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Wednesday, July 25, 2012

State of Illinois

Governor Quinn Signs New Consumer Protection Laws

Laws Protect Residents from Risky Home Loans and “Debtor’s Prison”


CHICAGO –July 25, 2012. Governor Pat Quinn continued his long history of fighting for consumers today by signing two new laws to help Illinois residents avoid risky home loans and protect those who are in debt from being unfairly sent to jail. The new laws increase protections for families from High Risk Home Loans and Refund Anticipation Loans and also establish stringent new guidelines before a borrower can be sent to jail following non-payment of debt.

“Illinois consumers deserve the strongest protections possible from predatory lenders and unfair collection practices,” Governor Quinn said. “These new laws will help consumers and empower Illinois families with a better understanding of lending and debt collection."

Senate Bill 1692, sponsored by Sen. Jacqueline Collins (D-Chicago) and Rep. Michael Zalewski (D-Summit), makes clear to borrowers the definition of a risky home loan to prevent families from falling into the trap of debt. The law brings Illinois up to federal standards by clarifying and streamlining the definition of a high risk home loan to meet federal guidelines. The law also sets limits on fees and penalties that may be charged when a loan is issued, and prohibits any mortgage from containing pre-payment penalties if a loan is paid off before its term ends.

In addition, Senate Bill 1692 limits how much a taxpayer who is seeking a check or loan tied to their federal and state tax refunds can be charged. Companies that offer such loans will be required to post notices to their customers reminding the taxpayer that if a tax return is filed electronically, any refund owed can be deposited directly into their personal account within eight to 15 days at no cost to the taxpayer. SB 1692 goes into effect Jan. 1.

Also today, Governor Quinn signed House Bill 5434, sponsored by Rep. Ann Williams (D-Chicago) and Sen. William Haine (D-Alton), which codifies and clarifies best practices for the post-judgment collection of debts. The law will ensure that debt collectors and lenders provide evidence that there might be unprotected assets available to repay the debt before sending the debtor to jail. This law is designed to ensure that no Illinois residents are incarcerated as a result of being subject to a payment order they cannot afford, or for missing a hearing for which they did not receive notice.

Initiated by Attorney General Lisa Madigan, the measure was developed after Illinois officials found evidence that customers of licensed consumer lenders were unfairly being sent to jail because of their debt. Testimony from public hearings hosted by the Illinois Department of Financial and Professional Regulation (IDFPR) in Alton and Marion earlier this year showed that lenders and creditors have been distorting and exploiting the court system to collect debts.

“The Department first became aware of the so-called debtors' prison problem around June 2010” said Secretary of Financial and Professional Regulation Brent Adams.  “That month, we revoked a company's lending license for distorting and exploiting certain legitimate, but extraordinary measures to seek and obtain the arrest and incarceration of debtors.  We later reached a settlement with that particular company, but our investigation into the overall phenomenon had begun.  In January of this year, we held public hearings in southern Illinois, which is from where most of the reports were coming.  In Alton, we heard from Lisa Lindsey, who was incarcerated following debts she incurred in her fight against breast cancer.  One night, after returning home around 11:00 from the second of her two jobs, two police officers knocked on her door.”

This is from Ms. Lindsey’s actual testimony: “They were going to take me to jail for something to do with court.  They asked if I had any weapons in the house and started acting like I was going to get aggressive, I was in my bathrobe. They searched around my house; I said it was just my husband who was asleep. They said, ‘You need to come with us.’  I said, ‘Well, I need to get dressed.’ They said that they have to watch me get dressed, to watch me so that I didn’t try to flee. They proceeded to let me get dressed, as long as they watched. I got dressed, handcuffed, got put in the front seat of the police car. with my neighbors watching. They took me to Winston County jail, and had me booked for $300, which the original [medical] bill was $280. So my husband had to go to all of our friends and everyone, to have me bailed out for $300 so I didn’t lose my 2 jobs that I had to go to the next day.”

“Now for most of the last decade, I have fought financial exploitation, but this is one of the most despicable tactics I have ever encountered. HB 5434 is a significant step toward addressing this problem.  It should limit the ease with which consumers whose lives are in economic chaos are being thrown in jail.  The Department initiated legislation on this matter in the spring.  It seeks to have licensees report to us instances in which customers are jailed.  We are hopeful that the legislature will pass this bill when it reconvenes in November.  Stories like Ms. Lindsey's are a major part of the reason why folks like Governor Quinn and I get up to go to work in the morning.  I would like to thank the Attorney General, Sen. Haine, Rep. Williams, and Governor Quinn for their leadership in fighting to improve, not incarcerate, the lives of consumers in Illinois.”

HB 5434 goes into effect immediately. For more information on debtor’s prison, visit


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