[ Search ] [ Legislation ]
[ Home ] [ Back ] [ Bottom ]
| [ Senate Amendment 002 ] | [ Senate Amendment 006 ] |
91_SB1275
LRB9107260JSpcD
1 AN ACT concerning the regulation of certain lending
2 practices.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 1. Short title. This Act may be cited as the
6 Short-term Loan Act.
7 Section 5. Definitions.
8 "Check" means a check, draft, or other negotiable
9 instrument used for payment of money.
10 "Department" means the Department of Financial
11 Institutions.
12 "Director" means the Director of the Department of
13 Financial Institutions.
14 "Interest bearing loan" means a loan in which the debt is
15 expressed as a principal amount plus interest charged on
16 actual unpaid principal balances for the time actually
17 outstanding.
18 "Licensee" means an entity licensed under this Act to
19 provide loan services.
20 "Local Government Authorization Form" means a form
21 prescribed by the Director and signed by the clerk or chief
22 executive officer of the county or municipality in which the
23 licensee is to be located certifying that the applicant for a
24 short-term loan license or license renewal and the location
25 at which the licensee will be located comply with the zoning
26 and all other applicable county or municipal ordinances and
27 regulations.
28 "Net worth" means total assets minus total liabilities.
29 "Short-term loan" means a loan that has a term of not
30 more than 30 days or upon which interest is charged at an
31 annual percentage rate exceeding 36% and made by a lender
-2- LRB9107260JSpcD
1 that does not accept insured deposits.
2 Section 10. License required. No person, partnership,
3 association, limited liability company, corporation, or other
4 business combination or entity may engage in the business of
5 making short-term loans except as authorized by this Act and
6 while licensed under this Act.
7 Section 15. Application; fees; net worth; bond.
8 (a) An applicant for a license under this Act shall apply
9 in writing in the form prescribed by the Director. At the
10 time of making the application, the applicant shall pay to
11 the Director $750 as a non-refundable application fee and
12 $1,000 as an annual license fee for a period terminating on
13 the last day of the current calendar year. If the application
14 is filed after June 30th in any year, however, the license
15 fee shall be 50% of the annual license fee for the year.
16 (b) An applicant shall prove in form satisfactory to the
17 Director that the applicant has and will maintain net worth
18 of a minimum of $250,000 for each licensed location.
19 (c) A licensee shall maintain a surety bond in the
20 principal sum of $50,000 for each licensed location issued by
21 a bonding company authorized to do business in this State and
22 approved by the Director. The bond shall run to the Director
23 and shall be for the benefit of any person who is lawfully
24 awarded damages pursuant to an appropriate court order as a
25 result of the actions of the licensee arising out of a
26 violation of this Act. If the Director finds at any time that
27 a bond is of insufficient size or is insecure, exhausted, or
28 otherwise doubtful, an additional bond in such amount as
29 determined by the Director shall be filed by the licensee
30 within 30 days after written demand therefor by the Director.
31 (d) An applicant shall provide a completed Local
32 Government Authorization Form signed by the clerk or chief
-3- LRB9107260JSpcD
1 executive officer of the county or municipality in which the
2 licensee is to be established with any application for a
3 license, license renewal, or relocation.
4 Section 20. Granting of license.
5 (a) The Director shall not issue a license for the
6 location described in the application if he or she finds any
7 of the following to exist:
8 (1) a director, managerial employee, collection
9 agent, partner, or officer of the applicant has been
10 convicted of a felony;
11 (2) the location fails to conform to local zoning
12 laws with respect to location, structural, aesthetic, or
13 other requirements;
14 (3) the location is within one mile of a facility
15 operated by an inter-track wagering location licensee or
16 an organization licensee subject to the Illinois Horse
17 Racing Act of 1975, is within one mile of a facility at
18 which gambling is conducted under the Riverboat Gambling
19 Act, is within one mile of the location at which a
20 riverboat subject to the Riverboat Gambling Act docks, or
21 is within one mile of the main or branch campus of a
22 public or private college or university that provides
23 student housing or student residences; or
24 (4) the applicant has failed to submit a completed
25 Local Government Authorization Form.
26 (b) A licensee must obtain written approval from the
27 Director before relocating a licensed office.
28 (c) A licensee shall prominently display at each
29 licensed location a notice disclosing that the licensee is
30 regulated by the Department of Financial Institutions and
31 that any questions regarding such licensing should be
32 directed to the Department at the telephone number specified
33 in the notice. The notice shall disclose a schedule of all
-4- LRB9107260JSpcD
1 fees and interest to be charged, including the corresponding
2 interest rate, for loans payable in 14 days and for loans
3 payable in 30 days. The notice shall also disclose that the
4 licensee cannot use the criminal justice system to collect a
5 short-term loan.
