Bill Text: IL SB1376 | 2009-2010 | 96th General Assembly | Introduced

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Bill Title: Amends the Consumer Installment Loan Act. Defines the terms "Class A loan", "Class B loan", "Class C loan", and "payday loan". Specifies the charges allowed for interest bearing and precomputed Class A loans and Class B loans. In the provisions concerning Class C loans, sets forth provisions concerning (1) loan amortization, (2) use of consumer reporting services in comportment with the Payday Loan Reform Act, (3) lenders' prohibited acts, (4) protections for members of the military in comportment with the Payday Loan Reform Act, (5) allowable fees in the case of a defaulted loan, (6) disclosure requirements, and (7) controlling terms of the Consumer Installment Loan Act. Amends the Payday Loan Reform Act. Provides that no payday loan may be made to a consumer if the loan would result in the consumer being indebted to one or more payday lenders for a period in excess of 56 consecutive days (now 45 consecutive days). Provides that no lender may charge more than $17 per $100 loaned (now $15.50 per $100 loaned). Provides that lenders may seek and may be awarded court costs, but not attorney's fees, in the event of a customer default on the repayment plan. Provides that lenders may seek and may be awarded court costs and attorney's fees when a customer is in default and refuses to enter into the repayment plan. Effective January 1, 2010.

Spectrum: Bipartisan Bill

Status: (Introduced - Dead) 2009-03-13 - Rule 3-9(a) / Re-referred to Assignments [SB1376 Detail]

Download: Illinois-2009-SB1376-Introduced.html

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96TH GENERAL ASSEMBLY State of Illinois 2009 and 2010 SB1376 Introduced 2/10/2009, by Sen. Linda Holmes SYNOPSIS AS INTRODUCED:
205 ILCS 670/15 from Ch. 17, par. 5415
815 ILCS 122/2-5
815 ILCS 122/2-41 new
815 ILCS 122/2-42 new
Amends the Consumer Installment Loan Act. Defines the terms "Class A loan", "Class B loan", "Class C loan", and "payday loan". Specifies the charges allowed for interest bearing and precomputed Class A loans and Class B loans. In the provisions concerning Class C loans, sets forth provisions concerning (1) loan amortization, (2) use of consumer reporting services in comportment with the Payday Loan Reform Act, (3) lenders' prohibited acts, (4) protections for members of the military in comportment with the Payday Loan Reform Act, (5) allowable fees in the case of a defaulted loan, (6) disclosure requirements, and (7) controlling terms of the Consumer Installment Loan Act. Amends the Payday Loan Reform Act. Provides that no payday loan may be made to a consumer if the loan would result in the consumer being indebted to one or more payday lenders for a period in excess of 56 consecutive days (now 45 consecutive days). Provides that no lender may charge more than $17 per $100 loaned (now $15.50 per $100 loaned). Provides that lenders may seek and may be awarded court costs, but not attorney's fees, in the event of a customer default on the repayment plan. Provides that lenders may seek and may be awarded court costs and attorney's fees when a customer is in default and refuses to enter into the repayment plan. Effective January 1, 2010.
LRB096 08911 MJR 19047 b
A BILL FOR
SB1376 LRB096 08911 MJR 19047 b
AN ACT concerning financial regulation.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Consumer Installment Loan Act is amended by
changing Section 15 as follows:
(205 ILCS 670/15) (from Ch. 17, par. 5415)
Sec. 15. Charges permitted.
(a) Every licensee may lend a principal amount not
exceeding $40,000 and may charge, contract for and receive
thereon interest at the rate agreed upon by the licensee and
the borrower, subject to the provisions of this Act.
(b) For purpose of this Section, the following terms shall
have the meanings ascribed herein.
"Applicable interest" for a precomputed loan contract
means the amount of interest attributable to each monthly
installment period. It is computed as if each installment
period were one month and any interest charged for extending
the first installment period beyond one month is ignored. The
applicable interest for any monthly installment period is that
portion of the precomputed interest that bears the same ratio
to the total precomputed interest as the balances scheduled to
be outstanding during that month bear to the sum of all
scheduled monthly outstanding balances in the original

