A new law has been enacted in Illinois that permanently extends the state’s Collection Agency Act, revises licensing rules for collection agencies and debt buyers, and strengthens oversight powers for regulators. Senate Bill 2457 amends the Collection Agency Act and removes its scheduled repeal date of Jan. 1, 2026, under the Regulatory Sunset Act. The measure also updates definitions, expands exemptions, clarifies out-of-state licensing rules, and enhances enforcement provisions for the Illinois Department of Financial and Professional Regulation (IDFPR).
Key provisions:
- Expanded exemptions: Newly exempted entities from licensing include licensed student loan servicers, consumer installment lenders, pawnbrokers, consumer legal funding companies, and motor vehicle retail sellers collecting their own contracts. Existing exemptions remain for banks, credit unions, licensed attorneys, and other financial institutions.
- Out-of-state agencies: Collection agencies based outside Illinois can collect from Illinois consumers without an Illinois license if they are licensed in their home state, operate only through interstate communications, and Illinois provides reciprocal privileges.
- Child support collections: The law refines rules for agencies collecting court-ordered child support, including capping fees at 29% of collected amounts (subject to adjustment by rule) and prohibiting charges on payments intercepted through government programs such as tax refunds or unemployment benefits.
- Enforcement powers: IDFPR’s fine authority is expanded to $10,000 per violation for unlicensed activity or prohibited conduct. The Department may also issue cease-and-desist orders and pursue injunctions for repeat offenders.
- Procedural updates: The law authorizes electronic service of notices, updates rules for investigations and hearings, and allows consent orders to resolve disciplinary matters without formal hearings.
- The amendments also preserve an annual meeting mechanism, requiring IDFPR to meet with debt collection industry representatives upon request to discuss developments and regulatory issues.
