We are not aware of any restrictions on charging or rebating to customers the premiums for Lenders Single Interest (LSI) insurance (also known as Vendors Single Interest (VSI) insurance).

The Illinois Collateral Protection Act does govern certain types of collateral protection insurance, but it does not apply to the following types of insurance (among other exceptions) (815 ILCS 180/5):

• Insurance “purchased at the inception of a credit transaction to which the debtor is a party or agrees, whether or not the costs are included in any payment plan under the credit transaction,”

• Insurance “maintained by the creditor for the protection of any or all collateral which may come into the possession or control of the creditor through foreclosure, repossession, or a similar event,” or

• “credit insurance, mortgage protection insurance, insurance issued to cover the life or health of the debtor, or any other insurance maintained to cover the inability or failure of the debtor to make payment under the credit agreement.”

Also note that in general, Illinois banks are not subject to restrictions on the fees and charges that they receive from customers. Section 5e of the Banking Act states that a bank may “elect to contract for and receive 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. The only provisos 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. 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).