6 Section 25. License renewal.
7 (a) A license under this Act expires on December 31 of
8 each year.
9 (b) A license must be renewed on forms prescribed by the
10 Director no later than November 30 of each year.
11 (c) A license not renewed by December 31 shall be
12 considered canceled without the licensee being entitled to a
13 hearing.
14 (d) The Director may not renew a license for a location
15 that due to a change in circumstances, including the
16 enactment of a local zoning ordinance, since the original
17 issuance or most recent renewal:
18 (1) has a director, managerial employee, collection
19 agent, partner, or officer of the applicant that has been
20 convicted of a felony;
21 (2) is within one mile of a facility operated by an
22 inter-track wagering location licensee or an organization
23 licensee subject to the Illinois Horse Racing Act of
24 1975, is within one mile of a facility at which gambling
25 is conducted under the Riverboat Gambling Act, is within
26 one mile of the location at which a riverboat subject to
27 the Riverboat Gambling Act docks; or is within one mile
28 of the main or branch campus of a public or private
29 college or university which provides student housing or
30 student residences; or
31 (3) fails to provide a completed Local Government
32 Authorization Form.
-5- LRB9107260JSpcD
1 Section 30. Multiple licenses to same licensee. No more
2 than one place of business shall be maintained under the same
3 license, but the Director may issue more than one license to
4 the same licensee upon compliance with all of the provisions
5 of this Act governing the original issuance of a license.
6 Section 35. Lending limits and refinancing. A loan
7 secured by a post-dated check may not exceed $500 in
8 principal amount, and any other loan may not exceed $2,000 in
9 principal amount. A loan made under this Act may be
10 refinanced a maximum number of 2 times. If a loan is secured
11 by a post-dated check, the post-dated check must name the
12 lender as the payee.
13 Section 40. Investigation of conduct of business.
14 (a) For the purpose of discovering violations of this Act
15 or securing information lawfully required by it, the Director
16 may at any time investigate the loans and business and
17 examine the books, accounts, records, and files used therein,
18 of every licensee and of every person, partnership,
19 association, limited liability company, and corporation
20 engaged in the business of making short-term loans, whether
21 such person, partnership, association, limited liability
22 company, or corporation shall act or claim to act as
23 principal or agent or within or without the authority of this
24 Act. For such purpose the Director shall have free access to
25 the offices and places of business, books, accounts, papers,
26 records, files, safes, and vaults of such persons,
27 partnerships, associations, limited liability companies, and
28 corporations. The Director may require the attendance of and
29 examine under oath all persons whose testimony he or she may
30 require relative to such loans or such business, and in such
31 cases the Director shall have power to administer oaths to
32 all persons called as witnesses; and the Director may conduct
-6- LRB9107260JSpcD
1 such examinations.
2 (b) The Director shall make an examination of the
3 affairs, business, office, and records of each licensee at
4 least once each year. The Director shall by rule set the fee
5 to be charged for each examination day, including travel
6 expenses for out-of-state licensed locations. The fee shall
7 reasonably reflect actual costs. The Director shall also have
8 authority to examine the books and records, as the Director
9 deems necessary, of a former licensee that is being
10 liquidated and may charge the examination fees otherwise
11 required for licensees.
12 (c) All books, accounts, records, and files of a
13 licensee shall be available in a computerized or electronic
14 format and shall, at a minimum, provide the following
15 information:
16 (1) the customer's name and the original date of the
17 loan;
18 (2) an indication of whether the transaction
19 recorded is a new loan or a renewal or rollover of an
20 existing loan and, if a renewal or rollover, the date of
21 the renewal or rollover;
22 (3) the number of loan contracts obtained by the
23 borrower, including renewals and rollovers of prior
24 loans;
25 (4) the total finance charges incurred by that
26 customer with respect to the loan transaction; and
27 (5) such other information as the Director may
28 require.
