2023 Illinois Compiled Statutes › Chapter 815 - BUSINESS TRANSACTIONS › 815 ILCS 180/ - Collateral Protection Act.

(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.)
(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.)
(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.)
(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 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; 90-35, eff. 6-27-97.)
(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.)
(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.)
(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.)
(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.)
(815 ILCS 180/40)
Sec. 40. Substantial compliance.
(a) 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.
(b) A servicer subject to the regulations prescribed by the Consumer Financial Protection Bureau pursuant to Section 1463 of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act (12 C.F.R. 1024.37) that places hazard insurance in substantial compliance with those regulations
shall be deemed to be in substantial compliance with the terms of this Act.
(Source: P.A. 98-1120, eff. 8-26-14.)
(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.)
(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.)
(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.)
(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.)
(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.)
(815 ILCS 180/99)
Sec. 99. 
		Effective date. 
		This Act takes effect upon becoming law.
(Source: P.A. 89-623, eff. 8-9-96.)