Laws Protect Residents from Risky Home Loans and “Debtor’s Prison”
CHICAGO, IL – July 25, 2012 – (RealEstateRama) — 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.
HB 5434 goes into effect immediately. For more information on debtor’s prison, visit www.idfpr.com.