96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
SB2244

 

Introduced 2/20/2009, by Sen. Chris Lauzen

 

SYNOPSIS AS INTRODUCED:
 
New Act

    Creates the Debt Settlement Act. Provides that no person shall engage in the business of debt settlement in the State without a license. Provides that an applicant for a license to engage in the business of debt settlement shall file an application with the Director of the Division of Financial Institutions of the Department of Financial and Professional Regulation that contains specified provisions. Contains provisions concerning the renewal of licenses. Requires a licensee to create, maintain, and preserve accurate and complete books relating to the licensee's business. Contains provisions concerning contract fees. Provides for debt settlement contract requirements. Specifies the functions required to be performed and acts that are prohibited by a debt settlement provider. Provides that without limiting the generality of the Act and other applicable laws, the debt settlement provider, manager, or an employee of the debt settlement provider (except a licensed attorney who provides legal services in an attorney-client relationship or who is otherwise authorized to practice law in the State) shall not perform specified actions. Provides that the Attorney General or the prosecuting attorney of any county within the State may bring an action in the name of the State against any person to restrain and prevent any violation of the Act and specifies penalties for violations of the Act.


LRB096 06016 MJR 16097 b

 

 

A BILL FOR

 

SB2244 LRB096 06016 MJR 16097 b

1     AN ACT concerning regulation.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 1. Short title. This Act may be cited as the Debt
5 Settlement Act.
 
6     Section 5. Definitions. In this Act:
7     "Director" means the Director of the Division of Financial
8 Institutions of the Department of Financial and Professional
9 Regulation.
10     "Debt settlement provider" means any person or entity
11 engaging in or holding itself out as engaging in the business
12 of debt settlement for compensation. The term shall not include
13 any of the following:
14         (1) Attorneys-at-law, escrow agents, accountants,
15     broker dealers in securities, or investment advisors in
16     securities, while performing services during the course of
17     the practice of their professions.
18         (2) Any person, partnership, association, or
19     corporation doing business under, and as permitted by, any
20     law of this State or any federal law relating to banks,
21     consumer finance businesses, consumer loan companies,
22     trust companies, mutual savings banks, savings and loan
23     associations, building and loan associations, credit

 

 

SB2244 - 2 - LRB096 06016 MJR 16097 b

1     unions, crop credit associations, development credit
2     corporations, industrial development corporations, title
3     insurance companies, or insurance companies.
4         (3) Persons who, as employees on a regular salary or
5     wage of an employer not engaged in the business of debt
6     settlement, perform credit services for their employer.
7         (4) Public officers while acting in their official
8     capacities and persons acting under court order.
9         (5) Any person while performing services incidental to
10     the dissolution, winding up, or liquidating of a
11     partnership, corporation, or other business enterprise.
12     "Debt settlement service" means the negotiation,
13 adjustment, or settlement of a consumer's debt with the
14 consumer's creditor without holding or receiving the debtor's
15 funds or property and without paying the debtor's funds to, or
16 distributing the debtor's property among, creditors.
 
17     Section 10. License required.
18     (a) No person shall engage in the business of debt
19 settlement in this State without a license. An applicant for a
20 license to engage in the business of debt settlement shall file
21 an application with the Director in writing and under oath that
22 includes all of the following:
23         (1) The name and exact address of the applicant and the
24     name and address of each of the following, as applicable:
25             (A) If the applicant is a corporation, its officers

 

 

SB2244 - 3 - LRB096 06016 MJR 16097 b

1         and directors.
2             (B) If the applicant is an association, its
3         officers and directors.
4             (C) If the applicant is a partnership, its
5         partners.
6             (D) If the applicant is a limited liability
7         company, its manager or managers.
8             (E) If the applicant is any other legal entity, its
9         manager or other person designated to control the
10         operation of that legal entity.
11         (2) A copy of a certificate of an assumed name, if
12     applicable.
13         (3) One or more of the following, as applicable:
14             (A) If the applicant is a corporation, a copy of
15         the articles of incorporation.
16             (B) If the applicant is an association, a copy of
17         the organizational documents of the association.
18             (C) If the applicant is a partnership, a copy of
19         the partnership agreement.
20             (D) If the applicant is a limited liability
21         company, a copy of the articles of organization.
22         (4) The telephone number, email address, and website
23     URL of the applicant.
24         (5) The address of each office in this State, if any,
25     where the applicant will provide debt settlement services.
26         (6) A description or sample forms of the applicant's

