Bill Text: IL HB5320 | 2019-2020 | 101st General Assembly | Introduced

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Bill Title: Amends the Debt Settlement Consumer Protection Act. Adds student loan borrowers to the definition of "consumer". Adds to the definition of "debt settlement provider" any person or entity engaging in, or holding itself out as engaging in, or any person who solicits for or acts on behalf of such person or entity engaging in or holding itself out as engaging in, the business of student loan debt relief services in exchange for any fee or compensation assessed against or charged to a consumer. Excludes institutions of higher education from the definition of "debt settlement provider". Defines other terms. Requires a specified notice and disclosure to student loan borrowers to be included in advertising and marketing communications concerning student loan debt relief services. Requires providers of student loan debt relief services to provide a specified notice and disclosure before a student loan borrower signs a contract. Provides that any fees charged to a student loan borrower in exchange for student loan debt relief shall comply with a provision concerning fees. Makes other changes. Effective immediately.

Spectrum: Slight Partisan Bill (Democrat 20-7)

Status: (Introduced - Dead) 2020-06-23 - Rule 19(b) / Re-referred to Rules Committee [HB5320 Detail]

Download: Illinois-2019-HB5320-Introduced.html

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101ST GENERAL ASSEMBLY State of Illinois 2019 and 2020 HB5320 Introduced , by Rep. Michael J. Zalewski SYNOPSIS AS INTRODUCED:
225 ILCS 429/10
225 ILCS 429/105
225 ILCS 429/115
225 ILCS 429/125
Amends the Debt Settlement Consumer Protection Act. Adds student loan borrowers to the definition of "consumer". Adds to the definition of "debt settlement provider" any person or entity engaging in, or holding itself out as engaging in, or any person who solicits for or acts on behalf of such person or entity engaging in or holding itself out as engaging in, the business of student loan debt relief services in exchange for any fee or compensation assessed against or charged to a consumer. Excludes institutions of higher education from the definition of "debt settlement provider". Defines other terms. Requires a specified notice and disclosure to student loan borrowers to be included in advertising and marketing communications concerning student loan debt relief services. Requires providers of student loan debt relief services to provide a specified notice and disclosure before a student loan borrower signs a contract. Provides that any fees charged to a student loan borrower in exchange for student loan debt relief shall comply with a provision concerning fees. Makes other changes. Effective immediately.
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FISCAL NOTE ACT MAY APPLY
A BILL FOR
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AN ACT concerning regulation.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Debt Settlement Consumer Protection Act is
amended by changing Sections 10, 105, 115, and 125 as follows:
(225 ILCS 429/10)
Sec. 10. Definitions. As used in this Act:
"Consumer" means any person who purchases or contracts for
the purchase of debt settlement services or a student loan
borrower.
"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: (1) 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; (2) , 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

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service in exchange for any fee or compensation; (3) any person
or entity engaging in, or holding itself out as engaging in the
business of student loan debt relief services in exchange for
any fee or compensation assessed against or charged to a
consumer; or (4) any person who solicits for or acts on behalf
of such person or entity engaging in or holding itself out as
engaging in, the business of student loan debt relief services
in exchange for any fee or compensation assessed against or
charged to a consumer. "Debt settlement provider" does not
include:
(1) attorneys licensed, or otherwise authorized, to
practice in Illinois who are engaged in the practice of
law;
(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, operating subsidiary of
a bank, affiliate 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, title
insurance agent, independent escrowee or insurance company
operating or organized under the laws of a state or the
United States, or any other person authorized to make loans

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under State law while acting in the ordinary practice of
that business;
(4) any person who performs credit services for his or
her 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) a collection agency licensed pursuant to the
Collection Agency Act that is collecting a debt on its own
behalf or on behalf of a third party;
(6) 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;
(7) public officers while acting in their official
capacities and persons acting under court order;
(8) any person while performing services incidental to
the dissolution, winding up, or liquidating of a
partnership, corporation, or other business enterprise; or
(9) persons licensed under the Real Estate License Act
of 2000 when acting in the ordinary practice of their
profession and not holding themselves out as debt
settlement providers; or .
(10) any institution of higher education as defined in
the Higher Education Act of 1965, 20 U.S.C. 1001.
"Debt settlement service" means:

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(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
unsecured 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
unsecured 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 .
(3) student loan debt relief.
"Debt settlement service" does not include (A) the services
of attorneys licensed, or otherwise authorized, to practice in
Illinois who are engaged in the practice of law, or (B) debt
management service as defined in the Debt Management Service
Act, (C) the services of a student loan servicer, as defined in
the Student Loan Servicing Rights Act, or (D) the services of
any other originator, guarantor, or servicer of federal

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education loans.
"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.
"Federal education loan" means any loan made, guaranteed,
or insured under Title IV of the federal Higher Education Act
of 1965.
"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

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creditor's claim with regard to that debt.
"Secretary" means the Secretary of Financial and
Professional Regulation.
"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.
"Student loan borrower" means a person who has received or
agreed to pay a student loan for his or her own educational
expenses.
"Student loan debt relief" means, in exchange for any fee
or compensation assessed against or charged to a student loan
borrower, offering to provide advice or service, or acting as
an intermediary between or on behalf of a consumer and the
United States Department of Education or any other originator
or guarantor of federal education loans or one or more of the
servicers of a student loan borrowers' federal education loan,
where the primary purpose of the advice, service, or action is
to (1) negotiate, arrange, or obtain a settlement, adjustment,
discharge, or satisfaction of the student loan borrower's
federal education loan debt in an amount less than the full
amount of the principal amount of the debt, a reduction or
alteration to the interest rate, a reduction or alteration in
the amount of monthly payment or fees owed, or in an amount

