How should we disclose fees that do not appear on our note or a separate fee schedule, such as a flat fee for payments made by phone? If a customer service representative informs a customer about the pay-by-phone fee, does that satisfy any disclosure requirements?

We do not recommend charging fees that are not disclosed in your loan agreement or in another document that is incorporated by reference, such as a fee schedule or “rules and regulations.” A verbal disclosure of a fee not previously disclosed would not suffice.

If you are contemplating a new fee, such as a pay-by-phone fee, you need to follow the steps detailed in your contractual change-in-terms provisions, which should be found in your loan agreement. Also note that if these loans are subject to Regulation Z, you also need to follow the change-in-terms requirements in that regulation, particularly in the open-end credit requirements.

For resources related to our guidance, please see:

  • Illinois Banking Act, 205 ILCS 5/5e(a) (“Notwithstanding the provisions of any other law in connection with extensions of credit, a State bank may elect to contract for and receive interest, fees, and other charges for extensions of credit subject only to the provisions of subsection (1) of Section 4 of the Interest Act, except for extensions of credit secured by residential real estate, which shall be subject to the laws applicable thereto.”)

  • 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. . . .”)

  • Interest Act, 815 ILCS 205/4(1) (“It is lawful for a state bank . . . to receive or to contract to receive and collect interest and charges at any rate or rates agreed upon by the bank or branch and the borrower.”)

  • Regulation Z, 12 CFR 1026.9(c) (Change-in-terms requirements for open-end credit.)