Topic: Usury Laws
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Does Illinois have any usury laws that set a maximum interest rate for loans?
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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. Any interest rates and fees must be agreed to by a bank’s customers in a loan agreement, and some other limitations apply in certain situations, such as post-judgment and during…
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What is the maximum interest rate allowed on a home equity line of credit (HELOC) in Illinois?
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There are very few limitations on interest rates charged by banks under Illinois law for HELOCs. 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…
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We make consumer loans to finance purchases of powersports vehicles, such as motorcycles, snowmobiles and all-terrain vehicles (ATVs). We make the loans directly to the consumer borrowers, rather than taking an assignment of a retail installment sales contract from the dealer. We plan to start providing balloon loans, and we have seen that many non-bank lenders are subject to states’ retail installment sale laws, some of which prohibit balloon loans and impose other consumer protections. Do those laws apply to our bank?
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While we cannot comment on the laws in other states, in Illinois both the Motor Vehicle Retail Installment Sales Act and the Retail Installment Sales Act apply only to credit sales of motor vehicles and consumer goods or services, respectively. Because banks are not in the business of making credit sales of motor vehicles, goods…
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For the state of Illinois, is there a maximum late fee that we can charge for late loan payments?
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There are very few limitations on loan late fees under Illinois law, provided that your customers have agreed to such fees in the loan agreements. The Illinois Financial Services Development Act authorizes late fees on revolving credit plans (such as HELOCs) without any specific limit. Financial institutions may set the fee amount in their plan…
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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.
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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…
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We would like to raise the post-maturity rate that we charge on consumer loans. This rate is charged after the consumer defaults on a loan. Is there a maximum post-maturity rate we can charge in Illinois?
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No, we are not aware of a maximum post-maturity rate set by Illinois law. There are very few limitations on interest rates and fees charged by banks under Illinois law, whether for consumer or commercial loans. Post-maturity rates (also known as default rates) must be agreed to by your customers in your loan agreements, and…
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Are there any limitations in Illinois on late fees for a home equity line of credit (HELOC) or for first or second lien real estate mortgages? Is there a required grace period before we can charge late fees?
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There are very few limitations on loan late fees under Illinois law, provided that your customers have agreed to such fees in the loan agreements. The Illinois Financial Services Development Act authorizes late fees on revolving credit plans (such as HELOCs) without any specific limit. Financial institutions may set the fee amount in their plan…
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Can we set a minimum interest amount required for all loans, which would be charged if a customer pays off a loan without accruing the minimum interest amount? If so, can we set up our system to automatically impose that charge?
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While minimum interest charges are permitted for many loans, such charges could be considered prepayment penalties, which are prohibited for certain types of loans. Consequently, we do not recommend setting up your loan system to automatically impose this charge on all loans, without distinguishing loan types for which this charge is prohibited. In general, there…
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Are you aware of whether Illinois has usury limits applicable to banks?
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There are very few limitations on interest rates under Illinois law for loans made by Illinois banks, provided that your customers have agreed to pay such interest in your loan agreements. The Illinois Banking Act permits banks to charge any “interest, fees, and other charges . . . subject only to the provisions of [subsection…
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We are a national bank with one location in Illinois. We recently were purchased by an out-of-state bank holding company. We are told that the other state’s law establishes a usury limit of 10%. The holding company is concerned about our document preparation fee for small-dollar, short-term loans, which can cause these loans’ APRs to exceed the other state’s 10% cap. Are these loans subject to the other state’s interest rate cap?
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First, we should note that we are not experts on the other state’s law, and we cannot opine as to whether its restrictions on interest rates would apply to document preparation fees. Having said that, we do not believe that your bank’s document preparation fees are subject to the other state’s interest rate limit. As…