815 ILCS 205/4a

(815 ILCS 205/4a) (from Ch. 17, par. 6410)

Sec. 4a. Installment loan rate.

(a) On money loaned to or in any manner owing from any person, whether secured or unsecured, except where the money loaned or in any manner owing is directly or indirectly for the purchase price of real estate or an interest therein and is secured by a lien on or retention of title to that real estate or interest therein, to an amount not more than $25,000 (excluding interest) which is evidenced by a written instrument providing for the payment thereof in 2 or more periodic installments over a period of not more than 181 months from the date of the execution of the written instrument, it is lawful to receive or to contract to receive and collect either of the following:

(i) Interest in an amount equivalent to interest computed at a rate not exceeding an annual percentage rate of 9% per year on the entire principal amount of the money loaned or in any manner owing for the period from the date of the making of the loan or the incurring of the obligation for the amount owing evidenced by the written instrument until the date of the maturity of the last installment thereof, and to add that amount to the principal, except that there shall be no limit on the rate of interest which may be received or contracted to be received and collected by (1) any bank that has its main office or, after May 31, 1997, a branch in this State; or (2) a savings and loan association chartered under the Illinois Savings and Loan Act of 1985, or a savings bank chartered under the Savings Bank Act, or a federal savings and loan association established under the laws of the United States and having its main office in this State.

It is lawful to receive or to contract to receive and collect interest and charges as authorized by the Interest Act, the Consumer Installment Loan Act, the Retail Installment Sales Act, the Motor Vehicle Retail Installment Sales Act, the Payday Loan Reform Act, and the Illinois Financial Services Development Act.

In any case in which interest is received, contracted for, or collected on the basis of paragraph (i) of subsection (a) of Section 4a, the debtor may satisfy in full at any time before maturity the debt evidenced by the written instrument, and in so satisfying must receive a refund credit against the total amount of interest added to the principal computed in the manner provided under paragraph (3) of subsection (f) of Section 15 of the Consumer Installment Loan Act for refunds or credits of applicable interest on payment in full of precomputed loans before the final installment due date.

(ii) Interest accrued on the principal balance from time to time remaining unpaid, from the date of making of the loan or the incurring of the obligation to the date of the payment of the debt in full, at a rate not exceeding the annual percentage rate equivalent of the rate permitted to be charged under clause (i) above, but in any such case the debtor may, provided that the debtor shall have paid in full all interest and other charges accrued to the date of such prepayment, prepay the principal balance in full or in part at any time, and interest shall, upon any such prepayment, cease to accrue on the principal amount which has been prepaid.

(b) Whenever the principal amount of an installment loan is $300 or more and the repayment period is 6 months or more, a minimum charge of $15 may be collected instead of interest, but only one minimum charge may be collected from the same person during one year. When the principal amount of the loan (excluding interest) is $800 or less, the lender or creditor may contract for and receive a service charge not to exceed $5 in addition to interest; and that service charge may be collected when the loan is made, but only one service charge may be contracted for, received, or collected from the same person during one year.

(c) Credit life insurance and credit accident and health insurance, and any charge therefor which is deducted from the loan or paid by the obligor, must comply with Article IX 1/2 of the Illinois Insurance Code and all lawful requirements of the Director of Insurance related thereto. When there are 2 or more obligors on the loan contract, only one charge for credit life insurance and credit accident and health insurance may be made and only one of the obligors may be required to be insured. Insurance obtained from, by or through the lender or creditor must be in effect when the loan is transacted. The purchase of that insurance from an agent, broker or insurer specified by the lender or creditor may not be a condition precedent to the granting of the loan.

(d) The lender or creditor may require the obligor to provide property insurance on security other than household goods, furniture and personal effects. The amount and term of the insurance must be reasonable in relation to the amount and term of the loan contract and the type and value of the security, and the insurance must be procured in accordance with the insurance laws of this State. The purchase of that insurance from an agent, broker or insurer specified by the lender or creditor may not be a condition precedent to the granting of the loan.

(e) The lender or creditor may, if the contract provides, collect a delinquency and collection charge on each installment in default for a period of not less than 10 days in an amount not exceeding 5% of the installment on installments in excess of $200 or $10 on installments of $200 or less, but only one delinquency and collection charge may be collected on any installment regardless of the period during which it remains in default. In addition, the contract may provide for the payment by the borrower or debtor of attorney's fees incurred by the lender or creditor. The lender or creditor may enforce such a provision to the extent of the reasonable attorney's fees incurred by him in the collection or enforcement of the contract or obligation. Whenever interest is contracted for or received under this Section, no amount in addition to the charges authorized by this Section may be directly or indirectly charged, contracted for or received, except lawful fees paid to a public officer or agency to record, file or release security, and except costs and disbursements including reasonable attorney's fees, incurred in legal proceedings to collect a loan or to realize on a security after default. This Section does not prohibit the receipt of any commission, dividend or other benefit by the creditor or an employee, affiliate or associate of the creditor from the insurance authorized by this Section.

