While the Federal Government continues to crack down on abusive debt collection tactics the City of Chicago takes its own stance on the industry. The City recently passed a new ordinance governing collector conduct within its city limits, which takes effect July 1, 2013. This new ordinance requires collectors attempting to collect consumer debts from Chicago residents to be licensed in the State of Illinois and to comply with all federal and state laws and regulations, including the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. 1692 et seq., and the Illinois Collection Agency Act, 225 ILCS 425 et seq.
This law, which already exists in several other cities and states nationwide, is only applicable to the collection of consumer debts as defined under the FDCPA. The FDCPA defines this as a person or business “who in the ordinary course of business, on behalf of himself or others, regularly engages in consumer debt collection.” 15 U.S.C. 1692. While this ordinance aims to protect consumers from debt buyers, it does not branch out to protect consumers from entities already excluded under the Illinois Collection Agency Act such as banks, lending institutions, licensed attorneys, credit unions and finance companies.
On par with the requirements of the FDCPA, the new ordinance makes it a requirement to provide written notice to a debtor when attempting to collect a debt. The notice must include a statement regarding the consumer’s opportunity to dispute the debt and request validation of the debt. Furthermore, the ordinance imposes strict guidelines on collectors to maintain notes on all communication with debtors, including but not limited to any payments received and/or payment schedules agreed upon. Also in line with the FDCPA, the Chicago ordinance imposes monetary fines ranging from $250 to $2,500 for a first time offense and between $500 and $5,000 for any additional offenses during a 12 month period. More egregious conduct may carry a harsher punishment of losing a collectors’ license for four years prior to reinstatement.
With its enactment, the City of Chicago has agreed to share any information it receives regarding collection agencies with higher authorities and fully intends to prosecute collectors who are in violation of the ordinance. Bottom line is, collectors beware of any collection efforts not in compliance with the Chicago ordinance, as you stand to be held accountable under both City, State and Federal Law.