Illinois Debt Settlement Laws
Debt Settlement License Registration Required:
Statutes: Ill. Rev. Stat. ch. 205, §665/1 et seq. and Ill. Rev. Stat. ch. 225, §429/1 et seq.
Definition: “Debt management service” means the planning and management of the financial affairs of a debtor for a fee and the receiving of money from the debtor for the purpose of distributing it to the debtor’s creditors in payment or partial payment of the debtor’s obligations or soliciting financial contributions from creditors. The business of debt management is conducted in this State if the debt management business, its employees, or its agents are located in this State or if the debt management business solicits or contracts with debtors located in this State. “Debt management service” does not include “debt settlement service” as defined in the Debt Settlement Consumer Protection Act.
This term shall not include the following when engaged in the regular course of their respective businesses and professions:
(a) Attorneys at law licensed, or otherwise authorized to practice, in Illinois who are engaged in the practice of law.
(b) Banks, operating subsidiaries of banks, affiliates of banks, fiduciaries, credit unions, savings and loan associations, and savings banks as duly authorized and admitted to transact business in the State of Illinois and performing credit and financial adjusting service in the regular course of their principal business.
(c) Title insurers, title agents, independent escrowees, and abstract companies, while doing an escrow business.
(d) Judicial officers or others acting pursuant to court order.
(e) Employers for their employees, except that no employer shall retain the services of an outside debt management service to perform this service unless the debt management service is licensed pursuant to this Act.
(f) Bill payment services, as defined in the Transmitters of Money Act.
(g) Credit counselors, only when providing services described in the definition of credit counselor in this Section.
“Debt settlement provider” means any person or entity engaging in, or holding itself out as engaging in, the business of providing debt settlement service in exchange for any fee or compensation, or any person who solicits for or acts on behalf of any person or entity engaging in, or holding itself out as engaging in, the business of providing debt settlement service in exchange for any fee or compensation. “Debt settlement provider” does not include:
(1) attorneys licensed, or otherwise authorized, to practice in Illinois who are engaged in the practice of law;
(2) escrow agents, accountants, broker dealers in securities, or investment advisors in securities, when acting in the ordinary practice of their professions and through the entity used in the ordinary practice of their profession;
(3) any bank, agent of a bank, operating subsidiary of a bank, affiliate of a bank, trust company, savings and loan association, savings bank, credit union, crop credit association, development credit corporation, industrial development corporation, title insurance company, title insurance agent, independent escrowee or insurance company operating or organized under the laws of a state or the United States, or any other person authorized to make loans under State law while acting in the ordinary practice of that business;
(4) any person who performs credit services for his or her employer while receiving a regular salary or wage when the employer is not engaged in the business of offering or providing debt settlement service;
(5) a collection agency licensed pursuant to the Collection Agency Act that is collecting a debt on its own behalf or on behalf of a third party;
(6) an organization that is described in Section 501(c)(3) and subject to Section 501(q) of Title 26 of the United States Code and exempt from tax under Section 501(a) of Title 26 of the United States Code and governed by the Debt Management Service Act;
(7) public officers while acting in their official capacities and persons acting under court order;
(8) any person while performing services incidental to the dissolution, winding up, or liquidating of a partnership, corporation, or other business enterprise; or
(9) persons licensed under the Real Estate License Act of 2000 when acting in the ordinary practice of their profession and not holding themselves out as debt settlement providers.
“Debt settlement service” means:
(1) offering to provide advice or service, or acting as an intermediary between or on behalf of a consumer and one or more of a consumer’s creditors, where the primary purpose of the advice, service, or action is to obtain a settlement, adjustment, or satisfaction of the consumer’s unsecured debt to a creditor in an amount less than the full amount of the principal amount of the debt or in an amount less than the current outstanding balance of the debt; or
(2) offering to provide services related to or providing services advising, encouraging, assisting, or counseling a consumer to accumulate funds for the primary purpose of proposing or obtaining or seeking to obtain a settlement, adjustment, or satisfaction of the consumer’s unsecured debt to a creditor in an amount less than the full amount of the principal amount of the debt or in an amount less than the current outstanding balance of the debt.
“Debt settlement service” does not include (A) the services of attorneys licensed, or otherwise authorized, to practice in Illinois who are engaged in the practice of law or (B) debt management service as defined in the Debt Management Service Act.