The Illinois UCC limits the fee for deposited checks returned dishonored on commercial checking accounts to $4.50. Does the Illinois Banking Act provision that allows banks to use their business judgment in setting fees and charges override this restriction? What about the “wild card” provision that puts state banks on parity with national banks?

Section 5e of the Illinois Banking Act, which recognizes that the setting of account fees is a business decision (subject, of course, to the account agreement), does not override the $4.50 returned check fee limit on commercial accounts set forth in the Illinois Uniform Commercial Code. Section 5e states that the amount of a service charge “not otherwise limited or prescribed by law” is a business decision to be made by the bank. Returned check fees for commercial accounts are in fact limited and prescribed by another law. Consequently, this particular fee clearly falls outside the scope of the “business decision” leeway granted to Illinois state banks.

As to the parity provisions in the Illinois Banking Act, there is a credible argument that national banks are not subject to the returned check fee restriction because it is preempted by federal law. However, we are not aware of any case or OCC rule or guidance applying the preemption argument to this provision in the UCC. We believe that many national banks doing business in Illinois have been adhering to the $4.50 restriction on business accounts, either because they do not wish to take on the argument that it is preempted by the National Bank Act, or because they simply wish to remain competitive for their business customers.

For resources related to our guidance, please see:

Illinois Banking Act, 205 ILCS 5/5e(b) (“The establishment of account service charges and the amounts of the charges not otherwise limited or prescribed by law is a business decision to be made by a bank according to prudent business judgment and safe and sound operating standards.”)

Illinois UCC, 810 ILCS 5/3-806 (“A fee or charge not to exceed $4.50 may be assessed to any person or owner of a commercial checking account or other similar commercial account where a check or other draft that is deposited into the account is dishonored upon presentment because of insufficient funds or because the drawer does not have an account with the drawee; provided, however, that, the limitation on the fee or charge specified in this paragraph does not apply to any fee or charge assessed to any bank or other depository institution or to any non-commercial checking account or other similar non-commercial account.”)

Illinois Banking Act, 205 ILCS 5/5(11) (“Notwithstanding any other provisions of this Act or any other law, to do any act and to own, possess, and carry as assets property of the character, including stock, that is at the time authorized or permitted to national banks by an Act of Congress, but subject always to the same limitations and restrictions as are applicable to national banks by the pertinent federal law and subject to applicable provisions of the Financial Institutions Insurance Sales Law.”)

Illinois Banking Act, 205 ILCS 5/5(25) (“A bank organized under this Act or subject hereto shall be a body corporate and politic and shall, without specific mention thereof in the charter, have all the powers conferred by this Act and the following additional general corporate powers: Notwithstanding any other provisions of this Act or any other law, to offer any product or service that is at the time authorized or permitted to any insured savings association or out-of-state bank by applicable law, provided that powers conferred only by this subsection (25): shall always be subject to the same limitations and restrictions that are applicable to the insured savings association or out-of-state bank for the product or service by such applicable law . . . .”)