 

 

SB2244 - 4 - LRB096 06016 MJR 16097 b

1     budget analysis and initial budget plan, including any form
2     or electronic model, that are used to evaluate the
3     financial condition of the debtors.
4         (7) A copy of the agreement form that the applicant
5     will use with the debtor.
6     (b) When filing the application, the applicant shall do all
7 of the following:
8         (1) Pay to the Director an initial license fee of $100.
9         (2) Provide evidence of insurance in the amount of
10     $250,000 against the risks of dishonesty, fraud, theft, and
11     other misconduct on the part of the applicant or a
12     director, employee, or agent of the applicant. The
13     insurance shall be issued by an insurance company
14     authorized to do business in this State and rated at least
15     by a nationally recognized rating organization. The
16     insurance shall have no greater than a $10,000 deductible
17     and shall cover claims filed by the applicant, the
18     individuals who have agreements with the applicant, and
19     this State. The insurance shall not be subject to
20     cancellation by the applicant without a replacement policy
21     in place.
22     (c) Unless surrendered, revoked, or suspended, a license
23 issued under this Act expires on December 31 of the year for
24 which it is issued. A licensee may renew a license before the
25 expiration date as provided in this Act.
26     (d) A licensee shall create, maintain, and preserve

 

 

SB2244 - 5 - LRB096 06016 MJR 16097 b

1 accurate and complete books and records relating to the
2 licensee's business. A licensee shall maintain the books and
3 records according to generally accepted accounting principles.
4 A licensee or an applicant shall notify the Director in writing
5 of the address where the books and records are kept. If a
6 licensee changes the location of the books and records, the
7 licensee shall notify the Director in writing within 10
8 business days after the change. The Director may prescribe by
9 rule or order the form and contents of books and records
10 relating to a licensee's business.
11     (e) An applicant shall file a financial statement with an
12 application for a debt settlement license. The Director may
13 require an audit or review of the financial statement by an
14 independent certified public accountant.
15     (f) If a licensee has a board of directors or the
16 equivalent, the Director shall not require that the licensee
17 provide information concerning a member of the board of
18 directors or the equivalent if that member does not receive a
19 salary, stock dividend, or other financial benefit from that
20 corporation other than reimbursement of the actual expenses
21 incurred in carrying out the duties of a director of that
22 corporation.
23     (g) Upon receiving the application and determining that the
24 applicant has complied with subsection (b) of this Section, the
25 Director shall investigate the applicant's responsibility,
26 experience, character, and general fitness. If after

 

 

SB2244 - 6 - LRB096 06016 MJR 16097 b

1 investigation the Director believes that the business will be
2 operated fairly and honestly within the provisions of this Act,
3 the Director shall issue a license to the applicant. The
4 investigation of the applicant shall at least include
5 investigation of the following, as applicable:
6         (1) If the applicant is a corporation, its officers and
7     directors.
8         (2) If the applicant is a partnership, its partners.
9         (3) If the applicant is an association, its officers.
10         (4) If the applicant is a limited liability company,
11     its manager or managers.
12         (5) If the applicant is any other legal entity, its
13     manager or other person designated to control the operation
14     of that legal entity.
15     (h) A license shall not be issued if the investigation
16 reveals one or more of the following:
17         (1) That an individual investigated did any of the
18     following:
19             (A) Was ever convicted of a crime involving moral
20         turpitude, including forgery, embezzlement, obtaining
21         money under false pretenses, larceny, extortion,
22         conspiracy to defraud, or any other similar offense.
23             (B) Violated or failed to comply with this Article
24         or a rule adopted pursuant to this Act.
25             (C) Had a license to engage in the business of debt
26         settlement revoked or suspended for any reason other

 

 