(f) When interest is contracted for or received under this Section, the lender must disclose the following items to the obligor in a written statement before the loan is consummated:

(1) the amount and date of the loan contract;

(2) the amount of loan credit using the term "amount financed";

(3) every deduction from the amount financed or payment made by the obligor for insurance and the type of insurance for which each deduction or payment was made;

(4) every other deduction from the loan or payment made by the obligor in connection with obtaining the loan;

(5) the date on which the finance charge begins to accrue if different from the date of the transaction;

(6) the total amount of the loan charge for the scheduled term of the loan contract with a description of each amount included using the term "finance charge";

(7) the finance charge expressed as an annual percentage rate using the term "annual percentage rate". "Annual percentage rate" means the nominal annual percentage rate of finance charge determined in accordance with the actuarial method of computation with an accuracy at least to the nearest 1/4 of 1%; or at the option of the lender by application of the United States rule so that it may be disclosed with an accuracy at least to the nearest 1/4 of 1%;

(8) the number, amount and due dates or periods of payments scheduled to repay the loan and the sum of such payments using the term "total of payments";

(9) the amount, or method of computing the amount of any default, delinquency or similar charges payable in the event of late payments;

(10) the right of the obligor to prepay the loan and the fact that such prepayment will reduce the charge for the loan;

(11) a description or identification of the type of any security interest held or to be retained or acquired by the lender in connection with the loan and a clear identification of the property to which the security interest relates. If after-acquired property will be subject to the security interest, or if other or future indebtedness is or may be secured by any such property, this fact shall be clearly set forth in conjunction with the description or identification of the type of security interest held, retained or acquired;

(12) a description of any penalty charge that may be imposed by the lender for prepayment of the principal of the obligation with an explanation of the method of computation of such penalty and the conditions under which it may be imposed;

(13) unless the contract provides for the accrual and payment of the finance charge on the balance of the amount financed from time to time remaining unpaid, an identification of the method of computing any unearned portion of the finance charge in the event of prepayment of the loan.

The terms "finance charge" and "annual percentage rate" shall be printed more conspicuously than other terminology required by this Section.

(g) At the time disclosures are made, the lender shall deliver to the obligor a duplicate of the instrument or statement by which the required disclosures are made and on which the lender and obligor are identified and their addresses stated. All of the disclosures shall be made clearly, conspicuously and in meaningful sequence and made together on either:

(i) the note or other instrument evidencing the obligation on the same side of the page and above or adjacent to the place for the obligor's signature; however, where a creditor elects to combine disclosures with the contract, security agreement, and evidence of a transaction in a single document, the disclosures required under this Section shall be made on the face of the document, on the reverse side, or on both sides, provided that the amount of the finance charge and the annual percentage rate shall appear on the face of the document, and, if the reverse side is used, the printing on both sides of the document shall be equally clear and conspicuous, both sides shall contain the statement, "NOTICE: See other side for important information", and the place for the customer's signature shall be provided following the full content of the document; or

(ii) one side of a separate statement which identifies the transaction.

The amount of the finance charge shall be determined as the sum of all charges, payable directly or indirectly by the obligor and imposed directly or indirectly by the lender as an incident to or as a condition to the extension of credit, whether paid or payable by the obligor, any other person on behalf of the obligor, to the lender or to a third party, including any of the following types of charges:

(1) Interest, time price differential, and any amount payable under a discount or other system of additional charges.

(2) Service, transaction, activity, or carrying charge.

(3) Loan fee, points, finder's fee, or similar charge.

(4) Fee for an appraisal, investigation, or credit report.

(5) Charges or premiums for credit life, accident, health, or loss of income insurance, written in connection with any credit transaction unless (a) the insurance coverage is not required by the lender and this fact is clearly and conspicuously disclosed in writing to the obligor; and (b) any obligor desiring such insurance coverage gives specific dated and separately signed affirmative written indication of such desire after receiving written disclosure to him of the cost of such insurance.

(6) Charges or premiums for insurance, written in connection with any credit transaction, against loss of or damage to property or against liability arising out of the ownership or use of property, unless a clear, conspicuous, and specific statement in writing is furnished by the lender to the obligor setting forth the cost of the insurance if obtained from or through the lender and stating that the obligor may choose the person through which the insurance is to be obtained.

(7) Premium or other charges for any other guarantee or insurance protecting the lender against the obligor's default or other credit loss.

(8) Any charge imposed by a lender upon another lender for purchasing or accepting an obligation of an obligor if the obligor is required to pay any part of that charge in cash, as an addition to the obligation, or as a deduction from the proceeds of the obligation.

A late payment, delinquency, default, reinstatement or other such charge is not a finance charge if imposed for actual unanticipated late payment, delinquency, default or other occurrence.

(h) Advertising for loans transacted under this Section may not be false, misleading, or deceptive. That advertising, if it states a rate or amount of interest, must state that rate as an annual percentage rate of interest charged. In addition, if charges other than for interest are made in connection with those loans, those charges must be separately stated. No advertising may indicate or imply that the rates or charges for loans are in any way "recommended", "approved", "set" or "established" by the State government or by this Act.

(i) A lender or creditor who complies with the federal Truth in Lending Act, amendments thereto, and any regulations issued or which may be issued thereunder, shall be deemed to be in compliance with the provisions of subsections (f), (g) and (h) of this Section.

(j) For purposes of this Section, "real estate" and "real property" include a manufactured home as defined in subdivision (53) of Section 9-102 of the Uniform Commercial Code that is real property as defined in the Conveyance and Encumbrance of Manufactured Homes as Real Property and Severance Act.

(Source: P.A. 101-658, eff. 3-23-21.)