The Illinois General Assembly passed a number of bills this session that may be of interest to banks and their compliance personnel. Please note that these bills have yet to be signed by the Governor, and they are likely to have varying effective dates.

Bill Harmonizes Hazard Insurance Rules

Senate Bill 3423 amends the Illinois Collateral Protection Act to harmonize the Illinois law with the CFPB’s new mortgage servicing rules. The legislation will ensure that when mortgagees and their servicers comply with the new CFPB rules on force placing hazard insurance, they will be deemed to be in compliance with the Illinois law. This preserves their safe harbor in the Illinois law, while eliminating potentially conflicting state and federal standards.

Regulation of Employer-Issued Payroll Debit Cards

House Bill 5622 regulates payroll cards — reloadable prepaid cards provided by employers to pay employee wages.  The legislation prohibits most fees, imposes new notice requirements, and includes a number of limitations on payroll card programs.

Bill Authorizes Conversions of Manufactured Housing to Real Property

House Bill 5938 creates a voluntary procedure for converting a manufactured home to real property when it is permanently affixed to land. The legislation helps both consumers and lenders by opening the door to less costly residential mortgages for manufactured homes (instead of chattel mortgages), while providing owners of manufactured homes with more marketable titles and broadening access to affordable housing. The legislation also establishes a secondary market in Illinois for manufactured home loans, further increasing credit availability, since secondary market investors such as Fannie Mae and Freddie Mac will not invest in manufactured home loans unless a state has enacted express statutory conversion procedures.

Bill Calls for Consistency in Bank & Thrift Examinations

House Bill 5342 amends the Illinois Banking Act and the Savings Bank Act to require the Secretary of the Illinois Department of Financial and Professional Regulation (IDFPR) to adopt administrative rules that “ensure consistency and due process in the examination process.” The language also encourages the IDFPR to establish examination guidelines that define the scope of the examination process and clarify examination items that need to be resolved.

Combatting Patent Trolls

Senate Bill 3405 is intended to help banks and other businesses combat patent trolls. “Patent trolls” are law firms and shell companies that send demand letters to banks and other businesses threatening legal actions unless the recipient pays a licensing fee for the use of allegedly patented technologies. The letters often are baseless or deceptive, but recipients often feel compelled to pay the demands to avoid costly litigation. SB 3405 states that the act of sending an ambiguous or misleading patent demand letter is an unlawful practice under the Illinois Consumer Fraud and Deceptive Business Practices Act. The bill provides the Attorney General with enforcement powers to combat patent trolls, while also providing banks and other businesses with a private right of action.

Removing Omitted Subordinated Lienholders after Judicial Sales

Senate Bill 2730 creates a process for obtaining strict foreclosures of subordinated interests that were not included in a property’s foreclosure proceeding. An amendment to the legislation ensures that the legislation protects lenders holding junior liens on foreclosed properties when there is a surplus from the judicial sale.

Small Estate Affidavit Protections

Senate Bill 2985 revises the small estate affidavit. The bill was drafted in response to a series of hostile bills collectively referred to as “Violet’s Law,” the most recent being House Bill 162, all of which would have placed significant burdens and liabilities on financial institutions when relying on small estate affidavits.

Check Printing Modernization

Senate Bill 3029 removes outdated check printing requirements from the Consumer Deposit Accounts Act.

Public Funds in Demand Deposit Accounts

Senate Bill 1812 permits public funds to be deposited into demand deposit accounts.

Park District Borrowing

House Bill 4597 permits Illinois park districts to borrow directly from financial institutions.

Caps on Delinquent Condominium Assessments for Judicial Sale Purchasers

Senate Bill 2664 caps the delinquent condominium assessments and legal fees that may be charged to purchasers of foreclosed condominium units at judicial sales.

Lender Subordination Agreements for Mechanics Liens

Senate Bill 3023, as amended by Senate Amendment 3, amends the Mechanics Lien Act to expressly authorize construction lenders to request subordination agreements from contractors, subcontractors, material suppliers and other parties after 50% of a construction project’s initial loan proceeds have been disbursed.

Presumption of Void Transfers

Senate Bill 1048 is intended to address situations in which an elderly person’s third-party caregiver is named as a beneficiary in a trust, will or other transfer instrument due to fraud or deception.

Expanded Definition of Financial Exploitation in Probate Act

Senate Bill 2955 revises and expands the definition of “financial exploitation” under the Probate Act.

Assessment Freeze for Distressed Residential Properties

Senate Bill 336 creates a pilot program permitting county assessors to reduce the assessed value of improvements made to certain residential properties located in economically depressed areas. The legislation is intended to encourage homebuyers and developers to rehabilitate properties in areas with high foreclosure and vacant property rates.

State Investment Policies

Senate Bill 452 is intended to promote the participation of investment managers of public funds, including pension funds, that are minority-owned, female-owned, or owned by persons with disabilities.