We believe that the fee for providing a coupon book would be considered a finance charge, as it would not be charged in a comparable cash transaction and does not fall into any of the categories that are exempted from the definition of a finance charge. 12 CFR 1026.4(a). Whether it is a prepaid finance charge depends on how it is paid: if it is “paid separately in cash or by check before or at consummation of a transaction, or withheld from the proceeds of the credit at any time,” then it is a prepaid finance charge. 12 CFR 1026.2(a)(23). We cannot advise you as to where to place the charge, but one possibility would be to include it in your administration charge and could be disclosed with other origination charges (in Block 1 of the GFE for a residential mortgage loan, for example).

Finally, we do not believe that an Illinois law would require any rebate of the coupon book fee, even if a customer pays off the loan before the end of the loan term. Section 5e of the Banking Act states that “[n]otwithstanding the provisions of any other law in connection with extensions of credit” banks may charge any fees, “subject only to the provisions of [subsection 4(1)] of the Interest Act,” provided that the bank sets fees based on its “prudent business judgment and safe and sound operating standards.” 205 ILCS 5/5e. The Interest Act 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). That section goes on to state that “it is lawful to charge, contract for, and receive any rate or amount of interest or compensation with respect to . . . (l) Loans secured by a mortgage on real estate.” 815 ILCS 205/4(1)(l).