Statutes > Illinois Statutes > CHAPTER 815 BUSINESS TRANSACTIONS > 815 ILCS 122/ Payday Loan Reform Act. > Article 2 - Payday Loans

Article 2 - Payday Loans


 
    (815 ILCS 122/Art. 2 heading)
Article 2. Payday Loans
(Source: P.A. 94‑13, eff. 12‑6‑05.)

    (815 ILCS 122/2‑5)
    (Text of Section before amendment by P.A. 96‑936)
    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 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 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 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.
    (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 $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.)
 
    (Text of Section after amendment by P.A. 96‑936)
    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) Except for an installment payday loan as defined in this Section, 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 45 consecutive days. Except as provided under subsection (c) of this Section and Section 2‑40, if a consumer has or has had loans outstanding for a period in excess of 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 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.
    (c) Notwithstanding anything in this Act to the contrary, a payday loan shall also include any installment loan otherwise meeting the definition of payday loan contained in Section 1‑10, but that has a term agreed by the parties of not less than 112 days and not exceeding 180 days; hereinafter an "installment payday loan". The following provisions shall apply:
        (i) Any installment payday loan must be fully
     amortizing, with a finance charge calculated on the principal balances scheduled to be outstanding and be repayable in substantially equal and consecutive installments, according to a payment schedule agreed by the parties with not less than 13 days and not more than one month between payments; except that the first installment period may be longer than the remaining installment periods by not more than 15 days, and the first installment payment may be larger than the remaining installment payments by the amount of finance charges applicable to the extra days.
        (ii) An installment payday loan may be refinanced by
     a new installment payday loan one time during the term of the initial loan; provided that the total duration of indebtedness on the initial installment payday loan combined with the total term of indebtedness of the new loan refinancing that initial loan, shall not exceed 180 days. For purposes of this Act, a refinancing occurs when an existing installment payday loan is paid from the proceeds of a new installment payday loan.
        (iii) In the event an installment payday loan is paid
     in full prior to the date on which the last scheduled installment payment before maturity is due, other than through a refinancing, no licensee may offer or make a payday loan to the consumer for at least 2 calendar days thereafter.
        (iv) No installment 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 180 consecutive days.
    (d) (Blank).
    (e) No lender may make a payday loan to a consumer if the total of all payday loan payments coming due within the first calendar month of the loan, when combined with the payment amount of all of the consumer's other outstanding payday loans coming due within the same month, exceeds the lesser of:
        (1) $1,000; or
        (2) in the case of one or more payday loans, 25% of
     the consumer's gross monthly income; or
        (3) in the case of one or more installment payday
     loans, 22.5% of the consumer's gross monthly income; or
        (4) in the case of a payday loan and an installment
     payday loan, 22.5% of the consumer's gross monthly income.
    No loan shall be made to a consumer who has an
     outstanding balance on 2 payday loans, except that, for a period of 12 months after the effective date of this amendatory Act of the 96th General Assembly, consumers with an existing CILA loan may be issued an installment loan issued under this Act from the company from which their CILA loan was issued.
    (e‑5) No lender may charge more than $15.50 per $100
     loaned on any payday loan, or more than $15.50 per $100 on the initial principal balance and on the principal balances scheduled to be outstanding during any installment period on any installment payday loan. Except for installment payday loans and except as provided in Section 2‑25, this charge is considered fully earned as of the date on which the loan is made. For purposes of determining the finance charge earned on an installment payday loan, the disclosed annual percentage rate shall be applied to the principal balances outstanding from time to time until the loan is paid in full, or until the maturity date, which ever occurs first. No finance charge may be imposed after the final scheduled maturity date.
    When any loan contract is paid in full, the licensee shall refund any unearned finance charge. The unearned finance charge that is refunded shall be calculated based on a method that is at least as favorable to the consumer as the actuarial method, as defined by the federal Truth in Lending Act. The sum of the digits or rule of 78ths method of calculating prepaid interest refunds is prohibited.
    (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. 96‑936, eff. 3‑21‑11.)

