The Magazine of Illinois Lawyers

December 2017Volume 105Number 12Page 10

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Veto session wrap-up

The General Assembly overrode Governor Rauner's vetos of student loan legislation and the Unclaimed Life Insurance Benefit Act.

In a veto session conducted under the shadow of sexual harassment allegations by female lobbyists and others, the General Assembly overrode Governor Rauner's vetoes of many bills, and the Illinois House passed a bill that is significant given the recent Equifax data breach. Here's the roundup of selected action.

Illinois Student Loan Servicing Rights Act. Legislators voted to override Governor Rauner's veto of Senate Bill 1351, which was introduced by Attorney General Lisa Madigan. Also known as the Illinois Student Loan Servicing Rights Act, the Act introduces licensing requirements for servicing student loans in Illinois.

It also establishes a "Student Loan Bill of Rights," which prohibits certain servicing practices, imposing various requirements upon student loan servicers. The Act allows the Attorney General to enforce violations under the Consumer Fraud and Deceptive Business Practices Act.

The Act requires that student loan servicers obtain a license to service student loans in Illinois. This licensing process will be overseen by the Secretary of Financial and Professional Regulation. It applies to almost every student loan servicer, encompassing both federal and private student loans, including those taken out to refinance an existing student loan. Some entities are excluded from the licensing requirement.

Federal and state-chartered banks are exempt, as are open-end credit and loans secured by real property. If a postsecondary school extends its own credit, it is also exempt so long as the loan term doesn't exceed the length of the school program, if the principal balance at the time of graduation is less than $1,500, or if the borrower does not successfully complete the program.

The Student Loan Bill of Rights establishes payment processing rules, such as requiring the prompt and accurate crediting of payments. It also prohibits charging a payment penalty if the servicer has changed its address within 90 days. Similarly, the Act regulates the application of fees. Servicers can only charge late fees that are reasonable and proportional to the cost the servicer incurred due to the late payment. Servicers also cannot charge borrowers or cosigners for forbearing, extending, renewing, or modifying a loan.

Another major change is that the Act requires servicers to provide borrowers with special assistance when they are delinquent in payments, have requested information about reducing payments, or have missed two consecutive payments. The law takes effect December 31, 2018.

Criminal justice reform. The General Assembly made more strides towards criminal justice reform during the veto session. In particular, HB 184 has been amended to reduce some burdens placed on parolees and to give courts more latitude in determining sentencing.

Individuals are subjected to a risk assessment review, which determines the likelihood of recidivism, among other things. Those who are deemed low-risk are given the ability to check in with their parole officer via phone or other electronic means. In theory, this creates less disruption to a parolee's life, including less time taken off of work to physically report in.

Courts are also given the ability to substitute community service requirements with other activities or treatment as deemed appropriate. This increases the ability of courts to tailor unique remedies that address the needs of the offender. Instead of 30 hours of community service, outpatient drug or alcohol treatment may be more appropriate. The bill has been referred back to the Rules Committee, but is worth watching.

Unclaimed Life Insurance Benefit Act. Third, the legislature overrode Governor Rauner's amendatory veto of SB 302, which amends the Unclaimed Life Insurance Benefit Act. The bill expands the Act's scope to include lapsed and terminated life insurance policies. It also requires insurers to compare policies, annuity contracts, and retained asset files to the full Death Master File to determine whether there are unclaimed benefits.

The same requirement applies to accounts acquired from another insurer - they have to be compared within six months of their acquisition. It also requires that insurers request information to ensure the distribution of benefits or proceeds to the appropriate persons upon the death of the insured. This must be done at the time the account is opened or the policy is issued. The bill amends the Act to make the requirements apply to any policy in force on or after January 1, 2012.

Consumer Fraud and Deceptive Business Practices Act. The General Assembly considered HB 4095, which would amend the Consumer Fraud and Deceptive Business Practices Act. The measure passed the House and has moved on to the Senate. It would provide that a consumer reporting agency, such as Equifax, could not charge a consumer for placing a freeze, removing a freeze, or temporarily lifting a freeze on their credit. An amendment in the House added a provision that allows consumer reporting agencies to designate a telephone or electronic location to receive any credit freeze requests.

Matthew Hector
Matthew Hector is a senior associate at Woerthwein & Miller.