(815 ILCS 180/1)
Sec. 1. Short title. This Act may
be cited as the Collateral Protection Act.
(Source: P.A. 89-623, eff. 8-9-96.)
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(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; 90-35,
eff. 6-27-97.)
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(815 ILCS 180/10)
Sec. 10. Placement of collateral
protection insurance. A creditor may place collateral protection
insurance provided the following conditions are met:
(1) the debtor has entered into
a credit transaction with the creditor;
(2) the credit transaction has
been reduced to a credit agreement, and the credit agreement
requires the debtor to maintain insurance on the collateral;
and
(3) a notice substantially similar
to the following has been included in the credit agreement or
on a separate document provided to the debtor and to any cosigner,
guarantor, or other person liable with the debtor for the obligation,
at the time the credit agreement is entered:
"Unless you provide us with
evidence of the insurance coverage required by your agreement
with us, we may purchase insurance at your expense to protect
our interests in your collateral. This insurance may, but need
not, protect your interests. The coverage that we purchase may
not pay any claim that you make or any claim that is made against
you in connection with the collateral. You may later cancel any
insurance purchased by us, but only after providing us with evidence
that you have obtained insurance as required by our agreement.
If we purchase insurance for the collateral, you will be responsible
for the costs of that insurance, including interest and any other
charges we may impose in connection with the placement of the
insurance, until the effective date of the cancellation or expiration
of the insurance. The costs of the insurance may be added to
your total outstanding balance or obligation. The costs
of the insurance may be more than the cost of insurance you may
be able to obtain on your own."
(Source: P.A. 89-623, eff. 8-9-96.)
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(815 ILCS 180/15)
Sec. 15. Notice of purchase of
collateral protection insurance; repayment terms.
(a) Within 30 calendar days following
the purchase 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 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 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
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the Notice of Placement of Insurance;
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(2)
a final balloon payment within 30 days after the
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last scheduled payment required by the
credit agreement; or
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(3)
full amortization over the term of the credit
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transaction,
the term of the collateral protection insurance
policy, or the term for which amortization is used
by the creditor.
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(Source: P.A. 89-623, eff. 8-9-96;
90-35, eff. 6-27-97.)
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(815 ILCS 180/20)
Sec. 20. Coupon books. If any form
of amortization is used by the creditor and a coupon book was
sent to the debtor at the inception of the credit transaction,
the creditor shall send to the debtor either:
(1) a reprinted coupon book with
revised calculations of the debtor's payments that includes the
amortized costs of the collateral protection insurance; or
(2) a supplemental coupon book
with calculations of the debtor's additional payments based upon
the amortized costs of the collateral protection insurance, for
use by the debtor in addition to the original coupon book.
(Source: P.A. 89-623, eff. 8-9-96.)
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(815 ILCS 180/25)
Sec. 25. Cancellation of collateral
protection insurance. A debtor may at any time cause the cancellation
of collateral protection insurance by providing proper evidence
to the creditor that the debtor has obtained insurance as required
by the credit agreement. If, within 30 days after notice is sent
pursuant to subsection (a) of Section 15, a debtor provides the
creditor with proper evidence that the debtor had insurance on
the collateral as required by the credit agreement on the date
the creditor purchased insurance and that the debtor continues
to have insurance on the collateral as required by the credit
agreement, the creditor shall cancel the insurance that it purchased
and may not charge the debtor any costs, interest, or other charges
in connection with the insurance.
(Source: P.A. 89-623, eff. 8-9-96.)
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(815 ILCS 180/30)
Sec. 30. Unearned premiums. Upon
cancellation or expiration of collateral protection insurance,
the amount of unearned premiums, if any, as calculated in accordance
with the policy, shall be refunded to the debtor. The amount
of unearned premiums, however, may not be calculated by the Rule
of 78ths method. A refund of unearned premiums may be credited
to the debtor's obligation under the credit agreement or distributed
directly to the debtor by check or other means.
(Source: P.A. 89-623, eff. 8-9-96.)
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(815 ILCS 180/35)
Sec. 35. Selection of insurance
carrier. Collateral protection insurance may be placed with any
insurance carrier selected by the creditor that is licensed to
underwrite the insurance by the Department of Insurance. The
insurance shall be evidenced by an individual policy or a certificate
of insurance.
(Source: P.A. 89-623, eff. 8-9-96.)
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(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 under this Act shall be mailed by United
States Mail, first class, postage prepaid.
(Source: P.A. 89-623, eff. 8-9-96; 90-35,
eff. 6-27-97.)
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(815 ILCS 180/45)
Sec. 45. No fiduciary relationship.
This Act does not impose a fiduciary relationship between the
creditor and the debtor. Placement of collateral protection insurance
is for the sole purpose of protecting the interest of the creditor
when the debtor fails to insure collateral as required by the
credit agreement.
(Source: P.A. 89-623, eff. 8-9-96.)
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(815 ILCS 180/50)
Sec. 50. No cause of action created.
A creditor is not, by virtue of this Act, required to purchase
collateral protection insurance or to otherwise insure collateral.
A creditor shall not, by virtue of this Act, be liable to a debtor
or to any other person for not purchasing collateral protection
insurance, as a result of the amount or level of coverage of
collateral protection insurance purchased by the creditor, or
because the creditor purchased collateral protection insurance
that protects only the interests of the creditor or less than
all of the interests of the debtor. This Act shall not be deemed
to create a cause of action for damages on behalf of the debtor
or any other person in connection with the placement of collateral
protection insurance.
(Source: P.A. 89-623, eff. 8-9-96.)
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(815 ILCS 180/55)
Sec. 55. Uniform Commercial Code.
The obligations and rights of the creditor and the debtor with
respect to the collateral as provided by the Uniform Commercial
Code are not affected by this Act.
(Source: P.A. 89-623, eff. 8-9-96.)
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(815 ILCS 180/60)
Sec. 60. Severability; no impairment
of creditor's rights. The provisions of this Act are severable
under Section 1.31 of the Statute on Statutes. This Act shall
not impair any other remedies, rights, or options available to
a creditor pursuant to any law, regulation, ruling, court order,
contract, or agreement.
(Source: P.A. 89-623, eff. 8-9-96.)
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(815 ILCS 180/65)
Sec. 65. Coverage of Act. Substantial
compliance with the provisions of this Act shall be mandatory
for the placement of collateral protection insurance in this
State by a creditor pursuant to a credit agreement entered into
on or after July 1, 1997.
No provision of this Act shall be held or applied against a creditor
in connection with collateral protection insurance placed prior
to July 1, 1997.
A creditor that places collateral protection insurance pursuant
to a credit agreement entered into prior to July 1, 1997, shall
have available to it all of the rights provided by this Act if
the creditor is in substantial compliance with the provisions
of this Act other than item (3) of Section 10.
(Source: P.A. 89-623, eff. 8-9-96.)
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(815 ILCS 180/99)
Sec. 99. Effective date. This Act
takes effect upon becoming law.
(Source: P.A. 89-623, eff. 8-9-96.)
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