    (815 ILCS 122/2‑7)
    Sec. 2‑7. Wage assignments. Any payday loan that is a transaction in which the lender accepts a wage assignment must meet the requirements of this Act, the requirements of the Illinois Wage Assignment Act, and the requirements of 16 C.F.R. 444.2(a)(3)(i)(2003, no subsequent amendments or editions are included). A violation of this Section constitutes a material violation of the Payday Loan Reform Act.
(Source: P.A. 94‑13, eff. 12‑6‑05.)

    (815 ILCS 122/2‑10)
    (Text of Section before amendment by P.A. 96‑936)
    Sec. 2‑10. Permitted fees.
    (a) If there are insufficient funds to pay a check, Automatic Clearing House (ACH) debit, or any other item described in the definition of payday loan under Section 1‑10 on the day of presentment and only after the lender has incurred an expense, a lender may charge a fee not to exceed $25. Only one such fee may be collected by the lender with respect to a particular check, ACH debit, or item even if it has been deposited and returned more than once. A lender shall present the check, ACH debit, or other item described in the definition of payday loan under Section 1‑10 for payment not more than twice. A fee charged under this subsection (a) is a lender's exclusive charge for late payment.
    (b) Except for the finance charges described in Section 2‑5 and as specifically allowed by this Section, a lender may not impose on a consumer any additional finance charges, interest, fees, or charges of any sort for any purpose.
(Source: P.A. 94‑13, eff. 12‑6‑05.)
 
    (Text of Section after amendment by P.A. 96‑936)
    Sec. 2‑10. Permitted fees.
    (a) If there are insufficient funds to pay a check, Automatic Clearing House (ACH) debit, or any other item described in the definition of payday loan under Section 1‑10 on the day of presentment and only after the lender has incurred an expense, a lender may charge a fee not to exceed $25. Only one such fee may be collected by the lender with respect to a particular check, ACH debit, or item even if it has been deposited and returned more than once. A lender shall present the check, ACH debit, or other item described in the definition of payday loan under Section 1‑10 for payment not more than twice. A fee charged under this subsection (a) is a lender's exclusive charge for late payment.
    (a‑5) A lender may charge a borrower a fee not to exceed $1 for the verification required under Section 2‑15 of this Act. Only one such fee may be collected by the lender with respect to a particular loan.
    (b) Except for the finance charges described in Section 2‑5 and as specifically allowed by this Section, a lender may not impose on a consumer any additional finance charges, interest, fees, or charges of any sort for any purpose.
(Source: P.A. 96‑936, eff. 3‑21‑11.)

    (815 ILCS 122/2‑15)
    (Text of Section before amendment by P.A. 96‑936)
    Sec. 2‑15. Verification.
    (a) Before entering into a loan agreement with a consumer, a lender must use a commercially reasonable method of verification to verify that the proposed loan agreement is permissible under this Act.
    (b) Within 6 months after the effective date of this Act, the Department shall certify that one or more consumer reporting service databases are commercially reasonable methods of verification. Upon certifying that a consumer reporting service database is a commercially reasonable method of verification, the Department shall:
        (1) provide reasonable notice to all licensees
     identifying the commercially reasonable methods of verification that are available; and
        (2) immediately upon certification, require each
     licensee to use a commercially reasonable method of verification as a means of complying with subsection (a) of this Section.
    (c) Except as otherwise provided in this Section, all personally identifiable information regarding any consumer obtained by way of the certified database and maintained by the Department is strictly confidential and shall be exempt from disclosure under Section 7(1)(b)(i) of the Freedom of Information Act.
    (d) Notwithstanding any other provision of law to the contrary, a consumer seeking a payday loan may make a direct inquiry to the consumer reporting service to request a more detailed explanation of the basis for a consumer reporting service's determination that the consumer is ineligible for a new payday loan.
    (e) In certifying a commercially reasonable method of verification, the Department shall ensure that the certified database:
        (1) provides real‑time access through an Internet
     connection or, if real‑time access through an Internet connection becomes unavailable to lenders due to a consumer reporting service's technical problems incurred by the consumer reporting service, through alternative verification mechanisms, including, but not limited to, verification by telephone;
        (2) is accessible to the Department and to licensees
     in order to ensure compliance with this Act and in order to provide any other information that the Department deems necessary;
        (3) requires licensees to input whatever information
     is required by the Department;
        (4) maintains a real‑time copy of the required
     reporting information that is available to the Department at all times and is the property of the Department;
        (5) provides licensees only with a statement that a
     consumer is eligible or ineligible for a new payday loan and a description of the reason for the determination; and
        (6) contains safeguards to ensure that all
     information contained in the database regarding consumers is kept strictly confidential.
    (f) The licensee shall update the certified database by inputting all information required under item (3) of subsection (e):
        (1) on the same day that a payday loan is made;
        (2) on the same day that a consumer elects a
     repayment plan, as provided in Section 2‑40; and
        (3) on the same day that a consumer's payday loan is
     paid in full.
    (g) A licensee may rely on the information contained in the certified database as accurate and is not subject to any administrative penalty or liability as a result of relying on inaccurate information contained in the database.
    (h) The certified consumer reporting service shall indemnify the licensee against all claims and actions arising from illegal or willful or wanton acts on the part of the certified consumer reporting service.
(Source: P.A. 94‑13, eff. 12‑6‑05.)
 
