A new Chicago City Ordinance affecting debt collectors was announced in the May 8th DBA International Member Alert. Effective July 1, 2013 the City of Chicago will require the licensing of debt collectors who collect on accounts against city residents. “In January, Chicago became the nation’s third municipality, after New York City and Buffalo, NY, to adopt a municipal licensing ordinance. The City of Chicago’s Department of Business Activity & Consumer Affairs recently posted information and began accepting applications for licensing.”
National List member attorney, Sam Fratantoni revised his NL white paper on Illinois Debt Collection Laws just before publication on 2/21/13, in order to add information on the new ordinance. He stated, “The Chicago City Council recently passed a law requiring debt collectors to obtain a Chicago business license, if they collect against debtors residing in Chicago. Aside from statutory penalties, a failure to comply can result in revocation of the debt collector’s license, which then cannot be reinstated for a period of four years. The statute does not apply to attorneys,* and it mirrors much of the language of the Illinois Collection Agency Act and the FDCPA.”
Sam agreed to answer questions from NL regarding the new ordinance from his perspective, as it is about to become law. We want to thank Sam for his time and his very informative responses.
NL: The above paragraph was included in your IL white paper. What else do you think our member attorneys and clients/creditors need to know about this new City Ordinance? The City of Chicago has just recently put in place a process to handle applications for the new license that is required for debt collectors/buyers. Those interested in obtaining the license can request and submit the initial application on line. However, because there is no established time line for completing the application process, interested parties should apply as soon as possible. In-person application can be made as well, and is most likely the fastest way to obtain the license.
NL: Will it be difficult for debt buyers, both in-state and out-of-state, to determine whether they own accounts that belong to Chicago residents? As long as debt buyers/collectors have the zip code for the debtor, they can determine if a debtor resides in Chicago by using any number of internet sites that list the zip codes for the city.
NL: Do you foresee processing delays? Since this is a new process and the City’s Department of Business Affairs already had a full plate before this licensing requirement was passed, I would expect there to be some delays.
NL: The Ordinance states, “Upon written request, collectors shall provide verification of the consumer debt that shall include: (1) the charge-off balance and itemized principal, interest, charges and fees; (2) itemized post charge-off interest, charges and fees; and (3) a description of the debtor’s obligation to pay.” Will this and other information from the original creditor be difficult for debt buyers and agencies to provide? I believe debt buyers and agencies are aware that requirements relating to the debt collection process are changing across the country, and they will do what is necessary to produce the documents needed to comply. The transition periods for new requirements may sometimes slow things down, but eventually, the legal requirements will dictate how debt buyers purchase accounts going forward so they can be compliant.
NL: Is revoking a license for four years an extraordinarily harsh provision of the ordinance? I have not surveyed other states, but it appears fairly harsh. The City of Chicago wanted to make the point that those who do not comply will suffer a strict penalty. What about the fines of $250 to $5,000 for each offense? While the lower end of the fine spectrum will not be much of a deterrent, fines reaching into the thousands will be. Again, the City of Chicago is sending a message that those who are issued licenses must be vigilant in following the statutory requirements regarding debt collection. Also keep in mind that a series of violations can lead to a revocation of one’s license, as do violations of the Wage Payment and Collections Act, or any other state or federal law regulating the collection of a debt.
NL: What prompted the Committee on License and Consumer Protection, Mayor Rahm Emanuel, Aldermen Solis, Mitts, and Pawar to amend the Municipal Code of Chicago regarding licensing of debt collection activity? The current trend is to beef up consumer protection laws, and a good indication of that is the Consumer Financial Protection Bureau. We may be seeing just the tip of the iceberg here.
NL: Was there any opposition or lobbying against the Ordinance from the collection industry? Several organizations were involved – including the Illinois Collector’s Association (ICA), the Debt Buyer’s Association (DBA), The Association of Credit and Collection Professionals (ACA), and the Illinois Creditor’s Bar Association (ILCBA). David Schultz, a well-known expert in defending against FDCPA claims, with the law firm of Hinshaw, Culbertson, was also involved.
NL: Will the licensing requirements make it unreasonably difficult for a third-party agency or debt buyer, either in-state or out-of-state, to collect debt in Chicago? For the most part, the city ordinance mirrors the language that’s already in the FDCPA and Illinois Collection Agency Act. So the differences are not dramatic enough for debt collection in the state or from out-of-state to be considered unreasonably difficult.
NL: Is there any way that this ordinance will help the debt collection industry in IL? It basically re-emphasizes the fact that debt buyers and debt collectors will need as much documentation as possible to support their claims, including the chain of title. In addition, debt collectors are reminded that governmental entities are closely monitoring the activities of debt collectors more than ever. Compliance is crucial.
NL: In what ways will it make collecting debt in IL more difficult? The portion of the statute on verifying a debt upon a debtor’s request is more burdensome. And, for those debt collectors/buyers who are not aware of the fact that they will need a license for the state and for the City of Chicago, they will have some exposure from the consumer attorneys.
NL: Do attorneys in other states need to be aware of this change to debt collection laws in Chicago, even though they are exempted from the licensing requirements? Why or why not? To the extent that they represent or counsel debt buyers or agencies who may be seeking to place collection claims in Illinois, they will be well served to know the requirements of the Chicago Ordinance, together with the Illinois Collection Agency Act.
NL: Do you have any advice for attorneys, agencies or debt buyers in other large cities that do not now have their own licensing requirements? Be sure to monitor the legislation being proposed in your state and be ready to act quickly if there is proposed legislation that affects debt collection or seeks to require licensing. With the goal of providing consumer protection, legislation of this type can be passed quickly. There are many organizations that will support your interests (such as those mentioned above) and can be invaluable in creating dialogue with your state or local legislators that will allow all sides to be heard.
*Specifically exempted from the licensing requirements of the statute are: original creditors attempting to collect their own debt, banks, credit unions, attorneys, loan and finance companies and insurance companies. (225 ILCS 425/2.03)