Topic: Usury Laws
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We got a warning from our mortgage form software stating that Illinois requires home equity loans to exceed $5,000. Is that true?
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The notice that pops up on home equity loans for amounts less than $5,000 is likely a response to the Interest Act, but we believe that your software vendor is taking an overly conservative position as to whether that limitation applies to financial institutions. The provision of the Interest Act at issue prohibits lenders from…
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Is there an Illinois law that allows banks to collect prepaid interest starting on the loan closing date, rather than on the disbursement date?
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Regulation Z allows interest (finance charges) to accrue at the loan closing and does not require you to wait until the expiration of the rescission period (provided that your loan agreement allows for this). Comment 3(iii), Official Staff Commentary, 12 CFR 1026.15(c), 12 CFR 1026.23(c). As to Illinois law, there are very few limitations on…
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Does Illinois set a 40% maximum for the APR on consumer loans?
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Under Illinois law, there are very few limitations on interest charges that apply to banks. Section 5e of the Banking Act states that “[n]otwithstanding the provisions of any other law in connection with extensions of credit” banks may charge any “interest, fees, and other charges . . . subject only to the provisions of [subsection…
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Do you know if there is an Illinois Law that prohibits charging a service or maintenance fee on a minor account?
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We believe that the general rule would apply, which is that a bank may charge any account fees agreed to by the customer, even if the customer is a minor. (Section 5e of the Banking Act states that “[n]otwithstanding the provisions of any other law in connection with extensions of credit” banks may charge any…
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Can you tell me what, if anything, Illinois state law says about HELOC fees?
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Illinois’s Banking Act and Interest Act allow banks to charge any fees agreed to by a borrower. 205 ILCS 5/5e
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When we do small consumer loans, the APR can be very high. Could a high APR violate an Illinois usury limit?
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Under Illinois law, there are very few limitations on interest charges that apply to banks. Section 5e of the Banking Act states that “[n]otwithstanding the provisions of any other law in connection with extensions of credit” banks may charge any “interest, fees, and other charges . . . subject only to the provisions of [subsection…
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Can we charge a lien release fee on mortgage loans, and how much can we charge?
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The Illinois Mortgage Act provides lenders with three alternative methods of releasing a mortgage (765 ILCS 905/2): Delivering the release to the county recorder. *If the bank will be delivering the release to the county recorder, we recommend including the following statement on payoff statements: “Notice to All Persons: ___________(“Lender”) objects to the filing of…
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Are there any restrictions on the interest rates we can charge on credit card accounts? We read that the Interest Act imposes a 9% cap.
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We do not believe that the 9% limit on annual interest rates, found in subsection 4(1) of the Illinois Interest Act, would apply to Illinois banks. In fact, there are very few limitations on interest rates (or on charges and fees) under Illinois law. Section 5e of the Banking Act states that “[n]otwithstanding the provisions…
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Does Illinois law allow or prohibit the collection of interest during rescission period?
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Of course, Regulation Z allows you to start accruing interest at the loan closing and does not require you to wait until the expiration of the rescission period (provided that your loan agreement allows for this). Comment 3(iv), Official Staff Commentary, 12 CFR 1026.15(c), 12 CFR 1026.23(c). As to Illinois law, there are very few…
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Can we charge a loan payoff processing fee?
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We do not believe that there is any restriction on charging a payoff processing fee, on the condition that the customer contracted to pay such a fee in your loan agreement. Section 4.1 of the Interest Act appears to prohibit such fees on revolving credit lines, as it states that lenders must pay “all expenses,…