    (Text of Section after amendment by P.A. 96‑936)
    Sec. 2‑15. Verification.
    (a) Before entering into a loan agreement with a consumer, a lender must use a commercially reasonable method of verification to verify that the proposed loan agreement is permissible under this Act.
    (b) Within 6 months after the effective date of this Act, the Department shall certify that one or more consumer reporting service databases are commercially reasonable methods of verification. Upon certifying that a consumer reporting service database is a commercially reasonable method of verification, the Department shall:
        (1) provide reasonable notice to all licensees
     identifying the commercially reasonable methods of verification that are available; and
        (2) immediately upon certification, require each
     licensee to use a commercially reasonable method of verification as a means of complying with subsection (a) of this Section.
    (c) Except as otherwise provided in this Section, all personally identifiable information regarding any consumer obtained by way of the certified database and maintained by the Department is strictly confidential and shall be exempt from disclosure under Section 7(1)(b)(i) of the Freedom of Information Act.
    (d) Notwithstanding any other provision of law to the contrary, a consumer seeking a payday loan may make a direct inquiry to the consumer reporting service to request a more detailed explanation of the basis for a consumer reporting service's determination that the consumer is ineligible for a new payday loan.
    (e) In certifying a commercially reasonable method of verification, the Department shall ensure that the certified database:
        (1) provides real‑time access through an Internet
     connection or, if real‑time access through an Internet connection becomes unavailable to lenders due to a consumer reporting service's technical problems incurred by the consumer reporting service, through alternative verification mechanisms, including, but not limited to, verification by telephone;
        (2) is accessible to the Department and to licensees
     in order to ensure compliance with this Act and in order to provide any other information that the Department deems necessary;
        (3) requires licensees to input whatever information
     is required by the Department;
        (4) maintains a real‑time copy of the required
     reporting information that is available to the Department at all times and is the property of the Department;
        (5) provides licensees only with a statement that a
     consumer is eligible or ineligible for a new payday loan and a description of the reason for the determination; and
        (6) contains safeguards to ensure that all
     information contained in the database regarding consumers is kept strictly confidential.
    (f) The licensee shall update the certified database by inputting all information required under item (3) of subsection (e):
        (1) on the same day that a payday loan is made;
        (2) on the same day that a consumer elects a
     repayment plan, as provided in Section 2‑40; and
        (3) on the same day that a consumer's payday loan is
     paid in full, including the refinancing of an installment payday loan as permitted under subsection (c) of Section 2‑5.
    (g) A licensee may rely on the information contained in the certified database as accurate and is not subject to any administrative penalty or liability as a result of relying on inaccurate information contained in the database.
    (h) The certified consumer reporting service shall indemnify the licensee against all claims and actions arising from illegal or willful or wanton acts on the part of the certified consumer reporting service.
    (i) The certified consumer reporting service may charge a verification fee not to exceed $1 upon a loan being made or entered into in the database. The certified consumer reporting service shall not charge any additional fees or charges.
(Source: P.A. 96‑936, eff. 3‑21‑11.)