29 Section 45. Contractual disclosures and prohibitions.
30 (a) The loan contract must provide all disclosures
31 required by Regulation Z of the Federal Truth-In-Lending Act.
32 A copy of all loan documents must be given to the borrower.
33 (b) Before entering into a short-term loan agreement, a
-7- LRB9107260JSpcD
1 licensee must give to the borrower a pamphlet describing the
2 borrower's rights and responsibilities in the transaction and
3 providing an 800 number through which the borrower can
4 contact the Department of Financial Institutions regarding
5 questions and complaints.
6 (c) The loan contract must include a separate statement
7 signed by the debtor attesting that the debtor does not have
8 any outstanding loans made by a licensee under this Act
9 within the preceding 30 days.
10 (d) A licensee who knowingly or recklessly makes a loan,
11 other than the renewal of an original loan, to a borrower who
12 has an outstanding loan made under this Act within the 30
13 days preceding the date the loan is made is guilty of a Class
14 4 felony. A borrower who provides a false statement with
15 respect to outstanding loans made to the borrower under this
16 Act within the 30 days preceding the obtaining of a new loan
17 and obtains a new loan may not bring a civil action pursuant
18 to Section 120 of this Act with respect to the new loan.
19 (e) No licensee may require binding arbitration or
20 mediation prior to the filing of a civil action pursuant to
21 Section 120 nor provide for arbitration or mediation in a
22 venue other than the county in which the loan was made. No
23 loan contract may contain a cognovit or confession of
24 judgement clause or provision. No short-term loan may require
25 the borrower to deposit a set of vehicle keys with the lender
26 or an agent of the lender as a condition of, or incident to,
27 the loan. A loan contract shall advise the borrower that
28 matters involving improprieties in the making of the loan or
29 in loan collection practices may be referred to the
30 Department and shall prominently display the Department's
31 address and telephone number. No licensee may take possession
32 of a motor vehicle for a loan default and lease the vehicle
33 back to the borrower.
-8- LRB9107260JSpcD
1 Section 50. Loan proceeds. A licensee must issue the
2 proceeds of a loan in the form of a check drawn on the
3 licensee's bank account.
4 Section 55. Security interest. In making a short-term
5 loan, a licensee shall not take a security interest in any of
6 the debtor's property other than the post-dated check or the
7 debtor's motor vehicle title, which is tendered by the debtor
8 at the time of obtaining the loan. When a post-dated check
9 is taken as security for a loan, the licensee must stamp or
10 otherwise imprint on the back of the check a notation that
11 the check secures a deferred deposit loan made under this Act
12 and that any holder takes the check subject to the claims and
13 defenses of the maker.
14 Section 60. Other business. A licensee shall not engage in
15 any business other than that for which the license is issued
16 at the licensed location without the prior written approved
17 of the Director.
18 Section 65. Refinancing. An original loan made under
19 this Act may be refinanced for a maximum of 2 times, but only
20 when the loan's previous outstanding balance has been reduced
21 by 25%.
22 Section 70. Charging of interest.
23 (a) All loans must be interest bearing.
24 (b) To compute time for the calculation of interest and
25 other purposes, the licensee shall calculate interest at the
26 rate of 1/365th of the agreed annual rate for each day
27 actually elapsed.
28 (c) Interest shall be computed on unpaid principal
29 balances outstanding from time to time, for the time
-9- LRB9107260JSpcD
1 outstanding, until fully paid. Each payment shall be applied
2 first to the accumulated interest and the remainder of the
3 payment applied to the unpaid principal balance; provided
4 however, that, if the amount of the payment is insufficient
5 to pay the accumulated interest, the unpaid interest
6 continues to accumulate to be paid from the proceeds of
7 subsequent payments and may not be added to the principal
8 balance.
9 (d) Interest shall not be payable in advance or
10 compounded.
11 (e) Licensees may assess charges only as permitted in
12 this Act.
13 Section 75. Prepayment. At the debtor's option, a loan
14 may be prepaid either in part or in full with the licensee
15 refunding the unearned interest charge calculated on a
16 prorata daily basis.
