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225 ILCS 429/ Debt Settlement Consumer Protection Act.

    (225 ILCS 429/1)
    Sec. 1. Short title. This Act may be cited as the Debt Settlement Consumer Protection Act.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/5)
    Sec. 5. Purpose and construction. The purpose of this Act is to protect consumers who enter into agreements with debt settlement providers and to regulate debt settlement providers. This Act shall be construed as a consumer protection law for all purposes. This Act shall be liberally construed to effectuate its purpose.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (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.
    "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 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, 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 service in exchange for any fee or compensation. "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 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.

"Debt settlement service" means:         (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.

"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.

"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.

"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 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.

(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/15)
    Sec. 15. Requirement of license. It shall be unlawful for any person or entity to act as a debt settlement provider except as authorized by this Act and without first having obtained a license under this Act.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/20)
    Sec. 20. Application for license. An application for a license to operate as a debt settlement provider in this State shall be made to the Secretary and shall be in writing, under oath, and in the form prescribed by the Secretary.
    Each applicant, at the time of making such application, shall pay to the Secretary the required fee as set by rule.
    Every applicant shall submit to the Secretary, at the time of the application for a license, a bond to be approved by the Secretary in which the applicant shall be the obligor, in the sum of $100,000 or an additional amount as required by the Secretary, and in which an insurance company, which is duly authorized by the State of Illinois to transact the business of fidelity and surety insurance, shall be a surety.
    The bond shall run to the Secretary for the use of the Department or of any person or persons who may have a cause of action against the obligor in said bond arising out of any violation of this Act or rules by a debt settlement provider. Such bond shall be conditioned that the obligor must faithfully conform to and abide by the provisions of this Act and of all rules, regulations, and directions lawfully made by the Secretary and pay to the Secretary or to any person or persons any and all money that may become due or owing to the State or to such person or persons, from the obligor under and by virtue of the provisions of this Act.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/25)
    Sec. 25. Qualifications for license. Upon the filing of the application and the approval of the bond and the payment of the specified fees, the Secretary may issue a license if he or she finds all of the following:
        (1) The financial responsibility, experience,

character, and general fitness of the applicant, the managers, if the applicant is a limited liability company, the partners, if the applicant is a partnership, and the officers and directors, if the applicant is a corporation or a not for profit corporation, are such as to command the confidence of the community and to warrant belief that the business will be operated fairly, honestly, and efficiently within the purposes of this Act.

(2) The applicant, if an individual, the managers, if

the applicant is a limited liability company, the partners, if the applicant is a partnership, and the officers and directors, if the applicant is a corporation, have not been convicted of a felony or a misdemeanor or disciplined with respect to a license or are not currently the subject of a license disciplinary proceeding concerning allegations involving dishonesty or untrustworthiness.

(3) The person or persons have not had a record of

having defaulted in the payment of money collected for others, including the discharge of those debts through bankruptcy proceedings.

(4) The applicant, or any officers, directors,

partners, or managers have not previously violated any provision of this Act or any rule lawfully made by the Secretary.

(5) The applicant has not made any false statement or

representation to the Secretary in applying for a license under this Section.

The Secretary shall deliver a license to the applicant to operate as a debt settlement provider in accordance with the provisions of this Act at the location specified in the application. The license shall remain in full force and effect until it is surrendered by the debt settlement provider or revoked by the Secretary as provided in this Act; provided, however, that each license shall expire by its terms on January 1 next following its issuance unless it is renewed as provided in this Act. A license, however, may not be surrendered without the approval of the Secretary.     More than one license may be issued to the same person for separate places of business, but separate applications shall be made for each location conducting business with Illinois residents. (Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/30)
    Sec. 30. Renewal of license.
    (a) Each debt settlement provider under the provisions of this Act may make application to the Secretary for renewal of its license, which application for renewal shall be on the form prescribed by the Secretary and shall be accompanied by a fee of $1,000 together with a bond or other surety as required, in a minimum amount of $100,000 or an amount as required by the Secretary based on the amount of disbursements made by the licensee in the previous year. The application must be received by the Department no later than December 1 of the year preceding the year for which the application applies.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/33)
    Sec. 33. Annual report; debt settlement provider disclosure of statistical information; Secretary to report statistical information.
    (a) A debt settlement provider must file an annual report with the Secretary that must include all of the following data:
        (1) for each Illinois resident:
            (i) the number of accounts enrolled;
            (ii) the principal amount of debt at the time

each account was enrolled;

(iii) the status of each account (for example,

active or terminated);

(iv) whether the account has been settled, and if

so, the settlement amount and the corresponding principal amount of debt enrolled for that account;

(v) the total amount of fees paid to the debt

settlement service provider;

(vi) whether the creditor has filed suit on the

account debt;

(vii) the date the resident is expected to

complete the debt settlement program; and

(viii) the date the resident canceled,

terminated, or became inactive in the program, if applicable.

