We are not aware of any restrictions on charging a Home Equity Line of Credit (HELOC) lien release fee, on the condition that your customer agreed to pay such a fee in your loan agreement.
As to HELOCs, Section 4.1 of the Interest Act appears to prohibit such fees on revolving credit lines, as it states that lenders must pay “all expenses, including recording fees and otherwise, to release any such security interest.” 815 ILCS 205/4.1. However, 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 “interest, fees, and other charges . . . subject only to the provisions of [subsection 4(1)] of the Interest Act” and any laws applicable to “credit secured by residential real estate.” 205 ILCS 5/5e.
Similarly, the Interest Act (in subsection (4)(1), cited in the Banking Act provision discussed above) also allows banks to charge any interest rate that a customer agrees to pay — it 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). The strongest argument for charging a fee is for credit secured by real estate, as 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). And, the Illinois Supreme court has confirmed this conclusion specifically as to loans secured by real property (concluding that restrictions on interest rates and charges found elsewhere in the Interest Act were implicitly repealed by the later-enacted Section 4(1)(l) of the Interest Act). 815 ILCS 205/4(1)(l)United States Bank Nat’l Ass’n v. Clark, 216 Ill.2d 334, 349 (2005); see also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.
Another Illinois law, the Illinois Financial Services Development Act, confirms that Illinois financial institutions may charge any fees or charges that a customer agrees to, including a mortgage release fee. The Act states that “[n]otwithstanding the provisions of any other laws in connection with revolving credit plans, any financial institution may . . . charge and collect interest and other charges . . . as the financial institution and borrower may agree upon from time to time.” 205 ILCS 675/4. It also authorizes financial institutions to charge “fees for services rendered” on any revolving credit plan. 205 ILCS 675/6.