What are the Illinois usury rates that apply to banks for commercial loans, agricultural loans, and consumer loans (whether unsecured or secured by a home or vehicle)? We believe that the Illinois Interest Act sets a 9% maximum interest rate.

There are very few limitations on interest rates charged by banks under Illinois law, whether for consumer or commercial loans, and whether secured or unsecured. Of course, any interest rates and fees must be agreed to by your customers in your loan agreements, and some other limitations will apply only in certain situations, such as post-judgment and during a service member’s active duty.

As you indicated, the Interest Act generally sets a ceiling of 9% on interest rates, but this provision has many exceptions, including one for banks. The Illinois Banking Act permits banks to 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.” This provision applies to banks “notwithstanding the provisions of any other law.”

Subsection 4(1) of the Interest Act expressly permits banks to collect “interest and charges at any rate or rates agreed upon by the bank or branch and the borrower” and also provides 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.” With respect to open-end credit, the Illinois Financial Services Development Act provides that Illinois financial institutions may collect interest and other charges as “the financial institution and the borrower may agree from time to time” — again, “[n]otwithstanding the provisions of any other laws in connection with revolving credit plans . . . .”

Note, though, that there are some restrictions on interest rates that apply only in certain situations. For example, if a bank sues a debtor and obtains a judgment, the Illinois Code of Civil Procedure limits the interest rate charged after judgment to 9%. And the Illinois version of the Service Member Civil Relief Act limits interest rates during a service member’s active duty to 6%.

For resources related to our guidance, please see:

Illinois Interest Act, 815 ILCS 205/4(1) (“It is lawful for a state bank or a branch of an out-of-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. . . .”)

Illinois Banking Act, 205 ILCS 5/5e (“Notwithstanding the provisions of any other law in connection with extensions of credit,” banks may charge “interest, fees, and other charges . . . subject only to the provisions of subsection (1) of Section 4 of the Interest Act” and the laws applicable to real estate loans, provided that the bank sets fees based on its “prudent business judgment and safe and sound operating standards.”)

Illinois Financial Services Development Act, 205 ILCS 675/4 (“Notwithstanding the provisions of any other laws in connection with revolving credit plans, any financial institution may, subject to the other provisions of this Section 4 offer and extend credit under a revolving credit plan to a borrower and in connection therewith may charge and collect interest and other charges, may take real and personal property as security therefor and may provide in the agreement governing the revolving credit plan for such other terms and conditions as the financial institution and borrower may agree upon from time to time.”)

Illinois Code of Civil Procedure, 735 ILCS 5/2-1303 (“Judgments recovered in any court shall draw interest at the rate of 9% per annum from the date of the judgment until satisfied . . . .”)

Illinois Service Member Civil Relief Act, 330 ILCS 63/40 (“Interest or finance charges collected or charged to a service member who has entered military service, or the spouse of that service member, in connection with an obligation entered into on or after the date of August 22, 2005, but prior to the date that the service member entered military service, shall be subject to Section 4.05 of the Interest Act.”)

Illinois Interest Act, 815 ILCS 205/4.05(b) (“Notwithstanding any contrary provision of State law, but subject to the federal Servicemembers Civil Relief Act, no creditor in connection with an obligation entered into on or after the effective date of this amendatory Act of the 94th General Assembly, but prior to a service member's period of military service, shall charge or collect from a service member who has entered military service, or the spouse of that service member, interest or finance charges exceeding 6% per annum during the period of military service.”)

Illinois Interest Act, 815 ILCS 205/4.05(c) (“Notwithstanding any contrary provision of law, interest or finance charges in excess of 6% per annum that otherwise would be incurred but for the prohibition in subsection (b) are forgiven.”)