provides otherwise) shall be deposited in the Financial Institution Fund (hereinafter "Fund"), a special fund that is hereby created in the State Treasury.

Moneys in the Fund shall be used by the Department, subject to appropriation, for expenses incurred in administering the above named and referenced Acts.

The Comptroller and the State Treasurer shall transfer from the General Revenue Fund to the Fund any monies received by the Department after June 30, 1993, under any of the above named and referenced Acts that have been deposited in the General Revenue Fund.

As soon as possible after the end of each calendar year, the Comptroller shall compare the balance in the Fund at the end of the calendar year with the amount appropriated from the Fund for the fiscal year beginning on July 1 of that calendar year. If the balance in the Fund exceeds the amount appropriated, the Comptroller and the State Treasurer shall transfer from the Fund to the General Revenue Fund an amount equal to the difference between the balance in the Fund and the amount appropriated.

Nothing in this Section shall be construed to prohibit appropriations from the General Revenue Fund for expenses incurred in the administration of the above named and referenced Acts.

Moneys in the Fund may be transferred to the Professions Indirect Cost Fund, as authorized under Section 2105-300 of the Department of Professional Regulation Law of the Civil Administrative Code of Illinois.

(Source: P.A. 94-91, eff. 7-1-05.)

Section 905. The Debt Management Service Act is amended by changing Section 2 as follows:

(205 ILCS 665/2) (from Ch. 17, par. 5302)

Sec. 2. Definitions. As used in this Act:

"Debt management service" means the planning and management of the financial affairs of a debtor for a fee and the receiving of money from the debtor for the purpose of distributing it, directly or indirectly, to the debtor's creditors in payment or partial payment of the debtor's obligations or soliciting financial contributions from creditors. The business of debt management is conducted in this State if the debt management business, its employees, or its agents are located in this State or if the debt management business solicits or contracts with debtors located in this State. "Debt management service" does not include debt settlement service as defined in the Debt Settlement Consumer Protection Act.

This term shall not include the following when engaged in the regular course of their respective businesses and professions:

(a) Attorneys at law licensed to practice in Illinois when acting in the ordinary practice of their professions and through the entity used in the ordinary practice of their profession, not holding themselves out as debt management service providers, and not providing debt management service except as incidental to other legal representation.

(b) Banks, fiduciaries, credit unions, savings and loan associations, and savings banks as duly authorized and admitted to transact business in the State of Illinois and performing credit and financial adjusting service in the regular course of their principal business.

(c) Title insurers and abstract companies, while doing an escrow business.

(d) Judicial officers or others acting pursuant to court order.

(e) Employers for their employees.

(f) Bill payment services, as defined in the Transmitters of Money Act.

"Director" means Director of Financial Institutions.

"Debtor" means the person or persons for whom the debt management service is performed.

"Person" means an individual, firm, partnership, association, limited liability company, corporation, or not-for-profit corporation.

"Licensee" means a person licensed under this Act.

(Source: P.A. 95-331, eff. 8-21-07.)

Section 910. The Consumer Fraud and Deceptive Business Practices Act is amended by changing Section 2Z as follows:

(815 ILCS 505/2Z) (from Ch. 121 1/2, par. 262Z)

Sec. 2Z. Violations of other Acts. Any person who knowingly violates the Automotive Repair Act, the Automotive Collision Repair Act, the Home Repair and Remodeling Act, the Dance Studio Act, the Physical Fitness Services Act, the Hearing Instrument Consumer Protection Act, the Illinois Union Label Act, the Job Referral and Job Listing Services Consumer Protection Act, the Travel Promotion Consumer Protection Act, the Credit Services Organizations Act, the Automatic Telephone Dialers Act, the Pay-Per-Call Services Consumer Protection Act, the Telephone Solicitations Act, the Illinois Funeral or Burial Funds Act, the Cemetery Care Act, the Safe and Hygienic Bed Act, the Pre-Need Cemetery Sales Act, the High Risk Home Loan Act, the Payday Loan Reform Act, the Debt Settlement Consumer Protection Act, the Mortgage Rescue Fraud Act, subsection (a) or (b) of Section 3-10 of the Cigarette Tax Act, the Payday Loan Reform Act, subsection (a) or (b) of Section 3-10 of the Cigarette Use Tax Act, the Electronic Mail Act, the Internet Caller Identification Act, paragraph (6) of subsection (k) of Section 6-305 of the Illinois Vehicle Code, Section 18d-115, 18d-120, 18d-125, 18d-135, or 18d-150 of the Illinois Vehicle Code, Article 3 of the Residential Real Property Disclosure Act, the Automatic Contract Renewal Act, or the Personal Information Protection Act commits an unlawful practice within the meaning of this Act.

(Source: P.A. 94-13, eff. 12-6-05; 94-36, eff. 1-1-06; 94-280, eff. 1-1-06; 94-292, eff. 1-1-06; 94-822, eff. 1-1-07; 95-413, eff. 1-1-08; 95-562, eff. 7-1-08; 95-876, eff. 8-21-08; revised 11-4-09.)

Section 970. Severability. The provisions of this Act are severable under Section 1.31 of the Statute on Statutes.

Section 999. Effective date. This Act takes effect upon becoming law.