In our view, the general rule is in the Illinois Banking Act, which states that banks may charge any interest or fees “subject only to the provisions of [Subsection 4(1)] of the Interest Act,” provided they are based on a bank’s “prudent business judgment and safe and sound operating standards.” 205 ILCS 5/5e. Moreover, Subsection 4(1) of the Interest Act states that a bank is authorized “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). And, the Illinois Supreme Court has specifically held that Section 4(1)(l) of the Interest Act, which allows banks to charge any fee on a loan “secured by a mortgage on real estate,” is not affected by certain other statutory provisions that restrict interest rates and charges. 815 ILCS 205/4(1)(l)United States Bank Nat’l Ass’n v. Clark, 216 Ill.2d 334, 349 (2005); see also IDFPR Interpretive Letter 98-01.
There are exceptions to some of the above statements, particularly under the federal Home Ownership Equity Protection Act (“HOEPA”) and the Illinois High Risk Home Loan Act (HRHLA). Both laws impose restrictions on home loans if the loan terms contain certain triggers. The federal law’s scope was expanded greatly by Dodd-Frank (and, as we have discussed, the state law will soon follow). For example, both laws previously applied only to home equity loans (a non-purchase money loan secured by the borrower’s primary residence). Dodd-Frank amended the federal HOEPA to apply to any “consumer credit transaction . . . that is secured by the consumer’s principal dwelling,” and the proposed amendment to the Illinois HRHLA will similarly expand its scope. See 15 USC 1602(bb) (HOEPA definition of “high cost mortgage”).
Also note that other laws may restrict the interest rates you may charge, such as the federal Servicemembers Civil Relief Act (15 USC app. 501 et seq.) and the Illinois Interest Act’s restrictions on loans made to military personnel on active duty (815 ILCS 205/4.05).