We are not aware of any Illinois law or regulation requiring HELOC payments to be applied in a certain order, although we strongly recommend following the order provided in your loan documents, if any.

Note, however, that in the context of check posting, this is a very controversial issue. In some states, checks must be posted in a certain order, and the FDIC has advised that “[t]ransactions should be processed in a neutral order that avoids manipulating or structuring processing order to maximize customer overdraft and related fees.” Examples of a “neutral order” include posting checks in the order received, by check number, or serial number sequence.

The Joint Agency Guidance on Overdraft Protection Programs also provides that banks should “[c]learly explain to consumers that transactions may not be processed in the order in which they occurred, and that the order in which transactions are received by the institution and processed can affect the total amount of overdraft fees incurred by the consumer.”

For resources related to our guidance, please see:

• UCC, 810 ILCS 5/4-303(b) (“Subject to subsection (a), items may be accepted, paid, certified, or charged to the indicated account of its customer in any order.”)

• FDIC Overdraft Payment Program Supervisory Guidance Frequently Asked Questions (“4. How can institutions and their third-party vendors work to process transactions in a manner that addresses risks identified in the Guidance? Transactions should be processed in a neutral order that avoids manipulating or structuring processing order to maximize customer overdraft and related fees. Examples of a neutral order include order received, check number, serial number sequence, or other approaches when necessary based on sound business justification. Re-ordering transactions to clear the highest item first is not considered neutral because this approach will tend to increase the number of overdraft fees. By contrast, processing batches of transactions in a random order or order received is a neutral approach; however, institutions should not arrange the order of types of transactions (i.e., batches) cleared in order to increase the number of overdrafts and maximize fees.”)

• Joint Agency Guidance on Overdraft Protection Programs: 70 Fed. Reg. 9127, 9132 (February 24, 2005) (“Explain impact of transaction clearing policies. Clearly explain to consumers that transactions may not be processed in the order in which they occurred, and that the order in which transactions are received by the institution and processed can affect the total amount of overdraft fees incurred by the consumer.”)