SB2244 - 7 - LRB096 06016 MJR 16097 b

1         than failure to pay licensing fees in this State or
2         another state.
3             (D) Defaulted in the payment of money collected for
4         others, including the discharge of debts through
5         bankruptcy proceedings. The Director may, at the
6         Director's discretion, waive this restriction if
7         provided with evidence of justifiable cause for the
8         bankruptcy, plus convincing evidence of the fitness of
9         the bankrupt party to carry out that party's duties and
10         responsibilities pursuant to this Act.
11         (2) An individual applicant is not at least 18 years of
12     age and a citizen of the United States.
13         (3) An applicant that is a partnership, corporation,
14     limited liability company, association, or other legal
15     entity required by law to obtain authority to do business
16     in this State has not been granted authority to do business
17     in this State.
18     (i) If the applicant holds a license or certificate of
19 registration in another state authorizing it to provide debt
20 settlement services, the provider may submit a copy of that
21 license or certificate in place of the application prescribed
22 in this Act. The Director shall accept the license or
23 certificate from the other state if the application process in
24 the other state contains information substantially similar to
25 or more comprehensive than that required in an application
26 submitted in this State.
 

 

 

SB2244 - 8 - LRB096 06016 MJR 16097 b

1     Section 15. Contract fees. By contract, a debt settlement
2 provider shall not charge fees in an aggregate amount exceeding
3 20% of the principal amount of the debt. In the event of
4 cancellation of the contract by the debtor prior to its
5 successful completion, the debt settlement provider shall
6 refund 50% of any collected fees associated with the amount of
7 debt remaining unsettled at the time of the termination of the
8 contract.
 
9     Section 20. Debt settlement contract requirements. Every
10 contract between a debt settlement provider and a debtor shall:
11         (1) List every debt to be handled with the creditor's
12     name and disclose the approximate total of all known debts.
13         (2) Provide fees charged by the debt settlement
14     provider for services.
15         (3) Disclose the approximate number and amount of
16     savings required to pay the debts in full.
17         (4) Disclose the name and address of the debt
18     settlement provider and of the debtor.
19         (5) State that the debt settlement provider shall
20     notify the debtor, in writing, within five days of
21     notification to the debt settlement provider by a creditor
22     that the creditor refuses to negotiate with the debt
23     settlement provider pursuant to the contract.
24         (6) Contain the following notice within the contract or

 

 

SB2244 - 9 - LRB096 06016 MJR 16097 b

1     agreement to engage the services of the debt settlement
2     provider in a form substantially similar to the following:
3     
"NOTICE TO DEBTOR:
4     
Do not sign this contract before you read it.
5     
Do not sign this contract if any spaces intended for
6     
the agreed terms are left blank.
7     
You are entitled to a copy of this contract at the time
8     
you sign it.
9     
You may cancel this contract within three days of
10     
signing the contract by sending notice of cancellation by
11     
certified mail, return receipt requested, to the debt
12     
settlement provider at his or her address shown on the
13     
contract, which notice shall be posted not later than
14     
midnight of the third day (excluding Sundays and the
15     
holidays) or by fax following your signing of the
16     
contract."
17         (7) Contain any other provision or disclosure that is
18     necessary for the protection of the debtor and the proper
19     conduct of business by the debt settlement provider.
 
20     Section 25. Debt settlement provider; functions required
21 to be performed. Every debt settlement provider shall perform
22 the following functions:
23         (1) Make a permanent record of all payments by debtors.
24     The record may be in an electronic format. No person shall
25     intentionally make any false entry in any record or

 

 

SB2244 - 10 - LRB096 06016 MJR 16097 b

1     intentionally mutilate, destroy, or otherwise dispose of
2     any record. Records shall at all times be open for
3     inspection by the Attorney General or the Attorney
4     General's authorized agent and shall be preserved (i) as
5     original records, (ii) in an electronic format, or (iii) in
6     a form of duplication, for at least 6 years after making
7     the final entry therein.
8         (2) Sign and deliver a completed copy of the contract
9     between the debt settlement provider and a debtor to the
10     debtor immediately after the debtor executes the contract.
11         (3) Notify the debtor of any offer of settlement made
12     by the creditor no later than 5 days of receiving the
13     offer.
 
