There are very few limitations on interest rates charged by banks under Illinois law, whether for consumer or commercial loans. Of course, any interest rates and fees must be agreed to by your customers in your loan agreements, and other limitations will apply only in certain situations, such as post-judgment and during a servicemember’s active duty.

Section 5e of the Illinois Banking Act states that “[n]otwithstanding the provisions of any other law in connection with extensions of credit,” banks may charge “interest, fees, and other charges . . . subject only to the provisions of subsection (1) of Section 4 of the Interest Act” and the laws applicable to real estate loans, provided that the bank sets fees based on its “prudent business judgment and safe and sound operating standards.” 205 ILCS 5/5e. And subsection 4(1) of the Interest Act authorizes a bank “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). For loans secured by real estate, the Illinois Supreme Court has confirmed that Section 4(1)(l) of the Interest Act implicitly repealed previous restrictions on interest and fee charges on real estate loans. United States Bank Nat’l Ass’n v. Clark, 216 Ill.2d 334, 349 (2005) (see also IDFPR Interpretive Letter 98-01).

There are some restrictions on interest rates that apply only in certain situations. For example, if a bank sues a debtor and obtains a judgment, the Illinois Code of Civil Procedure limits the interest rate charged after judgment to nine percent. 735 ILCS 5/2-1303. The Federal Code of Civil Procedure also limits interest that can be charged post-judgment, and bankruptcy courts require that the interest rate banks charge after a debtor defaults be “reasonable.” 28 USC 196111 USC 506(b). Regulation Z prohibits an increased interest rate after default for HOEPA (i.e., higher-cost) loans (12 CFR 1026.32(d)(4)), and both the federal and state versions of the Servicemembers Civil Relief Act limit interest rates during a service member’s active duty (815 ILCS 205/4.0550 USC App. 527(a)).