Topic: Late Fees
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Are there any limitations on late fees for higher-priced mortgage loans under federal or state law? If so, should our late fees be calculated as a percentage of the total payment or just the portion that is past-due?
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No, there are no limitations on late fees for “higher-priced mortgage loans,” which have interest rates exceeding 1.5%, 2.5% or 3.5% over the average prime offer rate (depending on the lien position and loan amount). Regulation Z imposes escrow, appraisal and other requirements on higher-priced mortgage loans, but it does not limit late charges for…
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Does Illinois law restrict the late fees we can charge for commercial loans?
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In general, the answer is no. Under Illinois law, there are very few limitations on interest rates and fees charged by banks, whether on commercial or consumer loans. Section 5e of the Illinois Banking Act states that “[n]otwithstanding the provisions of any other law in connection with extensions of credit” banks may charge any “interest,…
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Is it true that Illinois law does not require a grace period before we can charge late fees for loan payments?
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We are not aware of any Illinois law that requires a mandatory grace period for loan payments made to a financial institution. While Section 4.1a of the Illinois Interest Act requires a ten-day grace period before a lender can collect a delinquency fee on a loan payment, that provision does not apply to banks. 815…
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Are there any limitations on late fees under Illinois law for consumer loans or consumer mortgage loans?
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There are very few limitations on late charges under Illinois law for consumer loans or consumer mortgage loans, provided that your customers have agreed to such charges in the loan agreements. The Illinois Banking Act permits banks to charge fees, interest and other charges, provided that the bank sets these charges based on its “prudent…
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We are in the process of implementing the new integrated mortgage disclosure rules. Our forms vendor for prompted us to check state law as to whether a loan document for a consumer mortgage loan can state that a late charge will be assessed when a payment “is more than # days late” instead of “# days or more late.”
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We are not aware of any requirements under Illinois law as to the number of days for computing a late charge or the exact wording of your loan agreements regarding late charges. If your late charge practices match the language in your loan documents for late charges, and your late charges otherwise comply with all…
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Can our loan documents provide for an increased interest rate after a late payment on a commercial real estate loan that is secured by the borrower’s primary residence?
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We cannot give you a definitive answer, as we do not have all of the relevant facts. There are very few limitations on interest rates and fees charged by banks under Illinois law for commercial loans. Any default rates (charged after a late payment or other default) must be agreed to by your customers in…
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We have set late charges at 10% of a loan payment amount, with a minimum of $10. Our jumbo loan contract just sets a 10% late fee, with no mention of a minimum of $10. Can we omit the $10 minimum from our jumbo loan contracts?
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We don’t see any problem with omitting your minimum charge policy in the loan agreement for jumbo loans (where the loan principal is greater than $250,000), provided there is no chance that a 10% charge could be lower than $10. Section 5e of the Banking Act states that a bank may “elect to contract for…
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Does Illinois have any usury laws as to consumer loans that would apply to national banks?
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Late Fees on Loans We do not believe that there are any restrictions on interest rates for consumer (or other) loans, provided that the customer contracted to pay such fees in your loan agreement. Section 5e of the Banking Act states that “[n]otwithstanding the provisions of any other law in connection with extensions of credit”…
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Is there a cap on the late fees that we can charge on consumer loans (residential and non-residential, such as auto loans)?
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Late Fees on Loans We do not believe that there are any restrictions on charging fees for a loan secured by a mortgage on real estate or on consumer loans, provided that the customer contracted to pay such fees in your loan agreement. As stated in the Illinois Interest Act, a bank is authorized “to…