Topic: Usury Laws
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Under Illinois law, can we charge interest during the three-day right of rescission period?
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We agree that 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(iii), Official Staff Commentary, 12 CFR 1026.15(c), 12 CFR 1026.23(c). As to Illinois law, there are very…
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Does the Consumer Installment Loan Act apply to banks, and are there any other restrictions on late charges under Illinois law?
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First, we do not believe that the Consumer Installment Loan Act would apply. Section 21 of the Act exempts banks and other financial institutions from the application of the law. 205 ILCS 670/21. Otherwise, there are very few limitations on late charges (and interest charges and fees) under Illinois law. Section 5e of the Banking…
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Does Illinois prohibit banks from setting a minimum loan amount?
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We do not see any problem with establishing a minimum loan amount under Illinois law; in fact, the Illinois Interest Act prohibits you from taking a security interest in real property for a revolving loan (for example, a HELOC) of $5,000 or less. 815 ILCS 205/4.1 (Though we note that the Illinois Financial Services Development…
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Does Illinois restrict our bank’s ability under Regulation Z to accrue interest charges during the right of rescission period?
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In our view, the general rule is in the Illinois Banking Act, which states that banks may charge any interest or fees “subject only to the provisions of [Subsection 4(1)] of the Interest Act,” provided they are based on a bank’s “prudent business judgment and safe and sound operating standards.” 205 ILCS 5/5e. Moreover, Subsection…
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Can we charge a fee for a very short term (45–60 day) bridge loan? Or could we waive some of the fees that we would charge on a normal mortgage loan?
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We do not believe that any laws or regulations would prevent you from charging the same fees and penalties on a bridge loan as you could charge on a longer-term loan. In our view, the general rule in the Illinois Banking Act, that banks may charge any fees “subject only to the provisions of [Subsection…
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Has there ever been any prohibition against charging business customers (or customers in general) returned check fees?
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In Illinois, the answer is yes as to commercial accounts. The UCC caps returned check fees on commercial accounts at $4.50. 810 ILCS 5/3-806. As to consumer accounts, that rule does not apply. Instead, the general rule from the Banking Act applies, which is that banks may charge any fees “subject only to the provisions…
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Does Illinois have a law setting a maximum prepaid finance charge?
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We do not believe that Illinois has a law setting a ceiling for prepaid finance charges with respect to financial institutions. 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 fees, “subject only to the provisions of [subsection 4(1)]…
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Are there any limitations on the check cashing fees that we can charge under Illinois law?
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We are not aware of any limitations on check cashing fees in Illinois law. We do recommend that you review your account agreements to see if the fee is disclosed; this will ensure that you do not run into problems with non-customers who refuse to pay the check cashing fee when the check was written…
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Can we charge a credit report fee on consumer installment loans?
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Of course, a credit report fee would have to be included in the finance charge calculation, but we are not aware of any prohibitions or limitations on charging credit report fees. 12 CFR 1026.4(b)(4). If the loan is not subject to RESPA, there are no restrictions on “upcharging” with what could be considered an unearned…
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What is the maximum interest rate a bank can charge for loans secured by real property? Is it the same maximum for an unsecured loan?
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We do not believe that there are any restrictions on interest rates and charges in Illinois law that apply to bank loans, whether secured or unsecured. 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 fees, “subject only to…