(2) for persons completing the program during the

reporting period, the median and mean percentage of savings and the median and mean fees paid to the debt settlement service provider;

(3) for persons who cancelled, became inactive, or

terminated the program during the reporting period, the median and mean percentage of the savings and the median and mean fees paid to the debt settlement service provider;

(4) the percentage of Illinois residents who

canceled, terminated, became inactive, or completed the program without the settlement of all of the enrolled debt; and

(5) the total amount of fees collected from Illinois

residents.

The annual report must contain a declaration executed by an official authorized by the debt settlement provider under penalty of perjury that states that the report complies with this Section.     (b) The Secretary may prepare and make available to the public an annual consolidated report of all the data debt settlement providers are required to report pursuant to subsection (a) of this Section. (Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/35)
    Sec. 35. License; display and location of license. Each license issued shall be kept conspicuously posted in the place of business of the debt settlement provider. The business location may be changed by any debt settlement provider upon 10 days prior written notice to the Secretary. A debt settlement provider must operate under the name as stated in its original application.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/45)
    Sec. 45. Denial of license. Any complete application for a license shall be approved or denied within 60 days after the filing of the complete application with the Secretary.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/50)
    Sec. 50. Revocation or suspension of license.
    (a) The Secretary may revoke or suspend any license if he or she finds that:
        (1) any debt settlement provider has failed to pay

the annual license fee or to maintain in effect the bond required under the provisions of this Act;

(2) the debt settlement provider has violated any

provisions of this Act or any rule lawfully made by the Secretary under the authority of this Act;

(3) any fact or condition exists that, if it had

existed at the time of the original application for a license, would have warranted the Secretary in refusing its issuance; or

(4) any applicant has made any false statement or

representation to the Secretary in applying for a license under this Act.

(b) In every case in which a license is suspended or

revoked or an application for a license or renewal of a license is denied, the Secretary shall serve notice of his or her action, including a statement of the reasons for his or her actions, either personally or by certified mail, return receipt requested. Service by mail shall be deemed completed if the notice is deposited in the U.S. Mail.

(c) In the case of a denial of an application or renewal

of a license, the applicant or debt settlement provider may request, in writing, a hearing within 30 days after the date of service. In the case of a denial of a renewal of a license, the license shall be deemed to continue in force until 30 days after the service of the notice of denial, or if a hearing is requested during that period, until a final administrative order is entered.

(d) An order of revocation or suspension of a license

shall take effect upon service of the order unless the debt settlement provider requests, in writing, a hearing within 10 days after the date of service. In the event a hearing is requested, the order shall be stayed until a final administrative order is entered.

(e) If the debt settlement provider requests a hearing,

then the Secretary shall schedule the hearing within 30 days after the request for a hearing unless otherwise agreed to by the parties.

(f) The hearing shall be held at the time and place

designated by the Secretary. The Secretary and any administrative law judge designated by the Secretary have the power to administer oaths and affirmations, subpoena witnesses and compel their attendance, take evidence, and require the production of books, papers, correspondence, and other records or information that the Secretary considers relevant or material to the injury.

(g) The costs for the administrative hearing shall be set

by rule.