14     Section 30. Debt settlement provider; prohibited acts. A
15 debt settlement provider shall not do any of the following:
16         (1) Take any contract or other instrument which has any
17     blank spaces when signed by the debtor.
18         (2) Receive or charge any fee in the form of a
19     promissory note or other promise to pay.
20         (3) Receive or accept any mortgage or other security
21     for any fee, whether as to real or personal property.
22         (4) Lend money or credit.
23         (5) Take any confession of the judgment or power of
24     attorney to confess judgment against the debtor or appear
25     as the debtor in any judicial proceeding.

 

 

SB2244 - 11 - LRB096 06016 MJR 16097 b

1         (6) Take, concurrent with the signing of the contract
2     or as a part of the contract or the application for the
3     contract, a release of any obligation to be performed on
4     the part of the debt settlement provider.
5         (7) Advertise, display, distribute, broadcast, or
6     televise services or permit services to be displayed,
7     advertised, distributed, broadcasted, or televised in any
8     manner in which a false, misleading, or deceptive statement
9     or representation is made with regard to either (i) the
10     services to be performed by the debt settlement provider or
11     (ii) the fees to be charged by the debt settlement
12     provider.
13         (8) Receive any cash, fee, gift, bonus, premium,
14     reward, or other compensation from any person other than
15     the debtor or a person in the debtor's behalf in connection
16     with that person's activities as a debt settlement
17     provider.
18         (9) Disclose to anyone the debtors who have contracted
19     with the debt settlement provider other than a debtor's own
20     creditors or the provider's agents. The debt settlement
21     provider shall not disclose the creditors of a debtor to
22     anyone other than the debtor or another creditor of the
23     debtor and then only to the extent necessary to secure the
24     cooperation of the creditor in a debt settlement plan.
 
25     Section 35. Legal services; prohibited actions.

 

 

SB2244 - 12 - LRB096 06016 MJR 16097 b

1     (a) Without limiting the generality of this Act and other
2 applicable laws, the debt settlement provider, manager, or an
3 employee of the debt settlement provider shall not do any of
4 the following:
5         (1) Prepare, advise, or sign a release of attachment or
6     garnishment, stipulation, affidavit for exemption,
7     compromise agreement, or other legal or court document, nor
8     furnish legal advice or perform legal services of any kind.
9         (2) Represent that the debt settlement provider is
10     authorized or competent to furnish legal advice or perform
11     legal services.
12         (3) Communicate with the debtor or creditor or any
13     other person in the name of any attorney or upon the
14     stationery of any attorney or prepare any form or
15     instrument which only attorneys are authorized to prepare.
16     (b) This Section does not apply to a licensed attorney who
17 provides legal services in an attorney-client relationship or
18 who is otherwise authorized to practice law in this State.
 
19     Section 40. Violations and sanctions.
20     (a) Notwithstanding any other actions which may be brought
21 under the laws of this State, the Attorney General or the
22 prosecuting attorney of any county within the State may bring
23 an action in the name of the State against any person to
24 restrain and prevent any violation of this Act.
25     (b) The Attorney General may accept an assurance of

 

 

SB2244 - 13 - LRB096 06016 MJR 16097 b

1 discontinuance of any act or practice deemed in violation of
2 this Article in the enforcement thereof from any person
3 engaging in, or who has engaged in, the act or practice. The
4 assurance shall be in writing and be filed with and subject to
5 the approval of the superior court of the county in which the
6 alleged violator resides or has a principal place of business
7 or, in the alternative, in Cook County.
8     (c) Any person who violates an injunction issued pursuant
9 to this Act shall forfeit and pay a civil penalty of not more
10 than five thousand dollars $5,000. The clear proceeds of civil
11 penalties assessed pursuant to this subsection (c) shall be
12 credited to the General Professions Dedicated Fund.
 
13     Section 45. Saving prior contracts. The provisions of this
14 Act shall not invalidate or make unlawful contracts between
15 debt settlement providers and debtors executed lawfully prior
16 to the effective date of this Act.