IDFPR Announces Landmark
Legislation to Launch Illinois Consumer Financial Protection into
the Digital Age
Proposals would establish critical
consumer protections for cryptocurrencies and other digital assets
and solidify Illinois’s status as a national leader in defending
consumers against financial predators
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[April 04, 2023]
The
Illinois Department of Financial and Professional Regulation ("IDFPR")
announced today the Consumer Financial Protection and Innovation
Package, a pair of legislative initiatives designed to protect
Illinois residents from financial fraud and abuse and establish
regulatory oversight of cryptocurrencies and the broader digital
asset marketplace.
The Fintech-Digital Asset Bill (HB 3479/SB 2233) establishes
regulations for digital asset businesses and modernizes regulations
for money transmission in Illinois, while the Consumer Financial
Protection Bill (HB 3483/SB 2232) empowers IDFPR to enforce those
regulations and strengthens its authority and resources for existing
consumer financial protections. Both measures are sponsored by
Representative Mark Walker in the House and Senator Laura Ellman in
the Senate.
“States occupy a core role in overseeing the financial marketplace
and Illinois stands ready to usher in the future of consumer
financial protection,” said IDFPR Secretary Mario Treto, Jr. “These
two proposals combined will bring Illinois consumer financial
protection into the digital age and provide 21st Century protections
for 21st Century threats.”
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Like regulation in place in New York and under
consideration in the California legislature, the Fintech-Digital
Asset Bill requires digital asset exchanges and other digital asset
businesses to obtain a license from IDFPR to operate in Illinois.
The bill also establishes robust customer protections, including
investment disclosures, customer asset safeguards, and customer
service standards. Additionally, the bill requires companies to have
plans and procedures for addressing critical risks such as
cybersecurity, business continuity, fraud, and money laundering, as
well as sufficient financial resources to effectively conduct their
business in Illinois. Further, the bill replaces the Transmitters of
Money Act (205 ILCS 657) with the Money Transmission Modernization
Act, thereby harmonizing state licensing, regulation, and
supervision of money transmitters operating across state lines. The
bill also allows for the creation of trust companies for the special
purpose of acting as a fiduciary to safeguard customers’ digital
assets.
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“You can’t scroll through your
phone these days without seeing a headline about the latest tech
scam or cryptocurrency collapse wiping out someone’s savings,”
said IDFPR Regulatory Innovation Officer David DeCarlo. “Robust
and nimble financial regulation is essential for defending
Illinois residents against fraud and abuse, protecting
legitimate businesses from unfair competition, and promoting
responsible innovation in our state.”
Modeled after the law that created the federal Consumer
Financial Protection Bureau, the Consumer Financial Protection
Bill provides IDFPR with the authority and resources needed to
enforce the Fintech-Digital Asset Bill as well as existing
consumer financial protection laws. The bill also makes Illinois
a national leader in consumer financial protection by empowering
IDFPR to target unfair, deceptive, and abusive acts and
practices by unlicensed financial services providers.
Additionally, the Consumer Financial Protection Bill brings the
Illinois Financial Institutions Code (20 ILCS 1205) and other
statutes in line with more recently-enacted consumer protection
measures, such as the Student Loan Servicing Rights Act (110
ILCS 992).
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“These two bills provide clear, common-sense consumer
protection requirements, many of which have been standard across the
traditional financial sector for decades,” said Senator Laura Ellman
(D-Naperville). “By bringing these requirements into the digital
age, Illinois is establishing itself as a national leader in
consumer financial protection as well as setting the foundation for
sound and sustainable innovation and growth for years to come.”
“These combined bills provide much-needed protections to keep
Illinois consumers safe and their investments secure,” said
Representative Mark Walker (D-Arlington Heights). “These measures
not only work to hold bad actors accountable, but allow good actors
to enter the marketplace and prove to customers they are operating
within the bounds of the law.”
The full text of the Fintech-Digital Asset Bill may be
found here.
The full text of the Consumer Financial Protection Bill may be
found here.
[Illinois Office of Communication and
Information] |