Governor Signs Debt Buyer Bill Endorsed by ARM Industry

Illinois Governor Pat Quinn last week signed into law a bill that for the first time specifically defines a “debt buyer” in the state. The bill, which received universal approval from both chambers of the legislature, was a collaborative effort between state regulators and ARM industry representatives.

Illinois House Bill 5016, which amends the Illinois Collection Agency Act, was passed by the legislature in late May and signed by Quinn last week.  The legislation, sponsored by Representative Lou Lang (D-Skokie) and Senator Ira Silverstein (D-Chicago), clearly defines the term “Debt Buyer” in Illinois for the first time.

While debt buyers are still subject to the Illinois Collection Agency Act and may be subject to enforcement action by the Attorney General, the new law recognizes that certain collection agency requirements should not be applied to debt buyers.

Specifically, a debt buyer shall not be required to:

• file and maintain in force a surety bond;

• maintain a trust account;

• procure written authorization to refer the account to an attorney for suit; or

• adhere to the assignment for collection criteria.

The law goes into effect January 1, 2013.

Passage of the law was the culmination of a two-year process initiated by the Creditors Bar Coalition of Illinois (CBCI), a not for profit organization comprised of debt collection attorneys and debt purchasers working together to preserve and protect the ability to collect legitimate debt in the State of Illinois. Working with state regulatory agencies, the CBCI got the bill introduced in early 2012.

“CBCI applauds the dedication of the Office of the Attorney General and the Department of Financial and Professional Regulation in ensuring laws adequately protect consumers without unduly burdening legitimate businesses,” the group said in a statement.

The signing was also applauded by debt buyer trade group DBA International.

“DBA welcomes this statutory change, as it ends the uncertainty of what requirements contained in the Illinois Collection Agency Act apply to debt buyers,” the group noted in a statement. “The Act as originally adopted in 2001 was designed to apply to third party collections but in recent years was broadened through regulatory and judicial interpretation to apply to debt buyers even though a number of the Acts provisions would not apply to the legal owner of a debt.  The confusion created by these interpretations has been the basis of a number of consumer counterclaims and class action suits brought over the past few years.”

During the voting process in the Illinois legislature, the bill did not receive a single “No” vote.

In addition to formally defining “debt buyer,” the bill adds definitions of “charge-off balance” and “charge-off date” to the state’s Collection Agency Act.