New consumer protection law bans misleading solicitations from entities posing as savings institutions  

[JUNE 24, 2006]  SPRINGFIELD -- Gov. Rod R. Blagojevich signed a new law June 6 that will help protect Illinois consumers from misleading solicitations from organizations using the names of banks and savings and loans institutions. The law came in response to fraudulent schemes in which homeowners received materials in the mail asking them to refinance their mortgage or open a life insurance policy. The companies sending the mailings use the name of the consumers' bank, or a similar name, making consumers think their bank is actually sending them the advertisement.

"It's alarming that there are companies out there posing as other companies in order to get consumers to refinance their mortgages," Blagojevich said. "That's exploitive and it's wrong. This new law is intended to put a stop to it."

House Bill 4345, sponsored by state Rep. Daniel J. Burke, D-Chicago, and state Sen. Jacqueline Collins, D-Chicago, is similar to already existing laws prohibiting the use of commercial banks' names or similar names in marketing materials.

The legislation will:

• Prohibit organizations from advertising with names that are similar to those of a savings and loan association or a savings bank.

• Protect consumers from being misled about correspondence from their bank.

• Protect savings and loans institutions and saving banks from having their name used without their permission.

• Use the same standards for savings and loan associations and savings banks as for commercial banks.

The Illinois Department of Financial and Professional Regulation will enforce the new law, imposing the same penalties they use for commercial banks. Initially, the department will impose a cease and desist order on any organization violating the law. If the organization does not comply, the department can impose fines of up to $10,000.

The use of a savings and loan association's name or a savings bank's name in an unsolicited offer could lead consumers to assume that the new solicitation can be trusted. Marketing companies use these names when sending materials to consumers, which gives the impression that the materials were sent by the customer's financial institution. In some cases, the solicitation could be fraudulent -- an effort to obtain confidential information from the consumer -- and in other cases it can be an effort to convince a consumer to switch banks.

"This is really about consumer protection from a small number of businesses trying to push the limit," said Collins, who sponsored the bill in the Senate. "Many of these third-party businesses are taking advantage of consumers by attaching reputable names of other businesses to their own applications, leaving consumers oftentimes unaware of who the application actually came from. It will now be illegal for third-party businesses to attach the name of another business that is not affiliated with them."

The legislation becomes effective immediately.

Other actions taken to protect homebuyers and consumers include these:

• Protecting vulnerable homeowners against unscrupulous mortgage "rescue" firms: Last month the governor signed into law Senate Bill 2349, giving homeowners new rights when dealing with companies that offer financial assistance to help them save their homes from foreclosure. The law also guarantees that homeowners will receive a substantial portion of their equity in the home from the companies.

• Reducing the number of high-risk home loans: In August 2003, the governor signed the High Risk Home Loan Act to protect consumers from predatory mortgage lending practices. As a result of the act, the state has seen both a reduction in the number of high-risk home loans and a change in the business practices of lenders so that they are no longer offering high-risk loans as defined in the act.

• Protecting homebuyers in at-risk communities from predatory lenders: In July 2005, the governor signed into law House Bill 4050, which provides borrowers with critical information on home loans and helps state regulators and law enforcement track and crack down on dishonest lenders.

• Regulating the payday loan industry: In June 2005, the governor signed into law the Payday Loan Reform Act, which for the first time regulates the payday loan industry in Illinois and strengthens protections to consumers. The groundbreaking legislation limits the interest that can be charged for each loan to $15.50 per $100, sets caps on total loans amounts and prevents borrowers from having more than two loans at a time, among other provisions.

• Giving homebuyers easy access to accurate information about their properties: In August 2005, Blagojevich signed three bills to help homebuyers and homeowners obtain access to accurate and important information about their properties: House Bill 1428, which requires lenders to notify homebuyers of accurate and timely property tax payment from the buyer's escrow account; House Bill 2462, which requires property tax exemption information to be included on the seller's transfer declaration; and House Bill 2594, which requires home repair contracts to increase consumer awareness of contract clauses that waive the homeowner's right to trial by jury for repair disputes.

• Protecting homebuyers from discrimination: In 2005, Blagojevich announced a fair housing program to help protect homebuyers against discrimination in housing. The Illinois Department of Human Rights and other agencies conduct training seminars around the state to inform homebuyers, tenants, landlords, property owners, advertisers, housing advocates and community organizations about Illinois' anti-discrimination laws.

• Helping first-time homebuyers: In 2005, Blagojevich launched the I-Loan mortgage program, providing one more option for low- and moderate-income residents who want to purchase their first home. The program offers an interest rate that is approximately 0.5 percent below the market rate.

[News release from the governor's office]