SPRINGFIELD – Governor Rod R. Blagojevich today signed House Bill 5070, legislation designed to protect consumers from deceptive credit counseling services. The bill expands licensing requirements to include all debt management companies, including those companies that do not directly make payments to creditors.
"This closes the loophole that lets debt management companies pay themselves first before they honor their commitment to the consumer's creditors. It's critical that we take an aggressive approach in ensuring the legitimacy of services that help consumers who are trying to dig their way out of debt," said Gov. Blagojevich.
The bill, sponsored by Rep. Maria Antonia Berrios (D-Chicago) and Sen. Antonio Munoz (D- Chicago), allows financial management services to receive money from a debtor, directly or indirectly, for the purpose of distributing it. By adding “indirectly”, the Illinois Department of Financial and Professional Regulation’s (IDFPR), Division of Financial Institutions, will ensure that all debt management companies – even those that don’t directly pay off debt – become licensed with the State of Illinois.
“People go to debt management services in good faith believing that they will help them with their financial situations,” Rep. Berrios said. “Unfortunately, some of these providers have been over charging their clients, causing them more financial strains. I am glad to see that this legislation will be responsible for regulating debt management services and ensuring that consumers are protected.”
Personal debt has skyrocketed due to easy access to credit, debt management companies have proliferated, and abuses in the industry have been detected. IDFPR shut down 67 purported companies for not performing debt management services. An additional 16 companies have been penalized by IDFPR for operating without licenses and for violating a number of Illinois acts and rules.
Illinois law limits the amount debt management companies can charge in set-up and monthly fees. Initial fees for service cannot exceed $50, and the median fee a company charges on a monthly basis cannot be more than $30.
The amendment to HB 5070 does not affect banks, fiduciaries, credit unions, savings and loan associations, savings banks, attorneys at law, judicial officers, employers (for their employees), or title insurers, and abstract companies. The law is effective immediately.