Loans to employees are not subject to longer record retention periods than loans to other customers, although Regulation O imposes certain additional recordkeeping requirements for loans to employees who are considered “insiders” of your financial institution.

The statute of limitations for written contracts in Illinois is ten years. Consequently, the most conservative practice would be to retain all of your loan agreements — and any documents that might be relevant in a dispute involving the loan agreement — for ten years after the loan is paid off or discharged. This retention period would apply regardless of whether a loan was made to an employee or to another customer. (Note that these documents may be retained electronically.)

For employees' mortgage documents (other than related notes), you may wish to consider the lesser seven-year retention period required by Freddie Mac or the four-to-seven year period required by Fannie Mae, as appropriate.

As a reminder, Regulation B also requires loan applications to be retained for twenty-five months after an employee/applicant is notified of an action taken on a consumer loan application. For business loan applications, the retention period generally is twelve months, or sixty days for business loan applications involving trade credit, factoring, or a business with over $1 million in revenue. Retention periods also apply to documents used in evaluating loan applications, denial notices, and any written statements submitted by an applicant alleging a violation of the Equal Credit Opportunity Act.

To the extent that loans to employees are considered loans to “insiders” under Regulation O, there are more recordkeeping requirements. An insider “means an executive officer, director, or principal shareholder, and includes any related interest of such a person.” Regulation O requires banks to maintain records of all extensions of credit to insiders, and to make the records of outstanding insider loans from the previous quarter available to the public upon request. Banks must maintain records of such requests for two years from the date of the request. 

For resources related to our guidance, please see:

• Illinois Code of Civil Procedure,735 ILCS 5/13-206 (“Except as provided in Section 2-725 of the ‘Uniform Commercial Code’, actions on bonds, promissory notes, bills of exchange, written leases, written contracts, or other evidences of indebtedness in writing and actions brought under the Illinois Wage Payment and Collection Act shall be commenced within 10 years next after the cause of action accrued . . . .”)

• Freddie Mac Single Family Seller/Servicer Guide, Section 3302.3 (“The Servicer must maintain the Mortgage file while Freddie Mac retains an interest in the applicable Mortgage and for at least seven years from the date Freddie Mac’s interest in the Mortgage is satisfied.”)

• Fannie Mae Single Family Servicing Guide, Section A2-5.2-03 Retention and Storage of Individual Mortgage Loan Files and Records (Specifies the types of documents that must be retained for seven years from document collection or four years from loan liquidation, whichever is later.)

• Regulation B, 12 CFR 1002.12(b)(1) (“For 25 months (12 months for business credit, except as provided in paragraph (b)(5) of this section) after the date that a creditor notifies an applicant of action taken on an application or of incompleteness, the creditor shall retain in original form or a copy thereof: Any application that it receives, any information required to be obtained concerning characteristics of the applicant to monitor compliance with the Act and this part or other similar law, and any other written or recorded information used in evaluating the application and not returned to the applicant at the applicant's request; A copy of the following documents if furnished to the applicant in written form (or, if furnished orally, any notation or memorandum made by the creditor): The notification of action taken; and The statement of specific reasons for adverse action; and Any written statement submitted by the applicant alleging a violation of the Act or this part.”)

• Regulation B,12 CFR 1002.12(b)(5) (“With regard to a business that had gross revenues in excess of $1 million in its preceding fiscal year, or an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit, the creditor shall retain records for at least 60 days after notifying the applicant of the action taken. If within that time period the applicant requests in writing the reasons for adverse action or that records be retained, the creditor shall retain records for 12 months.”)

• Regulation O, 12 CFR 215.2(h) (“Insider means an executive officer, director, or principal shareholder, and includes any related interest of such a person.”)

• Regulation O, 12 CFR 215.9(b) (“Upon receipt of a written request from the public, a member bank shall make available the names of each of its executive officers and each of its principal shareholders to whom, or to whose related interests, the member bank had outstanding as of the end of the latest previous quarter of the year, an extension of credit that, when aggregated with all other outstanding extensions of credit at such time from the member bank to such person and to all related interests of such person, equaled or exceeded 5 percent of the member bank's capital and unimpaired surplus or $500,000, whichever amount is less. No disclosure under this paragraph is required if the aggregate amount of all extensions of credit outstanding at such time from the member bank to the executive officer or principal shareholder of the member bank and to all related interests of such a person does not exceed $25,000.”)

• Regulation O, 12 CFR 215.9(c) (“Each member bank shall maintain records of all requests for the information described in paragraph (b) of this section and the disposition of such requests. These records may be disposed of after two years from the date of the request.”)