We are developing a change-in-term notice for our open-end consumer loans (not secured by real estate). Does Illinois law impose any additional requirements on such notices beyond those Regulation Z? For example, an Iowa law requires sixty days’ advance notice of a change in terms.

Yes, the Illinois Financial Services Development Act (IFSDA) adds requirements for change-in-term notices for revolving credit, in addition to federal law.

Section 8 of the IFSDA requires change-in-term notices to be provided at least 30 days before an amendment that “has the effect of increasing the interest or other charges to be paid by the borrower.” However, because Regulation Z requires change-in-term notices to be provided 45 days before the effective date of a significant change (such as changes to the APR), we do not believe that the Illinois law’s 30-day requirement will require modifications to the timing of these notices.

Importantly, there are several other requirements in the Illinois law that may differ from the Regulation Z disclosure requirements for change in terms notices. For example, the Illinois law includes a special statutory notice that must be included on the change-in-term notice when an unfavorable change is made due to a change in the borrower’s credit standing. We recommend reviewing Section 8 of the IFSDA thoroughly to ensure that your institution’s change-in-term notices meet all of the unique requirements under the Illinois law.

For resources related to our guidance, please see:

Illinois Financial Services Development Act, 205 ILCS 675/8(a) (“If the agreement governing a revolving credit plan other than a credit card account so provides or allows, a financial institution may at any time or from time to time amend the terms of such agreement in accordance with the further provisions of this Section 8. The financial institution shall notify each affected borrower of the amendment in the manner set forth in the agreement governing the plan and in compliance with the requirements of the Truth-in-Lending Act and regulations promulgated thereunder, as in effect from time to time, if applicable.”)

Illinois Financial Services Development Act, 205 ILCS 675/8(c) (“Amendment of agreement governing revolving credit plans other than credit card accounts. . . . (c) If such amendment has the effect of increasing the interest or other charges to be paid by the borrower, the financial institution shall mail or deliver to the borrower, at least 30 days before the effective date of the amendment, a clear and conspicuous written notice . . . .”)

Regulation Z, 12 CFR 1026.9(c)(2)(i) (“[W]hen a significant change in account terms as described in paragraph (c)(2)(ii) of this section is made, a creditor must provide a written notice of the change at least 45 days prior to the effective date of the change to each consumer who may be affected. . . .”)

Regulation Z, 12 CFR 1026.9(c)(2)(ii) (“Significant changes in account terms. For purposes of this section, a ‘significant change in account terms’ means a change to a term required to be disclosed under § 1026.6(b)(1) and (b)(2), an increase in the required minimum periodic payment, a change to a term required to be disclosed under § 1026.6(b)(4), or the acquisition of a security interest.”)

Illinois Financial Services Development Act, 205 ILCS 675/8(c-5) (“If such amendment results in an unfavorable change in the interest or other charges on a revolving credit plan which: (i) relates to a change in the borrower's credit standing, (ii) does not affect all or a substantial portion of a class of the creditor's accounts, and (iii) does not relate to inactivity, default, or delinquency on that revolving credit plan, the financial institution shall include in the notice required by subsection (c) of this Section 8 a statement that is substantially similar to the following:

Change in Credit Standing

The amendment to the terms of your account relates to a change in your credit standing.

The change in your credit standing may have resulted from a default or delinquency on other accounts you may have, or other adverse changes in your financial circumstances. If you submit the enclosed postcard or otherwise notify us in a timely manner as provided in this notice that you do not accept the amendment, you will be able to pay off your existing balance at the rate in effect prior to the amendment. However, in that instance, you may not be eligible to obtain additional credit under this plan after the effective date of the amendment. If you do not provide timely notice to us as provided in this notice that you do not accept the amendment, the amendment to the terms of your account will become effective and apply to your account.”)