    (815 ILCS 122/2‑17)
    (Text of Section before amendment by P.A. 96‑936)
    Sec. 2‑17. Consumer reporting services qualification and bonding.
    (a) Each consumer reporting service shall have at all times a net worth of not less than $1,000,000 calculated in accordance with generally accepted accounting principles.
    (b) Each application for certification under this Act shall be accompanied by a surety bond acceptable to the Department in the amount of $1,000,000. The surety bond shall be in a form satisfactory to the Department and shall run to the State of Illinois for the benefit of any claimants against the consumer reporting service to secure the faithful performance of its obligations under this Act. The aggregate liability of the surety may exceed the principal sum of the bond. Claimants against the consumer reporting service may themselves bring suit directly on the surety bond or the Department may bring suit on behalf of claimants, either in one action or in successive actions.
    (c) The surety bond shall remain in effect until cancellation, which may occur only after 90 days' written notice to the Department. Cancellation shall not affect any liability incurred or accrued during that period.
    (d) The surety bond shall remain in place for 5 years after the consumer reporting service ceases operation in the State.
    (e) The surety bond proceeds and any cash or other collateral posted as security by a consumer reporting service shall be deemed by operation of law to be held in trust for any claimants under this Act in the event of the bankruptcy of the consumer reporting service.
    (f) To the extent that any indemnity or fine exceeds the amount of the surety bond described under this Section, the consumer reporting service shall be liable for that amount.
    (g) Each application for certification under this Act shall be accompanied by a nonrefundable investigation fee of $2,500, together with an initial certification fee of $1,000.
    (h) On or before March 1 of each year, each consumer reporting service qualified under this Section shall pay to the Department a certification fee in the amount of $1,000.
(Source: P.A. 94‑13, eff. 12‑6‑05.)
 
    (Text of Section after amendment by P.A. 96‑936)
    Sec. 2‑17. Consumer reporting services qualification and bonding.
    (a) Each consumer reporting service shall have at all times a net worth of not less than $1,000,000 calculated in accordance with generally accepted accounting principles.
    (b) Each application for certification under this Act shall be accompanied by a surety bond acceptable to the Department in the amount of $1,000,000. The surety bond shall be in a form satisfactory to the Department and shall run to the State of Illinois for the benefit of any claimants against the consumer reporting service to secure the faithful performance of its obligations under this Act. The aggregate liability of the surety may exceed the principal sum of the bond. Claimants against the consumer reporting service may themselves bring suit directly on the surety bond or the Department may bring suit on behalf of claimants, either in one action or in successive actions.
    (c) The surety bond shall remain in effect until cancellation, which may occur only after 90 days' written notice to the Department. Cancellation shall not affect any liability incurred or accrued during that period.
    (d) The surety bond shall remain in place for 5 years after the consumer reporting service ceases operation in the State.
    (e) The surety bond proceeds and any cash or other collateral posted as security by a consumer reporting service shall be deemed by operation of law to be held in trust for any claimants under this Act in the event of the bankruptcy of the consumer reporting service.
    (f) To the extent that any indemnity or fine exceeds the amount of the surety bond described under this Section, the consumer reporting service shall be liable for that amount.
    (g) Each application for certification under this Act shall be accompanied by a nonrefundable investigation fee of $2,500, together with an initial certification fee of $1,000.
    (h) On or before March 1 of each year, each consumer reporting service qualified under this Section shall pay to the Department a certification fee in the amount of $1,000.
    (i) Each consumer reporting service shall maintain at all times an ID Theft Red Flag Program that meets the standards established by the Federal Trade Commission's Red Flags Rule, promulgated under the Fair and Accurate Credit Transactions Act of 2003.
(Source: P.A. 96‑936, eff. 3‑21‑11.)

