City Of Chicago’s Regulation Of Debt Collectors

In January, 2013 the City of Chicago amended the Municipal Code by regulating the activities of debt collectors of consumer debt. Some of those rules may affect mortgage loan servicers and debt buyers. Its effective date is July 1, 2013.

The amendment defines a debt collector any person who in the ordinary course of business, on behalf of himself or others, regularly engages in consumer debt collection. 4-6-160(a). The definition thus reaches to include not only the collector but the owner of a debt. It does not include entities that are exempt from registration under the Illinois Collection Agency Act, (ICAA) 225 ILCS 425/2.03. Exempted therefore are persons whose collection activities are confined to and are directly related to the operation of a business other than that of a collection agency and, specifically, banks and their affiliates, loan and finance companies. Also, pursuant to a recent amendment to the ICAA, effective January 1, 2013, debt buyers are now expressly subject to the Act. 225 ILCS 425/8.5.

Debt collectors collecting a consumer debt from a Chicago resident must send the debtor a written notice very much like the written notice required under Section 1692g of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C.§1692g. Within five days of the initial communication the debt collector must send written notice which includes the amount of the debt, the name of the creditor to whom the debt is owed, a validation notice, and, upon debtor’s request, the name and address of the original creditor. 4-6-160(a)(2). If the consumer disputes the debt or requests the name of the original creditor, the debt collector must cease collection activities until that information is provided. The verification of the debt must include a statement of account which sets forth the interest, charges, and fees owed prior to the charge-off balance, and the principal balance, if different than the charge-off balance. It must also include interest, charges, and fees owed after the charge-off and identify the basis of the debtor’s obligation to pay. Also, the debt collector must maintain a separate file for each consumer debt for each debtor. The file must be searchable by either the debtor or creditor’s name and includes a complete payment history and communications log, among other things. 4-6-160(a)(3).

Fines for violating the ordinance may range from $250 up to $2500 for the first violation and double that for subsequent violations. Each day a violation continues is a separate and distinct offence. 4-6-160(e).

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