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contract.
"Class A loan" means a loan secured by an interest in real
estate or the title to a motor vehicle.
"Class B loan" means a loan with an original principal
amount advanced (including any amounts deducted or retained by
lender) of $3,000 or more.
"Class C loan" means a loan with an original principal
amount advanced (including any amounts deducted or retained by
lender) of less than $3,000.
"Interest-bearing loan" means a loan in which the debt is
expressed as a principal amount plus interest charged on actual
unpaid principal balances for the time actually outstanding.
"Payday loan" means a loan made pursuant to the Payday Loan
Reform Act.
"Precomputed loan" means a loan in which the debt is
expressed as the sum of the original principal amount plus
interest computed actuarially in advance, assuming all
payments will be made when scheduled.
(c) Loans may be interest-bearing or precomputed.
(d) To compute time for either interest-bearing or
precomputed loans for the calculation of interest and other
purposes, a month shall be a calendar month and a day shall be
considered 1/30th of a month when calculation is made for a
fraction of a month. A month shall be 1/12th of a year. A
calendar month is that period from a given date in one month to
the same numbered date in the following month, and if there is

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no same numbered date, to the last day of the following month.
When a period of time includes a month and a fraction of a
month, the fraction of the month is considered to follow the
whole month. In the alternative, for interest-bearing loans,
the licensee may charge interest at the rate of 1/365th of the
agreed annual rate for each day actually elapsed.
(e) With respect to interest-bearing Class A loans and
Class B loans:
(1) Interest shall be computed on unpaid principal
balances outstanding from time to time, for the time
outstanding, until fully paid. Each payment shall be
applied first to the accumulated interest and the remainder
of the payment applied to the unpaid principal balance;
provided however, that if the amount of the payment is
insufficient to pay the accumulated interest, the unpaid
interest continues to accumulate to be paid from the
proceeds of subsequent payments and is not added to the
principal balance.
(2) Interest shall not be payable in advance or
compounded. However, if part or all of the consideration
for a new loan contract is the unpaid principal balance of
a prior loan, then the principal amount payable under the
new loan contract may include any unpaid interest which has
accrued. The unpaid principal balance of a precomputed loan
is the balance due after refund or credit of unearned
interest as provided in paragraph (f), clause (3). The

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resulting loan contract shall be deemed a new and separate
loan transaction for all purposes.
(3) Loans may be payable as agreed between the parties,
including payment at irregular times or in unequal amounts
and rates that may vary with an index that is independently
verifiable and beyond the control of the licensee.
(4) The lender or creditor may, if the contract
provides, collect a delinquency or collection charge on
each installment in default for a period of not less than
10 days in an amount not exceeding 5% of the installment on
installments in excess of $200, or $10 on installments of
$200 or less, but only one delinquency and collection
charge may be collected on any installment regardless of
the period during which it remains in default.
(f) With respect to precomputed Class A loans and Class B
loans:
(1) Loans shall be repayable in substantially equal and
consecutive monthly installments of principal and interest
combined, except that the first installment period may be
longer than one month by not more than 15 days, and the
first installment payment amount may be larger than the
remaining payments by the amount of interest charged for
the extra days; and provided further that monthly
installment payment dates may be omitted to accommodate
borrowers with seasonal income.
(2) Payments may be applied to the combined total of

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

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

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or credit made for prepayment of the loan in full.
(6) If two or more installments are delinquent one full
month or more on any due date, and if the contract so
provides, the licensee may reduce the unpaid balance by the
refund credit which would be required for prepayment in
full on the due date of the most recent maturing
installment in default. Thereafter, and in lieu of any
other default or deferment charges, the agreed rate of
interest may be charged on the unpaid balance until fully
paid.
(7) Fifteen days after the final installment as
originally scheduled or deferred, the licensee, for any
loan contract which has not previously been converted to
interest-bearing under paragraph (f), clause (6), may
compute and charge interest on any balance remaining
unpaid, including unpaid default or deferment charges, at
the agreed rate of interest until fully paid. At the time
of payment of said final installment, the licensee shall
give notice to the obligor stating any amounts unpaid.
(g) With respect to Class C loans:
(1) The loan document shall provide for a repayment
schedule that fully amortizes the loan in substantially
equal periodic payments of principal and interest
regardless of the length of the loan. Loans requiring a
balloon payment of the loan principal at maturity are
prohibited by this Act.