17 Section 80. Closing of business; surrender of license.
18 (a) At least 10 days prior to a licensee ceasing
19 operations or closing business, the licensee shall:
20 (1) notify the Department of its action in writing;
21 (2) surrender its license to the Director for
22 cancellation; and
23 (3) notify the Department of the location where the
24 books, accounts, contracts, and records will be
25 maintained and the procedure to ensure prompt return of
26 contracts, titles, and releases to the customers.
27 (b) The surrender of the license shall not affect the
28 licensee's civil or criminal liability for acts committed
29 prior to surrender nor entitle the licensee to a return of
30 any part of the annual license fee.
31 (c) The accounts, books, records, and contracts shall be
32 maintained and serviced by the licensee or another licensee
-10- LRB9107260JSpcD
1 under this Act, or an entity exempt from licensure under this
2 Act.
3 (d) The Department shall have the authority to conduct
4 examinations of the books, records, and loan documents at any
5 time after surrender of the license, filing of bankruptcy, or
6 the cessation of operations.
7 Section 85. Bankruptcy.
8 (a) On the date of filing for bankruptcy, the licensee
9 shall notify the Department in writing of the:
10 (1) date of bankruptcy;
11 (2) docket number;
12 (3) presiding judge; and
13 (4) name and address of the trustee.
14 (b) If the bankrupt entity elects to close its business,
15 the provisions in Section 80 must be satisfied.
16 Section 90. Returned checks.
17 (a) If a check received as payment for a loan is returned
18 to the licensee for nonpayment, the licensee may assess the
19 debtor a fee not exceeding $15 or the cost actually incurred
20 by the lender as an insufficient funds charge, whichever is
21 less.
22 (b) No licensee, nor any person claiming directly or
23 indirectly through the licensee for a loan made pursuant to
24 this Act, may pursue or threaten to pursue criminal penalties
25 against a debtor for any returned or dishonored check.
26 (c) A violation of this Section is a Class B misdemeanor.
27 In addition to all other criminal and administrative
28 enforcement and penalties, a claim of violation of this
29 Section may be asserted pursuant to Section 120 of this Act.
30 Section 95. Recording or releasing lien.
31 (a) Upon making a loan secured by a title to a motor
-11- LRB9107260JSpcD
1 vehicle, the licensee must immediately take into possession
2 evidence of the debtor's ownership in the motor vehicle that
3 has been registered with the Office of the Illinois Secretary
4 of State.
5 (b) Within 24 hours after making the loan, the licensee
6 must file a lien with the Office of the Illinois Secretary of
7 State.
8 (c) Within 24 hours after payment in full, the licensee
9 must release all filed liens and provide evidence of the
10 release to the debtor.
11 (d) The licensee may not charge, directly or indirectly,
12 fees associated with the repossession of a motor vehicle.
13 Section 100. Sale or hypothecation of a loan. No licensee
14 may sell, hypothecate, pledge, or assign any loan made under
15 this Act.
16 Section 105. Financial Institutions Fund; deposits. All
17 moneys received by the Department under this Act shall be
18 deposited in the Financial Institutions Fund created under
19 Section 6z-26 of the State Finance Act.
20 Section 110. Penalties for violation; cease and desist
21 orders.
22 (a) Any entity engaging in the business of making
23 short-term loans without the requisite license is guilty of a
24 Class 4 felony.
25 (b) A license issued under this Act may be revoked if the
26 licensee or any director, manager of a limited liability
27 company, partner, or officer thereof is convicted of a
28 felony.
29 (c) No provision of this Section imposing any liability
30 shall apply to any act done or omitted in conformity with any
31 rule or written interpretation thereof by the Department of
-12- LRB9107260JSpcD
1 Financial Institutions, notwithstanding that after that act
2 or omission has occurred, the rule or interpretation is
3 amended, rescinded, or determined by judicial or other
4 authority to be invalid for any reason. All interpretations
5 relied upon must be written and signed by the Department's
6 Chief Counsel and approved by the Director.
7 (d) The Director may issue a cease and desist order to
8 any licensee, or person doing business without the required
9 license, when, in the opinion of the Director, the licensee
10 or other person is violating or is about to violate any
11 provision of this Act or any rule or requirement imposed in
12 writing by the Department as a condition of granting any
13 authorization permitted by this Act.
