Public Act 90-0035 of the 90th General Assembly
Public Act 90-0035
SB209 Enrolled LRB9002200JSmg
AN ACT to amend the Collateral Protection Act by changing
Sections 5, 15, and 40.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Collateral Protection Act is amended by
changing Sections 5, 15, and 40 as follows:
(815 ILCS 180/5)
Sec. 5. Definitions. In this Act, unless the context
otherwise requires, the following words and phrases shall
have the following meanings:
"Collateral" means any or all property pledged or
otherwise used to secure payment, repayment, or performance
under a credit or lease agreement, whether personal property,
real property, fixtures, inventory, receivables, rights,
privileges, or otherwise.
"Collateral protection insurance" means:
Insurance coverage that: (1) is purchased unilaterally by
a creditor subsequent to the date of a credit agreement; (2)
provides monetary protection against loss of or damage to the
collateral or against liability arising out of the ownership
or use of the collateral; and (3) is purchased according to
the terms of a credit agreement as a result of a debtor's
failure to provide evidence of insurance or failure to
maintain adequate insurance covering the collateral, with the
costs of the collateral protection insurance, including
interest and any other charges imposed by the creditor in
connection with the placement of the collateral protection
insurance, payable by the debtor. Collateral protection
insurance includes insurance coverage that is purchased to
protect only the interest of the creditor and insurance
coverage that is purchased to protect both the interest of
the creditor and some or all of the interest of the debtor.
The term of a collateral protection insurance policy may, but
need not, extend to the full term of the credit transaction.
Collateral protection insurance does not include
insurance coverage that is: (1) purchased by the creditor for
which the debtor is not charged; (2) purchased at the
inception of a credit transaction to which the debtor is a
party or agrees, whether or not the costs are included in any
payment plan under the credit transaction; (3) purchased by
the creditor following foreclosure, repossession, or a
similar event wherein the creditor gains possession or
control over the collateral; (4) maintained by the creditor
for the protection of any or all collateral which may come
into the possession or control of the creditor through
foreclosure, repossession, or a similar event; (5) credit
insurance, mortgage protection insurance, insurance issued to
cover the life or health of the debtor, or any other
insurance maintained to cover the inability or failure of the
debtor to make payment under the credit agreement; (6) title
insurance; or (7) flood insurance required to be placed by
creditors by 42 U.S.C. 4012(a), as amended, pursuant to the
National Flood Insurance Reform Act of 1994.
"Credit agreement" means the written document or
documents that set forth the terms of the credit transaction.
"Credit transaction" means any transaction the terms of
which require the payment or repayment of money, goods,
services, property, rights, or privileges, which is to be
made on one or more future dates, where such obligation is
secured by collateral.
"Creditor" means any person, corporation, partnership,
association, or other venture, which is a lender of money or
the vendor or lessor of goods, services, property, rights, or
privileges, for which repayment is arranged through a credit
transaction, and includes any successor to the rights, title,
interest, or liens of such lender, vendor, or lessor.
"Debtor" means a borrower of money or a purchaser or
lessee of goods, services, property, rights, or privileges,
for which payment or repayment is arranged through a credit
agreement. Debtor does not include any person who is not the
primary obligor under a credit transaction and who is not
jointly liable or jointly and severally liable with the
debtor for the obligation.
(Source: P.A. 89-623, eff. 8-9-96.)
(815 ILCS 180/15)
Sec. 15. Notice of purchase placement of collateral
protection insurance; repayment terms.
(a) Within 30 calendar days following the purchase
placement of collateral protection insurance, the creditor
shall mail to the debtor and to any cosigner, guarantor, or
other person liable with the debtor for the obligation, at
the last known address on file with the creditor for of any
such person, a notice entitled "Notice of Placement of
Insurance" in a form substantially similar to the following:
"NOTICE OF PLACEMENT OF INSURANCE
Your credit agreement with us requires you to maintain
adequate insurance on your collateral until you pay off your
loan. You have not given us proof that you have adequate
insurance on your collateral. Under the terms of your credit
agreement, we have purchased insurance at your expense to
protect our interests in your collateral.
The insurance we purchased will pay claims made by us as
the creditor. The insurance we purchased may not pay any
claims made by you or against you in connection with your
collateral.
You are responsible for the costs of this insurance,
including any interest and any other charges that we may
impose in connection with the purchase of this insurance.
The initial premium payment for this insurance will be
(amount), which may or may not include any interest or other
charges that we may impose. The costs of this insurance will
be added to your payment obligations and may be more than for
insurance you can buy on your own.
You still may obtain insurance of your own choosing on
the collateral. If you provide us with proof that you have
obtained adequate insurance on your collateral, we will
cancel the insurance that we purchased and refund or credit
any unearned premiums to you.
If, within 30 days after the date this notice was sent to
you, you provide us with proof that you had adequate
insurance on your collateral as of the date we also purchased
insurance and that you continue to have the insurance that
you purchased yourself, we will cancel the insurance that we
purchased without charging you any costs, interest, or other
charges in connection with the insurance that we purchased."
(b) The terms for repayment of the costs of the
collateral protection insurance, which shall include interest
and any other charges imposed by the creditor in connection
with the placement of the collateral protection insurance,
shall include one or more of the following:
(1) full payment within 30 days after the date of
the Notice of Placement of Insurance;
(2) a final balloon payment within 30 days after
the last scheduled payment required by the credit
agreement; or
(3) full amortization over the term of the credit
transaction, the term of the collateral protection
insurance policy, or the term for which amortization is
used by the creditor.
(Source: P.A. 89-623, eff. 8-9-96.)
(815 ILCS 180/40)
Sec. 40. Substantial compliance. A creditor that places
collateral protection insurance in substantial compliance
with the terms of this Act shall not be directly or
indirectly liable in any manner to a debtor, co-signor,
guarantor, or any other person, in connection with the
placement of the collateral protection insurance. Notices
and coupon books required to be mailed to a debtor under this
Act are not required to be mailed to any person other than to
the debtor and shall be mailed by United States Mail, first
class, postage prepaid, to the debtor's last known address on
file with the creditor.
(Source: P.A. 89-623, eff. 8-9-96.)
Section 99. Effective date. This Act takes effect upon
becoming law.