Two new laws aim to help Illinois residents avoid risky home loans and protect those who are in debt from being sent to jail.  The new laws, signed by the governor Wednesday, increase protections for families from high-risk home loans and refund anticipation loans and also establish guidelines before a borrower can be sent to jail following non-payment of debt.


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In dealing with risky home loans, the law brings Illinois up to federal standards by clarifying the definition of a high-risk home loan to meet federal guidelines. The law also sets limits on fees and penalties that may be charged when a loan is issued, and prohibits any mortgage from containing pre-payment penalties if a loan is paid off before its term ends.


The second law codifies best practices for the post-judgment collection of debts. The law will ensure that debt collectors and lenders provide evidence that there might be unprotected assets available to repay the debt before sending the debtor to jail. This law is designed to ensure that no Illinois residents are incarcerated as a result of being subject to a payment order they cannot afford, or for missing a hearing for which they did not receive notice.


The measure was developed after it was found that customers of licensed consumer lenders were being sent to jail because of their debt. Testimony from public hearings hosted by the Illinois Department of Financial and Professional Regulation in Alton and Marion earlier this year showed that lenders and creditors have been distorting and exploiting the court system to collect debts.


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