While there are few limitations on fees banks may charge under Illinois law, you cannot start charging NSF fees to existing customers who have not contracted to pay such fees in their loan agreements. That said, we recommend contacting your bank counsel, as your current loan agreements may already include provisions permitting you to charge NSF fees.

We are not aware of any Illinois laws that limit NSF fees. Section 5e of the Banking Act states that a bank may “elect to contract for and receive [emphasis added] interest, fees, and other charges” subject only section 4(1) of the Interest Act and any laws applicable to “credit secured by residential real estate.” 205 ILCS 5/5e. Similarly, Section 4(1) of the Illinois Interest Act allows banks to charge any interest rate that a customer agrees to pay — it authorizes banks “to receive or contract to receive and collect interest and charges at any rate or rates agreed upon by the bank or branch and the borrower.” 815 ILCS 205/4(1). Section 4(1)(l) explicitly allows a bank to contract for and charge any compensation relating to a loan secured by a mortgage on real estate. 815 ILCS 205/4(1)(l). The only provisos limiting a bank’s ability to charge NSF fees are that the customer must agree to the charges and that the bank must set its fees based on its “prudent business judgment and safe and sound operating standards.” 205 ILCS 5/5e.

As stated above, you are unlikely to be able to impose fees on customers under your existing contracts without obtaining their consent to a new account agreement. The loans in question are governed by the Truth in Lending Act and Regulation Z, which do not do not impose a notification requirement when NSF fees are modified (unlike Regulation DD, which does impose notification requirements for depository accounts). Any changes in NSF fees would be dictated by the terms of the loan’s contract, and a bank should be wary of the CFPB’s regulations on unfair, deceptive, and abusive practices when making modifications. The CFPB is increasingly restricting overdraft practices it considers “unfair, deceptive or abusive” under the Dodd-Frank Act. 12 USC 5531. Such abusive practices are defined as those that the consumer cannot easily avoid and substantially injure the consumer, or those that take unfair advantage of the consumer. The CFPB is currently working on regulation relating to overdraft and NSF fees, and recently published this whitepaper with some of its findings.