(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/55)
    Sec. 55. Contracts, books, records, and contract cancellation. Each debt settlement provider shall furnish to the Secretary, when requested, a copy of the contract entered into between the debt settlement provider and the debtor. The debt settlement provider shall furnish the debtor with a copy of the written contract at the time of execution, which shall set forth the charges, if any, agreed upon for the services of the debt settlement provider.
    Each debt settlement provider shall maintain records and accounts that will enable any debtor contracting with the debt settlement provider, at any reasonable time, to ascertain the status of all the debtor's accounts with the debt settlement service provider, including, but not limited to, the amount of any fees paid by the debtor, amount held in trust (if applicable), settlement offers made and received on each of the debtor's accounts, and legally enforceable settlements reached with the debtor's creditors. A statement showing the total amount received and the total disbursements to each creditor shall be furnished by the debt settlement provider to any individual within 7 days after a request therefor by the said debtor. Each debt settlement provider shall issue a receipt for each payment made by the debtor at a debt settlement provider office. Each debt settlement provider shall prepare and retain in the file of each debtor a written analysis of the debtor's income and expenses to substantiate that the plan of payment is feasible and practical.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/60)
    Sec. 60. Examination of debt settlement provider; duty to disclose a post‑license event.
    (a) The Secretary at any time, either in person or through an appointed representative, may examine the condition and affairs of a debt settlement provider. In connection with any examination, the Secretary may examine on oath any debt settlement provider and any director, officer, employee, customer, manager, partner, member, creditor, or stockholder of a debt settlement provider concerning the affairs and business of the debt settlement provider. The Secretary shall ascertain whether the debt settlement provider transacts its business in the manner prescribed by law and the rules issued thereunder. The debt settlement provider shall pay the cost of the examination as determined by the Secretary by administrative rule. Failure to pay the examination fee within 30 days after receipt of demand from the Secretary may result in the suspension of the license until the fee is paid. The Secretary shall have the right to investigate and examine any person, whether licensed or not, who is engaged in the debt settlement service business. The Secretary shall have the power to subpoena the production of any books and records pertinent to any investigation.
    (b) Each debt settlement provider shall disclose promptly to the Secretary, but in no event more than 30 days after the occurrence of the event, any change in any of the criteria listed in Section 25 of this Act for the issuance of a license.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/65)
    Sec. 65. Trust funds; requirements and restrictions.
    (a) All funds received by a debt settlement provider or his agent from and for the purpose of paying bills, invoices, or accounts of a debtor shall constitute trust funds owned by and belonging to the debtor from whom they were received. All such funds received by the debt settlement provider shall be separated from the funds of the debt settlement provider not later than the end of the business day following receipt by the debt settlement provider. All such funds shall be kept separate and apart at all times from funds belonging to the debt settlement provider or any of its officers, employees, or agents and may be used for no purpose other than paying bills, invoices, or accounts of the debtor. All such trust funds received at the main or branch offices of a debt settlement provider shall be deposited in a bank in an account in the name of the debt settlement provider‑designated trust account, or by some other appropriate name indicating that the funds are not the funds of the debt settlement provider or its officers, employees, or agents, on or before the close of the business day following receipt.
    (b) Such funds are not subject to attachment, lien, levy of execution, or sequestration by order of court except by a debtor for whom a debt settlement provider is acting as an agent in paying bills, invoices, or accounts.
    (c) At least once every month, the debt settlement provider shall render an accounting to the debtor that shall itemize the total amount received from the debtor, the total amount paid each creditor, the amount of charges deducted, and any amount held in reserve, if applicable, and the status of each of the debtors' enrolled accounts. A debt settlement provider shall, in addition, provide such an accounting to a debtor within 7 days after written demand, but not more than 3 times per 6‑month period.
    (d) Nothing in this Act requires the establishment of a trust account if no consumer funds other than earned settlement fees are held or controlled by a debt settlement provider.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/75)
    Sec. 75. Rules. The Secretary shall adopt and enforce all reasonable rules necessary or appropriate for the administration of this Act. The rulemaking shall be subject to the provisions of the Illinois Administrative Procedure Act.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/80)
    Sec. 80. Penalties.
    (a) Any person who operates as a debt settlement provider without a license shall be guilty of a Class 4 felony.
    (b) Any contract of debt settlement service as defined in this Act made by an unlicensed person shall be null and void and of no legal effect.
    (c) The Secretary may, after 10 days notice by registered mail to the debt settlement service provider at the address on the license or unlicensed entity engaging in the debt settlement service business, stating the contemplated action and in general the grounds therefore, fine such debt settlement service provider or unlicensed entity an amount not exceeding $10,000 per violation, and revoke or suspend any license issued hereunder if he or she finds that:
        (1) The debt settlement service provider has failed

to comply with any provision of this Act or any order, decision, finding, rule, regulation or direction of the Secretary lawfully made pursuant to the authority of this Act; or

(2) Any fact or condition exists which, if it had

existed at the time of the original application for the license, clearly would have warranted the Secretary in refusing to issue the license.

