Financial regulators in Illinois have unveiled a sweeping legislative package that’s intended to enhance consumer protections while also creating a regulatory framework for digital-asset firms.
The measures draw on numerous ideas that have been enacted in recent years by Democratic lawmakers in New York and California, as well as by congressional Democrats.
One bill would require digital-asset exchanges and related businesses to obtain a license to operate in Illinois. Another proposal would create new disclosure requirements for providers of small-business financing. And a third bill would expand the authority of the Illinois Department of Financial and Professional Regulation, which officials said will help the agency to target bad actors.
“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,” David DeCarlo, the state agency’s regulatory innovation officer, said Tuesday in a press release.
In addition to boosting consumer protections, the bills would force less-regulated financial companies to compete on more equal regulatory footing with Illinois banks and credit unions, state officials argue.
Still, the legislative proposals drew a mixed response Wednesday from the Illinois Bankers Association.
Ben Jackson, the trade group’s executive vice president for government relations, offered positive comments about the proposal for licensing of digital-asset businesses that do business in Illinois.
That proposal is modeled on the so-called BitLicense requirement that New York state regulators enacted in 2015. Similar legislation was introduced two years ago in Illinois, but it failed to get across the finish line, despite support from the Illinois Bankers Association.
Jackson was more critical of the other two measures, which would require more disclosure in connection with small-business financing and expand state regulators’ consumer protection authority.
The former bill draws from small-business financing disclosure laws that were passed in recent years in California and New York.
The latter measure would allow the Department of Financial and Professional Regulation to adopt rules in connection with so-called unfair, deceptive or abusive acts or practices. That language is modeled on legal authority that Congress granted to the Consumer Financial Protection Bureau more than a decade ago over the banking industry’s opposition.
Jackson expressed general support for adding protections from predatory lenders, but he likened the Illinois proposals to trying to kill a gnat with a sledgehammer. “It’s overkill,” he said.
He also expressed disappointment that the Illinois regulators did not collaborate more with industry groups in developing the legislation.
“I think that this package of bills shows a departure from that collaborative relationship that we’ve had in the past,” he said. “And I’m very hopeful that we can rectify that and move forward together.”
The Illinois Credit Union League is reviewing specific pieces of legislation that have the state agency’s backing, according to a spokesperson for the trade group who declined to comment further.
During an interview Tuesday, state officials indicated that financial industry groups will likely support some parts of the legislative package and oppose other parts.
“We’re having conversations with them, like we do with all different stakeholders,” said Chase Rehwinkel, state banking director at the Department of Financial and Professional Regulation. “I don’t think we’re at a point yet where we know exactly where they’re going to stand at the end of the day.”
Illinois officials argued that the legislative proposals are necessary to protect both consumers and small-business borrowers from unscrupulous companies.
“The Small Business Truth in Lending Act will help make small-business owners aware of the terms they’re signing up for when they take out a loan,” Christopher Slaby, a spokesman for the department, said in an email.
“These kinds of basic disclosures are made available to consumers under existing federal law, and small-business owners deserve similar protections,” Slaby added. “It’s an approach that’s working for small-business owners in California and New York, and we can do the same for our small businesses in Illinois.”
All three measures were introduced this month by Democratic lawmakers. If they pass both the Illinois House and Senate, they will go to the desk of Democratic Gov. J.B. Pritzker.
“We’re pretty optimistic that we’re in good shape to get through here,” Rehwinkel said.