Topic: Usury Laws
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We want to raise the ceiling rate on our HELOCs and ARMs. Does Illinois have a maximum interest rate? We saw that the Interest Act appears to set a 9% maximum interest rate.
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The Illinois Interest Act’s general maximum interest rate of 9% does not apply to banks. Section 4 of 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 .…
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In the Illinois Interest Act, there are provisions that appear to prohibit us from charging fees for releasing a security interest for a home equity line of credit (HELOC), including recording fees charged by the county recorder. Do I understand that correctly? Or are we exempted under the Illinois Financial Services Development Act?
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We believe that Illinois law permits banks to charge HELOC lien release fees, including county recorder fees, provided that your customer has agreed to pay such fees. Section 4.1 of the Interest Act appears to prohibit lenders from charging borrowers for “expenses, including recording fees and otherwise” when releasing a mortgage lien. However, the Illinois…
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What is the maximum late fee we can charge on a consumer (non-real-estate) loan in Illinois?
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There are very few limitations on late fees under Illinois law for consumer loans, provided that your customers have agreed to such fees 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 business judgment and safe…
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What is the maximum late fee we can charge on a consumer (non-real-estate) loan in Illinois?
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There are very few limitations on late fees under Illinois law for consumer loans, provided that your customers have agreed to such fees 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 business judgment and safe…
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In Indiana (where our main office and most branches are located), a lender may contract for a minimum loan finance charge of up to $30 on certain closed-end consumer loans (other than mortgage transactions). However, the lender cannot impose that charge if it also charges a loan origination fee. Does Illinois have similar restrictions?
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No, Illinois does not impose the same restrictions. The Illinois Banking Act states that “[n]otwithstanding the provisions of any other law in connection with extensions of credit” banks may charge any fees, “subject only to the provisions of [subsection 4(1)] of the Interest Act,” provided that the bank sets fees based on its “prudent business…
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Does Illinois law permit $15 fees for late payments on a Home Equity Line of Credit (HELOC)? What about for a closed-end home equity loan?
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A $15 late fee on a HELOC payment is permitted in Illinois. 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 agreements with their borrowers. Regarding closed-end home equity loans, the Illinois Banking Act…
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We have a residential loan with our bank that is being refinanced by our bank, and the three-day right of rescission (ROR) will apply to the refinancing. Can we collect interest on the original loan during the ROR period, as well as collect interest on the refinancing loan as of its closing date (which would mean collecting interest for both loans during the ROR period)? The funds for the refinancing loan would not be disbursed until after the ROR period expires.
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We believe this practice would be highly unusual and quite possibly could violate both loan agreements, as well as raise questions under both Illinois law and the federal UDAAP prohibitions. The crux of the problem is that interest begins accruing on the second loan before the second loan’s proceeds have been disbursed. Charging this interest…
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Is there a maximum loan doc prep fee that we can charge on a consumer loan that is not secured by real estate (such as an auto loan or unsecured loan)?
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No, we are not aware of a maximum or limitation on document preparation fees for consumer loans that are unsecured or secured by collateral that is not real estate. The Illinois Banking Act generally permits banks to establish fees without limitation, provided that they are agreed to by the borrower. Additionally, the Illinois Interest Act…
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Is there any law or regulation that prevents a bank from charging a fee for when business or consumer customers deposit Canadian checks, even if they are denominated in U.S. dollars?
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No, we are not aware of laws or regulations that would prohibit such a fee. Generally, Illinois law permits a bank to determine appropriate fees for deposit accounts in accordance with the bank’s prudent business judgment and safe and sound operating standards, provided that your customer has agreed to the charge in a deposit account…
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Do you know of any state or federal law that would prohibit a bank from charging a dormancy fee on a deceased customer’s account after one year of inactivity?
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No, we are not aware of any state or federal law prohibiting you from charging a deceased customer’s account a dormancy fee, provided that the customer agreed to the fee when opening the account. However, we recommend communicating with a representative of the decedent’s estate within a reasonable time to determine their intentions with the…