We want to implement three new fees for all of our loan customers: an NSF fee, an expedited payoff fee (for sending payoff statements via fax or courier), and a check-by-phone payment fee. How should we disclose these new fees? We are considering doing this for all of the types of consumer loans that we make.

In general, if you charge any new types of fees, your customers must agree to them. First, you should check your controlling loan agreements for provisions that might apply to the unilateral imposition of these new fees, as well as for any terms regarding the disclosure of new fees. It may be that there are no provisions in these controlling agreements that would constitute an agreement by your borrowers to accept these new fees. However, even if the provisions in your loan agreements permit you to unilaterally impose new fees at any time (by amending a fee schedule, for example), we would recommend taking a conservative approach regarding disclosures when unilaterally adding these new fees. Many financial institutions issue a “notice of change in terms” to their customers when imposing significant new fees on any type of account relationship. It also is worth noting that the CFPB is increasingly scrutinizing practices that it considers to be “unfair, deceptive or abusive,” with a particular emphasis on the charging of fees in any number of contexts.

Ultimately, the answer to your question depends in large part on the documentation already being used by your bank, and you may wish to have your bank counsel review the controlling loan agreements.

As to specific laws that may be relevant to these fees:

Illinois law. If the fees are permitted by your account agreements, then Illinois law does not prohibit you from charging these fees, although you must follow any disclosure requirements provided in your loan agreements. Section 5e of the Banking Act states that a bank may “elect to contract for and receive interest, fees, and other charges” subject only to section 4(1) of the Interest Act and any laws applicable to “credit secured by residential real estate,” and provided that the customer has agreed to the charges. 205 ILCS 5/5e. Subsection 4(1) of the Illinois Interest Act permits banks to charge any fees that a customer agrees to pay: “It is lawful for a state bank or a branch of an out-of-state 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) (emphasis added). Paragraph 4(1)(l) also explicitly allows a bank to contract for and charge any compensation relating to a loan secured by a mortgage on real estate. 815 ILCS 205/4(1)(l).

Regulation Z requirements. In addition to the disclosure requirements in your account agreements, additional disclosure requirements apply when you add new fees to open-end loans, even if your loan agreement reserves the right to change the account terms, such as fees, at any time. See 12 CFR 1026.9(c)(2)(i)(B) and Official Interpretations, 12 CFR 1026, Paragraph 9(c)(1)(i), Comment 3.

For open-end credit secured by a dwelling, you must provide 15 days’ advance written notice before adding a new type of fee. 12 CFR 1026.9(c)(1)(i). For open-end credit that is not secured by a dwelling, you must provide 45 days’ advance written notice before adding returned payment fees and transaction fees (which we believe would include check-by-phone phone payment fees), among other types of fees. 12 CFR 1026.9(c)(2)(i)(A)(b)(2)(iv) and (xi). However, we do not believe Regulation Z requires notice of an expedited payoff statement fee for non-home-secured open-end credit. See 12 CFR 1026.6(b)(2).

Payoff fees for high-cost mortgages. For loans that are considered high-cost mortgages under the Regulation Z HOEPA rules, fees for payoff statements are generally prohibited, unless the customer requests that you provide the statement by fax or courier service. 12 CFR 1026.34(a)(9)(i)12 CFR 1026.34(a)(9)(ii). If will be charging a permissible processing fee for payoff statements provided by fax or courier, you should disclose that payoff statements are otherwise available for free. 12 CFR 1026.34(a)(9)(iii).