Illinois recently passed the Illinois Consumer Contract Reciprocal Attorney's Fees Act
(Public Act 103-344), allowing recovery of attorney's fees for consumers in certain cases. In general, Illinois follows the American Rule
with respect to the recovery of attorney's fees. The American Rule provides that each party in litigation pays for their own attorneys’ fees.
There are two general exceptions to the American Rule:
(i) If a statute allows for the recovery of fees; and,
(ii) If the litigants are parties to a contract that dictates the recovery of fees.
The Illinois Consumer Contract Reciprocal Attorney's Fees Act becomes effective January 1, 2024, and applies to small claims cases under $10,000.00. The Act provides that if a consumer contract allows for the recovery of attorney's fees in an action brought by a commercial party, the court may award reasonable attorney's fees to the defendant if the defendant prevails in the action. A defendant prevails in the action under three circumstances. First, if judgment is entered by the court in favor of the defendant. Second, if a Section 2-619
motion to dismiss the case is filed by the defendant and granted by the court. Third, if the plaintiff voluntarily dismisses a case after a trial date has been set and after that case has already been voluntarily dismissed once before. Exceptions to the award of attorney's fees to the defendant apply if the plaintiff does not seek attorney's fees in its complaint or if both parties were represented by counsel in negotiating the contract.
The Act applies to any suit filed by a commercial party after the effective date of January 1, 2024, on a consumer contract entered into after January 1, 2024. It defines a commercial party as a seller, lender, participating lender, lessor, creditor, or assignee that provided money, property, or services to a consumer. With respect to a debt buyer, the Act is effective after January 1, 2024, and applies irrespective of the date on which the contract was entered into. The Act follows the definition of "debt buyer" set forth in the Illinois Collection Agency Act
, "a person or entity that is engaged in the business of purchasing delinquent or charged-off consumer loans or consumer credit accounts or other delinquent consumer debt for collection purposes, whether it collects the debt itself or hires a third-party for collection or an attorney-at-law for litigation in order to collect such debt."
The new Act will require attorneys representing creditors in small claims actions to reexamine their pleadings and to be ever more diligent in the management of their litigation calendars. This is particularly true in scenarios where a claim has been non-suited, refiled, and is approaching a trial setting.
We at Weltman strive to keep you up to date on all legislative changes impacting the rights of creditors. To view the full text of the legislation, click here
. If you have additional questions about this topic or more, connect with attorney Laura Alms
at any time.
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.