(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/83)
    Sec. 83. Additional liability for unlicensed activity. Any person who, without the required license, engages in conduct requiring a license under this Act without the required license shall be liable to the Department in an amount equal to the greater of (1) $1,000 or (2) an amount equal to four times the amount of consumer debt enrolled. The Department shall cause any funds so recovered to be deposited in the Debt Settlement Consumer Protection Fund.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/85)
    Sec. 85. Injunction. To engage in debt settlement service, render financial service, or accept debtors' funds, as defined in this Act, without a valid license to do so, is hereby declared to be inimical to the public welfare and to constitute a public nuisance. The Secretary may, in the name of the people of the State of Illinois, through the Attorney General of the State of Illinois, file a complaint for an injunction in the circuit court to enjoin such person from engaging in that business. An injunction proceeding shall be in addition to, and not in lieu of, penalties and remedies otherwise provided in this Act.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/90)
    Sec. 90. Review. All final administrative decisions of the Secretary under this Act shall be subject to judicial review pursuant to the provisions of the Administrative Review Law, including all amendments, modifications, and adopted rules.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/95)
    Sec. 95. Cease and desist orders.
    (a) The Secretary may issue a cease and desist order to any debt settlement provider or other person doing business without the required license when, in the opinion of the Secretary, the debt settlement provider or other person is violating or is about to violate any provision of the Act or any rule or condition imposed in writing by the Department.
    (b) The Secretary may issue a cease and desist order prior to a hearing.
    (c) The Secretary shall serve notice of his or her action, including a statement of the reasons for his or her action either personally or by certified mail, return receipt requested. Service by mail shall be deemed completed if the notice is deposited in the U.S. Mail.
    (d) Within 10 days after service of the cease and desist order, the licensee or other person may request, in writing, a hearing.
    (e) The Secretary shall schedule a hearing within 30 days after the request for a hearing unless otherwise agreed to by the parties.
    (f) If it is determined that the Secretary had the authority to issue the cease and desist order, then he or she may issue such orders as may be reasonably necessary to correct, eliminate, or remedy that conduct.
    (g) The powers vested in the Secretary by this Section are additional to any and all other powers and remedies vested in the Secretary by law, and nothing in this Section shall be construed as requiring that the Secretary shall employ the power conferred in this Section instead of or as a condition precedent to the exercise of any other power or remedy vested in the Secretary.
    (h) The cost for the administrative hearing shall be set by rule.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/100)
    Sec. 100. Moneys received; Financial Institution Fund. All moneys received by the Division of Financial Institutions under this Act, except for moneys received for the Debt Settlement Consumer Protection Fund, shall be deposited in the Financial Institution Fund created under Section 6z‑26 of the State Finance Act.
(Source: P.A. 96‑1420, eff. 8‑3‑10.)

    (225 ILCS 429/103)
    Sec. 103. Debt Settlement Consumer Protection Fund.
    (a) A special income‑earning fund is hereby created in the State Treasury, known as the Debt Settlement Consumer Protection Fund. This Fund is not subject to appropriation by the Illinois General Assembly.
    (b) All moneys paid into the Fund together with all accumulated, undistributed income thereon shall be held as a special Fund in the State Treasury. All interest earned on the Fund is non‑distributable and shall be returned to the Fund, and shall be invested and re‑invested in the Fund by the Treasurer or his or her designee. The Fund shall be used solely for the purpose of providing restitution to consumers who have suffered monetary loss arising out of a transaction regulated by this Act.
    (c) The Fund shall be applied only to restitution when restitution has been ordered by the Secretary. Restitution shall not exceed the amount actually lost by the consumer. The Fund shall not be used for the payment of any attorney or other fees.
    (d) The Fund shall be subrogated to the amount of the restitution, and the Secretary shall request the Attorney General to engage in all reasonable collection steps to collect restitution from the party responsible for the loss and reimburse the Fund.
    (e) Notwithstanding any other provisions of this Section, the payment of restitution from the Fund shall be a matter of grace and not right, and no consumer shall have any vested rights in the Fund as a beneficiary or otherwise. Before seeking restitution from the Fund, the consumer or beneficiary seeking payment of restitution shall apply for restitution on a form provided by the Secretary. The form shall include any information the Secretary may reasonably require in order to determine that restitution is appropriate. All documentation required by the Secretary, including the form, is subject to audit. Distributions from the Fund shall be made solely at the discretion of the Secretary, except that no paymen

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