    (815 ILCS 122/2‑20)
    (Text of Section before amendment by P.A. 96‑936)
    Sec. 2‑20. Required disclosures.
    (a) Before a payday loan is made, a lender shall deliver to the consumer a pamphlet prepared by the Secretary that:
        (1) explains, in simple English and Spanish, all of
     the consumer's rights and responsibilities in a payday loan transaction;
        (2) includes a toll‑free number to the Secretary's
     office to handle concerns or provide information about whether a lender is licensed, whether complaints have been filed with the Secretary, and the resolution of those complaints; and
        (3) provides information regarding the availability
     of debt management services.
    (b) Lenders shall provide consumers with a written agreement that may be kept by the consumer. The written agreement must include the following information in English and in the language in which the loan was negotiated:
        (1) the name and address of the lender making the
     payday loan, and the name and title of the individual employee who signs the agreement on behalf of the lender;
        (2) disclosures required by the federal Truth in
     Lending Act;
        (3) a clear description of the consumer's payment
     obligations under the loan;
        (4) the following statement, in at least 14‑point
     bold type face: "You cannot be prosecuted in criminal court to collect this loan." The information required to be disclosed under this subdivision (4) must be conspicuously disclosed in the loan document and shall be located immediately preceding the signature of the consumer; and
        (5) the following statement, in at least 14‑point
     bold type face:
        "WARNING: This loan is not intended to meet long‑term
     financial needs. This loan should be used only to meet short‑term cash needs. The cost of your loan may be higher than loans offered by other lending institutions. This loan is regulated by the Department of Financial and Professional Regulation."
    (c) The following notices in English and Spanish must be conspicuously posted by a lender in each location of a business providing payday loans:
        (1) A notice that informs consumers that the lender
     cannot use the criminal process against a consumer to collect any payday loan.
        (2) The schedule of all finance charges to be
     charged on loans with an example of the amounts that would be charged on a $100 loan payable in 13 days and a $400 loan payable in 30 days, giving the corresponding annual percentage rate.
        (3) In one‑inch bold type, a notice to the public in
     the lending area of each business location containing the following statement:
        "WARNING: This loan is not intended to meet long‑term
     financial needs. This loan should be used only to meet short‑term cash needs. The cost of your loan may be higher than loans offered by other lending institutions. This loan is regulated by the Department of Financial and Professional Regulation."
        (4) In one‑inch bold type, a notice to the public in
     the lending area of each business location containing the following statement:
        "INTEREST‑FREE REPAYMENT PLAN: If you still owe on
     one or more payday loans after 35 days, you are entitled to enter into a repayment plan. The repayment plan will give you at least 55 days to repay your loan in installments with no additional finance charges, interest, fees, or other charges of any kind."
(Source: P.A. 94‑13, eff. 12‑6‑05.)
 
    (Text of Section after amendment by P.A. 96‑936)
    Sec. 2‑20. Required disclosures.
    (a) Before a payday loan is made, a lender shall deliver to the consumer a pamphlet prepared by the Secretary that:
        (1) explains, in simple English and Spanish, all of
     the consumer's rights and responsibilities in a payday loan transaction;
        (2) includes a toll‑free number to the Secretary's
     office to handle concerns or provide information about whether a lender is licensed, whether complaints have been filed with the Secretary, and the resolution of those complaints; and
        (3) provides information regarding the availability
     of debt management services.
    (b) Lenders shall provide consumers with a written agreement that may be kept by the consumer. The written agreement must include the following information in English and in the language in which the loan was negotiated:
        (1) the name and address of the lender making the
     payday loan, and the name and title of the individual employee who signs the agreement on behalf of the lender;
        (2) disclosures required by the federal Truth in
     Lending Act;
        (3) a clear description of the consumer's payment
     obligations under the loan;
        (4) the following statement, in at least 14‑point
     bold type face: "You cannot be prosecuted in criminal court to collect this loan." The information required to be disclosed under this subdivision (4) must be conspicuously disclosed in the loan document and shall be located immediately preceding the signature of the consumer; and
        (5) the following statement, in at least 14‑point
     bold type face: