Topic: Usury Laws
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Can we charge a late fee after a ten-day delinquency on a loan secured by a mortgage? It appears that Illinois law permits late fees after ten days, but the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) preemption provisions permit late fees after fifteen days.
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We are not aware of any law that would prevent you from charging a late fee after a ten-day delinquency on a loan that is secured by a mortgage, provided that your customers have agreed to such charges in their loan agreements. While Section 4.1a of the Illinois Interest Act requires a ten-day grace period…
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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 Illinois usury laws that apply to our bank?
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There are very few limitations on interest rates charged by banks under Illinois law, whether for consumer or commercial loans. Of course, any interest rates and fees must be agreed to by your customers in your loan agreements, and other limitations will apply only in certain situations, such as post-judgment and during a servicemember’s active…
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We are converting to a new forms vendor, and as part of the conversion process, we have been asked to check off which of the following Illinois laws apply to us: the Illinois Financial Services Development Act, Consumer Installment Loan Act, Interest Act, and Illinois Credit Union Act.
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Illinois Financial Services Development Act: Yes, this law applies to banks. Consumer Installment Loan Act: No, this law does not apply to banks. 205 ILCS 670/21. Interest Act: Some but not all of the provisions in this law apply to banks. For example, Section 4 states that “it is lawful for a state bank or…
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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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Does the Interest Act prohibit us from charging lien release fees for home equity lines of credit?
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No, we do not believe that the Interest Act would prohibit you from charging a mortgage lien release fee, on the condition that the customer contracted to pay such a fee in your loan agreement. While Section 4.1 of the Interest Act appears to prohibit charging for lien releases on revolving credit lines, that provision…
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Are there any problems with charging an “escheat fee” against unclaimed deposit accounts before remitting them to the State Treasurer?
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Generally, Illinois law permits a bank to determine an appropriate dormancy fee 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 agreement or signature card. 205 ILCS 5/5e(b). If an account has been inactive long enough to…
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We want to implement three new fees for all of our loan customers: an NSF fee, an expedited payoff fee (for sending payoff statements via fax or courier), and a check-by-phone payment fee. How should we disclose these new fees? We are considering doing this for all of the types of consumer loans that we make.
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In general, if you charge any new types of fees, your customers must agree to them. First, you should check your controlling loan agreements for provisions that might apply to the unilateral imposition of these new fees, as well as for any terms regarding the disclosure of new fees. It may be that there are…