14 (e) The Director may issue a cease and desist order prior
15 to holding a hearing.
16 (f) The Director shall serve notice of his or her action,
17 designated as a cease and desist order made pursuant to this
18 Section, including a statement of the reasons for the action,
19 either personally or by certified mail, return receipt
20 requested. Service by certified mail shall be deemed
21 completed when the notice is deposited in the U.S. mail.
22 (g) Within 15 days after service of the cease and desist
23 order, the licensee or other person may request, in writing,
24 a hearing.
25 (h) The Director shall schedule a hearing within 30 days
26 after receiving the request for a hearing unless otherwise
27 agreed to by the parties.
28 (i) The Director shall have the authority to prescribe
29 rules for the administration of this Section.
30 (j) If it is determined that the Director had the
31 authority to issue the cease and desist order, he or she may
32 issue such orders as may be reasonably necessary to correct,
33 eliminate, or remedy such conduct.
34 (k) The powers vested in the Director by this Section are
-13- LRB9107260JSpcD
1 additional to any and all other powers and remedies vested in
2 the Director by law, and nothing in this Section shall be
3 construed as requiring that the Director shall employ the
4 power conferred in this Section instead of or as a condition
5 precedent to the exercise of any other power or remedy vested
6 in the Director.
7 (l) The cost for the administrative hearing shall be set
8 by rule.
9 Section 115. Fines; suspension or revocation of license.
10 (a) The Director may, after 10 days notice by registered
11 mail to the licensee at the address set forth in the license,
12 stating the contemplated action and in general the grounds
13 therefor, fine the licensee an amount not exceeding $10,000
14 per violation, or revoke or suspend any license issued under
15 this Act if the Director finds that:
16 (1) the licensee has failed to comply with any
17 provision of this Act or any order, decision, finding,
18 rule, or direction of the Director lawfully made pursuant
19 to the authority of this Act; or
20 (2) any fact or condition exists that, if it had
21 existed at the time of the original application for the
22 license, clearly would have warranted the Director in
23 refusing to issue the license.
24 (b) The Director may fine, suspend, or revoke only the
25 particular license with respect to which grounds for the
26 fine, revocation, or suspension occur or exist, but if the
27 Director finds that grounds for revocation are of general
28 application to all offices or to more than one office of the
29 licensee, the Director shall fine, suspend, or revoke every
30 license to which the grounds apply.
31 (c) No revocation, suspension, or surrender of any
32 license shall impair or affect the obligation of any
33 pre-existing lawful contract between the licensee and any
-14- LRB9107260JSpcD
1 obligor.
2 (d) The Director may issue a new license to a former
3 licensee whose license has been revoked when facts or
4 conditions that clearly would warrant the Director in
5 refusing to issue the license do not exist.
6 (e) In every case in which a license is suspended or
7 revoked or an application for a license or renewal of a
8 license is denied, the Director shall serve the licensee with
9 notice of that action, including a statement of the reasons
10 for the action, either personally or by certified mail,
11 return receipt requested. Service by certified mail shall be
12 deemed completed when the notice is deposited in the U.S.
13 Mail.
14 (f) An order assessing a fine, an order revoking or
15 suspending a license or, an order denying renewal of a
16 license shall take effect upon service of the order unless
17 the licensee requests, in writing, within 10 days after the
18 date of service, a hearing. If a hearing is requested, the
19 order shall be stayed until a final administrative order is
20 entered.
21 (g) If the licensee requests a hearing, the Director
22 shall schedule a hearing within 30 days after the request for
23 a hearing is received unless otherwise agreed to by the
24 parties.
25 (h) The hearing shall be held at the time and place
26 designated by the Director. The Director and any
27 administrative law judge designated by him or her shall have
28 the power to administer oaths and affirmations, subpoena
29 witnesses and compel their attendance, take evidence, and
30 require the production of books, papers, correspondence, and
31 other records or information that he or she considers
32 relevant or material to the inquiry.
33 (i) The costs for the administrative hearing shall be set
34 by rule.