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(2) The loan document shall not require a penalty or
premium for prepayment of the balance of the indebtedness.
(3) Lenders shall use a consumer reporting service
established by the Division of Financial Institutions of
the Department of Financial and Professional Regulation to
verify that the Class C loan would not conflict with the
Payday Loan Reform Act. A Class C loan may not be issued if
the borrower currently has a payday loan or if they are in
any cooling-off period or repayment plan of a payday loan.
(4) Lenders are prohibited from doing any of the
following:
(A) Threatening to use or using the criminal
process of this State or any other state to collect on
a loan made pursuant to this Act.
(B) Including any of the following provisions in a
loan document:
(i) a confession of judgment clause;
(ii) a waiver of the right to a jury trial, if
applicable, in any action brought by or against a
borrower, unless the waiver is included in an
arbitration clause that is allowable under the
Payday Loan Reform Act;
(iii) a mandatory arbitration clause that is
oppressive, unfair, unconscionable, or
substantially in derogation of the rights of the
borrower; or

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(iv) a provision in which the borrower agrees
not to assert any claim or defense arising out of
the contract.
(C) Taking any interest in real estate in
connection with a loan agreement.
(5) Lenders must comply with all protections given to
members of the military by the Payday Loan Reform Act.
(6) In the case of a default of a Class C loan, no
additional fees or interest charges of any kind may be
charged to the borrower except for actual court costs that
have been awarded to the lender by a court judgment and a
one-time fee not to exceed $25 if a borrower's check or an
electronic debit is returned unpaid by the borrower's
financial institution. No attorney's fees or treble damage
awards may be charged or awarded.
(7) The lender must provide the borrower with
disclosures approved by the Director and substantially
similar to those found in subsections (a) and (b) of
Section 2-20 of the Payday Loan Reform Act.
(8) The lender must make available financial literacy
education materials approved by the Director.
(9) In the case of a conflict between the terms of this
subsection (g) and the terms of subsections (a) through (f)
of this Section, the terms of this subsection (g) shall
control.
(Source: P.A. 93-264, eff. 1-1-04.)

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Section 10. The Payday Loan Reform Act is amended by
changing Section 2-5 and by adding Sections 2-41 and 2-42 as
follows:
(815 ILCS 122/2-5)
Sec. 2-5. Loan terms.
(a) Without affecting the right of a consumer to prepay at
any time without cost or penalty, no payday loan may have a
minimum term of less than 13 days.
(b) No payday loan may be made to a consumer if the loan
would result in the consumer being indebted to one or more
payday lenders for a period in excess of 56 45 consecutive
days. Except as provided under Section 2-40, if a consumer has
or has had loans outstanding for a period in excess of 56 45
consecutive days, no payday lender may offer or make a loan to
the consumer for at least 7 calendar days after the date on
which the outstanding balance of all payday loans made during
the 56 45 consecutive day period is paid in full. For purposes
of this subsection, the term "consecutive days" means a series
of continuous calendar days in which the consumer has an
outstanding balance on one or more payday loans; however, if a
payday loan is made to a consumer within 6 days or less after
the outstanding balance of all loans is paid in full, those
days are counted as "consecutive days" for purposes of this
subsection.

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(c) No lender may make a payday loan to a consumer if the
total principal amount of the loan, when combined with the
principal amount of all of the consumer's other outstanding
payday loans, exceeds $1,000 or 25% of the consumer's gross
monthly income, whichever is less.
(d) No payday loan may be made to a consumer who has an
outstanding balance on 2 payday loans.
(e) No lender may charge more than $17 $15.50 per $100
loaned on any payday loan over the term of the loan. Except as
provided in Section 2-25, this charge is considered fully
earned as of the date on which the loan is made.
(f) A lender may not take or attempt to take an interest in
any of the consumer's personal property to secure a payday
loan.
(g) A consumer has the right to redeem a check or any other
item described in the definition of payday loan under Section
1-10 issued in connection with a payday loan from the lender
holding the check or other item at any time before the payday
loan becomes payable by paying the full amount of the check or
other item.
(Source: P.A. 94-13, eff. 12-6-05.)
(815 ILCS 122/2-41 new)
Sec. 2-41. Repayment plan default. Notwithstanding any
other provision of this Act to the contrary, lenders may seek
and may be awarded court costs, but not attorney's fees, in the

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event of a customer default on the repayment plan as described
in Section 2-40 of this Act.
(815 ILCS 122/2-42 new)
Sec. 2-42. Refusal to enter into repayment plan after
default. Notwithstanding any other provision of this Act to the
contrary, lenders may seek and may be awarded court costs and
attorney's fees when a customer is in default and refuses to
enter into the repayment plan as described in Section 2-40 of
this Act.
Section 99. Effective date. This Act takes effect January
1, 2010.