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less than the current outstanding balance of the debt, (2)
enroll the student loan borrower in a repayment plan,
forbearance, or deferment of his or her federal education loan
debt, (3) apply for consolidation or consolidate the student
loan borrower's federal education loans, or (4) offer to
provide any other services related to altering the terms of a
student loan borrower's federal education loan debt,
including, but not limited to, a reduction in the amount of
interest, the principal balance, or the amount of monthly
payment or fees owed.
(Source: P.A. 96-1420, eff. 8-3-10.)
(225 ILCS 429/105)
Sec. 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 unless the debt settlement
provider possesses substantiation for such representation at
the time such representation is made.
(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

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following material information clearly and conspicuously:
"Debt settlement services are not appropriate for
everyone. Failure to pay your monthly bills in a timely
manner will result in increased balances and will harm your
credit rating. Not all creditors will agree to reduce
principal balance, and they may pursue collection,
including lawsuits."
(d) All advertising and marketing communications
concerning student loan debt relief services shall disclose the
following material information clearly and conspicuously,
along with the legally registered name of the company:
"[Name of company] is a private company, and is not
affiliated with the Department of Education or any other
academic entity or governmental agency. [Name of company]
is not a lender, guarantor, or servicer of federal student
loans. You can apply for consolidation and other repayment
plans without paid assistance through the United States
Department of Education. More information is available
through the Department's website or your federal student
loan servicer. You can find out who your servicer is
through the Department of Education.".
(Source: P.A. 96-1420, eff. 8-3-10.)
(225 ILCS 429/115)
Sec. 115. Required pre-sale consumer disclosures and
warnings.

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

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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 estimated to be necessary to
achieve the represented results.
(9) The estimated 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.
(10) For student loan debt relief services, before the
student loan borrower signs a contract, the provider shall
provide an oral and written notice to the student loan
borrower that clearly and conspicuously discloses the
following:
"[Name of company] is a private company, and is not
affiliated with the Department of Education or any
other academic entity or governmental agency. [Name of
company] is not a lender, guarantor, or servicer of
federal student loans. You can apply for consolidation
and other repayment plans without paid assistance
through the United States Department of Education.
More information is available through the Department's
website or your federal student loan servicer. You can
find out who your servicer is through the Department of

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Education.".
(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.
If the acknowledgment form is in electronic form, then it
shall contain the consumer disclosures required by Section
101(c) of the federal Electronic Signatures in Global and
National Commerce Act.
(c) Except as provided in subsection (d), the 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

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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.
- THE AMOUNT OF MONEY YOU OWE MAY INCREASE DUE TO CREDITOR
IMPOSITION OF INTEREST CHARGES, LATE FEES, AND OTHER PENALTY
FEES.
- 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

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any creditors.
IF YOU ARE DISSATISFIED
OR YOU HAVE QUESTIONS
If you are dissatisfied with a debt settlement provider or
have any questions, please bring it to the attention of the
Illinois Attorney General's Office and the Department of
Financial and Professional Regulation.
Attorney General Toll-Free Numbers:
Carbondale [phone]
Springfield [phone]
Chicago [phone]
Website for Department of Financial and Professional
Regulation: www.idfpr.com
I, the debtor, have received from the debt settlement provider
a copy of the form entitled Consumer Notice and Rights Form.".
(d) All providers of student loan debt relief services
shall include the following disclosure:
"[NAME OF COMPANY] IS A PRIVATE COMPANY, AND IS NOT
AFFILIATED WITH THE DEPARTMENT OF EDUCATION OR ANY OTHER
ACADEMIC ENTITY OR GOVERNMENTAL AGENCY. [NAME OF COMPANY]
IS NOT A LENDER, GUARANTOR, OR SERVICER OF FEDERAL STUDENT
LOANS. YOU CAN APPLY FOR CONSOLIDATION AND OTHER REPAYMENT
PLANS WITHOUT PAID ASSISTANCE THROUGH THE UNITED STATES
DEPARTMENT OF EDUCATION. MORE INFORMATION IS AVAILABLE
THROUGH THE DEPARTMENT'S WEBSITE OR YOUR FEDERAL STUDENT

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LOAN SERVICER. YOU CAN FIND OUT WHO YOUR SERVICER IS
THROUGH THE DEPARTMENT OF EDUCATION.".
(Source: P.A. 96-1420, eff. 8-3-10.)
(225 ILCS 429/125)
Sec. 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, except for a one-time
enrollment fee of no more than $50.
(c) A debt settlement provider may charge a settlement fee,
which shall not exceed an amount greater than 15% 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

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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.
(e) Any fees charged to a student loan borrower in exchange
for student loan debt relief shall comply with this Section.
(Source: P.A. 96-1420, eff. 8-3-10; 97-333, eff. 8-12-11.)
Section 99. Effective date. This Act takes effect upon
becoming law.