-15- LRB9107260JSpcD
1 (j) The Director shall have the authority to prescribe
2 rules for the administration of this Section.
3 Section 120. Civil action. A claim of violation of this
4 Act by a short-term lender may be asserted in a civil action,
5 including a class action, by any aggrieved person, for which
6 punitive damages, costs, and reasonable attorney fees may be
7 awarded. A borrower who falsely attests to not having an
8 outstanding loan made by a licensee under this Act within the
9 preceding 30 days, as required under Section 45, in order to
10 obtain a new loan may not bring a civil action under this
11 Section with respect to the new loan. No loan contract may
12 require binding arbitration or mediation prior to filing a
13 civil action pursuant to this Section.
14 Section 125. Rules. The Department may make and enforce
15 such reasonable rules, directions, orders, decisions, and
16 findings as the execution and enforcement of the provisions
17 of this Act require and as are not inconsistent therewith.
18 Section 130. Judicial review. All final administrative
19 decisions of the Department under this Act shall be subject
20 to judicial review pursuant to the provisions of the
21 Administrative Review Law, all amendments and modifications
22 thereof, and any rules adopted pursuant thereto.
23 Section 135. Injunction; civil penalty; costs. If it
24 appears to the Director that a person or any entity has
25 committed or is about to commit a violation of this Act, a
26 rule promulgated under this Act, or an order of the Director,
27 the Director may apply to the circuit court for an order
28 enjoining the person or entity from violating or continuing
29 to violate this Act, the rule, or order and for injunctive or
30 other relief that the nature of the case may require and may,
-16- LRB9107260JSpcD
1 in addition, request the court to assess a civil penalty up
2 to $1,000 along with costs and attorney's fees.
3 Section 140. Confidentiality of data.
4 (a) Reports of investigation and examination,
5 correspondence, and memoranda concerning or arising out of an
6 investigation, examination, or report, including any copies
7 thereof, in the possession of the Director shall be
8 confidential communications, shall not be subject to
9 disclosure under the Freedom of Information Act, and shall
10 not be made public unless the Director finds that the ends of
11 justice and the public advantage will be served by the
12 disclosure. Upon such finding, the Director may disclose, in
13 whole or in part, any report or other material referred to in
14 this Section in a manner he or she considers proper.
15 (b) The Director may release any of the information
16 described in subsection (a) to any agency of this State,
17 another state, or the United States when he or she finds that
18 the ends of justice and the public advantage will be served
19 by the disclosure, provided that the receiving agency has
20 confidentiality procedures comparable to those contained in
21 this Act.
22 (c) The Director may release to the public a list of
23 licensees.
24 Section 145. Local ordinances.
25 (a) A county or municipality may, by ordinance, require a
26 short-term lender to conduct its business within a described
27 geographic zone and may require that the licensed building or
28 premises conform to described aesthetic standards.
29 (b) A county or municipality may, by ordinance, require a
30 short-term lender to make all required disclosures,
31 pamphlets, and posted notices in languages other than English
32 as required to meet the needs of the community in which the
-17- LRB9107260JSpcD
1 short-term lender is located, including but not limited to,
2 notice of interest rates and fees, and that use of the
3 criminal justice system to collect a loan after default is
4 prohibited. A local ordinance may also require the posting
5 of a schedule in English and an appropriate foreign language
6 indicating all fees and interest to be charged on a loan
7 payable in 14 days and on a loan payable in 30 days.
8 (c) A county or municipality, including a home rule
9 county or municipality, may regulate short-term lending
10 businesses in a manner that is not inconsistent with the
11 regulation by the State of those businesses under this Act.
12 This Section is a limitation under subsection (i) of Section
13 6 of Article VII of the Illinois Constitution on the
14 concurrent exercise by home rule units of powers and
15 functions exercised by the State. A county or municipality
16 may charge a licensee a fee to cover the costs and expenses
17 reasonably associated with any inspection, clerical, and
18 other costs incurred in verifying and providing information
19 required by a Local Government Authorization Form or
20 otherwise associated with local regulations.
21 Section 150. Severability. The provisions of this Act are
22 severable under Section 1.31 of the Statute on Statutes.
23 Section 199. Effective date. This Act takes effect upon
24 becoming law.