SB2844 94TH GENERAL ASSEMBLY

LRB094 16498 LCT 51759 b

94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
SB2844

Introduced 1/20/2006, by Sen. Jeffrey M. Schoenberg

SYNOPSIS AS INTRODUCED:

815 ILCS 505/2XX new
815 ILCS 177/Act rep.

Amends the Consumer Fraud and Deceptive Business Practices Act. Makes it an unlawful practice within the meaning of the Act for a facilitator to directly or indirectly charge a refund anticipation loan fee for the making of or in connection with a refund anticipation loan when: (i) the refund anticipation loan is issued to a borrower who is eligible to receive the Illinois Earned Income Tax Credit under Section 12 of the Illinois Income Tax Act; and (ii) the refund anticipation loan has an interest rate in excess of 26% per annum. Sets out disclosure requirements for the facilitator. Provides a formula for calculating the interest rate for a refund anticipation loan. Repeals the Tax Refund Anticipation Loan Disclosure Act.

A BILL FOR

AN ACT concerning business.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Consumer Fraud and Deceptive Business Practices Act is amended by adding Section 2XX as follows:

(815 ILCS 505/2XX new)

Sec. 2XX. Refund anticipation loans.

(a) As used in this Section:

"Facilitator" means a person who individually or in conjunction or cooperation with another person makes a refund anticipation loan, processes, receives, or accepts for delivery an application for a refund anticipation loan, issues a check in payment of refund anticipation loan proceeds, or in any other manner acts to allow the making of a refund anticipation loan. "Facilitator" does not include a bank, savings and loan association, or credit union operating under the laws of the United States or this State and does not include any person who acts solely as an intermediary and does not deal with the public in the making of the refund anticipation loan.

"Borrower" means a person who receives the proceeds of a refund anticipation loan.

"Lender" means any person or entity that offers or makes a refund anticipation loan.

"Refund anticipation loan" means a loan arranged to be repaid directly from the proceeds of a borrower's income tax refunds.

"Refund anticipation loan fee" means the charges, fees, or other consideration charged or imposed by the facilitator or lender for the making of or in connection with a refund anticipation loan. "Refund anticipation loan fee" includes any charges, fees, or other consideration for a deposit account if the deposit account is used for receipt of the consumer's tax refund to repay the amount owed on the loan. "Refund anticipation loan fee" does not include charges, fees, or other consideration charged or imposed by the facilitator in the ordinary course of business such as fees for tax return preparation and fees for electronic filing of tax returns, if the same fees in the same amount are charged to the facilitator's customers who do not receive refund anticipation loans.

(b) The interest rate for a refund anticipation loan shall be calculated as follows: the total amount of refund anticipation loan fees divided by the loan amount (minus any loan fees), then divided by the number of days in the loan term, then multiplied by 365 and expressed as a percentage. If a deposit account is established or maintained in whole or in part for the purpose of receiving the consumer's tax refund to repay the amount owed on a refund anticipation loan:

(1) the maturity of the loan for the purpose of determining the refund anticipation loan interest rate shall be assumed to be the estimated date when the tax refund will be deposited in the deposit account; and

(2) any fee charged to the consumer for the deposit account shall be considered a loan fee and shall be included in the calculation of the refund anticipation loan interest rate.

If no deposit account is established or maintained for the repayment of the loan, the maturity of the loan shall be assumed to be the estimated date when the tax refund is received by the borrower.

(c) No facilitator shall directly or indirectly charge a refund anticipation loan fee for the making of or in connection with a refund anticipation loan when:

(1) the refund anticipation loan is issued to a borrower who is eligible to receive the Illinois Earned Income Tax Credit under Section 12 of the Illinois Income Tax Act; and

(2) the refund anticipation loan has an interest rate in excess of 26% per annum.

(d) At the time a borrower applies for a refund anticipation loan, a facilitator shall disclose to the borrower on a separate form headed "YOU ARE APPLYING FOR A LOAN" and printed in at least 14-point type:

(1) the refund anticipation loan fee schedule;

(2) the Annual Percentage Rate using the interest rate formula set forth in subsection (b) of this Section;

(3) the estimated fee for preparing and electronically filing a tax return;

(4) the total cost to the borrower for using a refund anticipation loan;

(5) the estimated date that the loan proceeds will be paid to the borrower if the loan is approved;

(6) that the borrower is responsible for repayment of the loan and related fees in the event the tax refund is not paid or not paid in full; and

(7) the availability of electronic filing for the income tax return of the borrower and the average time announced by the federal Internal Revenue Service within which the borrower can expect to receive a refund if the borrower's return is filed electronically and the borrower does not obtain a refund anticipation loan.

(e) The disclosure form provided to the borrower pursuant to subsection (d) shall contain an acknowledgment signed and dated by the borrower stating, "I, THE BORROWER, HAVE RECEIVED AND READ A COPY OF THIS DISCLOSURE STATEMENT." The facilitator shall sign and date the disclosure form. The original disclosure form shall be retained by the facilitator and the duplicate copy shall be retained by the borrower.

(f) A person who violates this Section commits an unlawful practice within the meaning of this Act.

(815 ILCS 177/Act rep.)

Section 10. The Tax Refund Anticipation Loan Disclosure Act is repealed.