Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021. Please note that this change may affect the continued accuracy of this guidance as it pertains to the ECSA.

We recommend retaining loan agreements for a period of ten years after the loan is paid off, due to Illinois’ ten-year statute of limitations for written contracts. This retention period would apply to documents retained in either paper or electronic form, and it also should apply to any documents that may be relevant in a dispute over the loan agreement, such as a mortgage release. For other documents in your loan files, we believe you may follow the general recommendation in the IBA’s Record Retention Manual, which is to retain records for five years after a mortgage loan is paid off.

Regarding electronic copies, the general rule under Illinois law is that electronic versions of documents have “the same force and effect under the laws of this State” as paper documents. However, for records that confer title, including negotiable instruments conferring title (such as certain mortgage notes), the Illinois Electronic Commerce Security Act requires you to retain those documents in their original form, unless your electronic storage system “allows for the existence of only one unique, identifiable, and unalterable original . . . that can be possessed by only one person, and which cannot be copied except in a form that is readily identifiable as a copy.”

Consequently, unless your bank possesses such electronic storage capabilities (by using blockchain technology, for example), we believe it would be prudent to retain hard copies of mortgage notes that are treated as “negotiable instruments” under the Uniform Commercial Code (UCC), in addition to mortgages and other recorded documents. (However, note that certain mortgage notes may not be treated as “negotiable instruments” under the UCC if they include certain undertakings and conditions outside of the payment of money or contain a conspicuous statement that they are not negotiable.)

For resources related to our guidance, please see:

• Illinois Code of Civil Procedure, 735 ILCS 5/13-206 (“Except as provided in Section 2-725 of the ‘Uniform Commercial Code’, actions on bonds, promissory notes, bills of exchange, written leases, written contracts, or other evidences of indebtedness in writing and actions brought under the Illinois Wage Payment and Collection Act shall be commenced within 10 years next after the cause of action accrued; but if any payment or new promise to pay has been made, in writing, on any bond, note, bill, lease, contract, or other written evidence of indebtedness, within or after the period of 10 years, then an action may be commenced thereon at any time within 10 years after the time of such payment or promise to pay.”)

• IBA Guide to Bank Record Retention 2013-14 (“Mortgage Loans” Recommendation: “RD [from date of making] + 5y”)

• Electronic Signatures in Global and National Commerce (ESIGN) Act, 15 USC 7001(a)(1)(“A signature, contract, or other record . . . may not be denied legal effect, validity, or enforceability solely because it is in electronic form.”)

• Financial Institutions Electronic Documents and Digital Signature Act, 205 ILCS 705/10(a) (“If in the regular course of business, a financial institution possesses, records, or generates any document, representation, image, substitute check, reproduction, or combination thereof . . . that accurately reproduces, comprises, or records the agreement, transaction, act, occurrence, or event . . . [it] shall have the same force and effect under the laws of this State as one comprised, recorded, or created on paper or other tangible form by writing, typing, printing, or similar means.”)

• Electronic Commerce Security Act, 5 ILCS 175/5-110 (“Information, records, and signatures shall not be denied legal effect, validity, or enforceability solely on the grounds that they are in electronic form.”)

• Electronic Commerce Security Act, 5 ILCS 175/5-115 (“Electronic records.

(a) Where a rule of law requires information to be ‘written’ or ‘in writing’, or provides for certain consequences if it is not, an electronic record satisfies that rule of law.

(b) The provisions of this Section shall not apply: . . . (3) to any record that serves as a unique and transferable instrument of rights and obligations including, without limitation, negotiable instruments and other instruments of title wherein possession of the instrument is deemed to confer title, unless an electronic version of such record is created, stored, and transferred in a manner that allows for the existence of only one unique, identifiable, and unalterable original with the functional attributes of an equivalent physical instrument, that can be possessed by only one person, and which cannot be copied except in a form that is readily identifiable as a copy.”)

• UCC, 810 ILCS 5/3-104(a) (“Except as provided in subsections (c) and (d), ‘negotiable instrument’ means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:

(1) is payable to bearer or to order at the time it is issued or first comes into possession of a holder;

(2) is payable on demand or at a definite time; and

(3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) a waiver of the benefit of any law intended for the advantage or protection of any obligor.

• UCC, 810 ILCS 5/3-104(d) (“A promise or order other than a check is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this Article.”)