Public Act 096-1421
 
SB1118 EnrolledLRB096 07197 KTG 17283 b

    AN ACT concerning business.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Interest Act is amended by changing Section
4 as follows:
 
    (815 ILCS 205/4)  (from Ch. 17, par. 6404)
    Sec. 4. General interest rate.
    (1) Except as otherwise provided in Section 4.05, in all
written contracts it shall be lawful for the parties to
stipulate or agree that 9% per annum, or any less sum of
interest, shall be taken and paid upon every $100 of money
loaned or in any manner due and owing from any person to any
other person or corporation in this state, and after that rate
for a greater or less sum, or for a longer or shorter time,
except as herein provided.
    The maximum rate of interest that may lawfully be
contracted for is determined by the law applicable thereto at
the time the contract is made. Any provision in any contract,
whether made before or after July 1, 1969, which provides for
or purports to authorize, contingent upon a change in the
Illinois law after the contract is made, any rate of interest
greater than the maximum lawful rate at the time the contract
is made, is void.
    It is lawful for a state bank or a branch of an
out-of-state bank, as those terms are defined in Section 2 of
the Illinois Banking Act, to receive or to contract to receive
and collect interest and charges at any rate or rates agreed
upon by the bank or branch and the borrower. It is lawful for a
savings bank chartered under the Savings Bank Act or a savings
association chartered under the Illinois Savings and Loan Act
of 1985 to receive or contract to receive and collect interest
and charges at any rate agreed upon by the savings bank or
savings association and the borrower.
    It is lawful to receive or to contract to receive and
collect interest and charges as authorized by this Act and as
authorized by the Consumer Installment Loan Act and by the
"Consumer Finance Act", approved July 10, 1935, as now or
hereafter amended, or by the Payday Loan Reform Act. It is
lawful to charge, contract for, and receive any rate or amount
of interest or compensation with respect to the following
transactions:
        (a) Any loan made to a corporation;
        (b) Advances of money, repayable on demand, to an
    amount not less than $5,000, which are made upon warehouse
    receipts, bills of lading, certificates of stock,
    certificates of deposit, bills of exchange, bonds or other
    negotiable instruments pledged as collateral security for
    such repayment, if evidenced by a writing;
        (c) Any credit transaction between a merchandise
    wholesaler and retailer; any business loan to a business
    association or copartnership or to a person owning and
    operating a business as sole proprietor or to any persons
    owning and operating a business as joint venturers, joint
    tenants or tenants in common, or to any limited
    partnership, or to any trustee owning and operating a
    business or whose beneficiaries own and operate a business,
    except that any loan which is secured (1) by an assignment
    of an individual obligor's salary, wages, commissions or
    other compensation for services, or (2) by his household
    furniture or other goods used for his personal, family or
    household purposes shall be deemed not to be a loan within
    the meaning of this subsection; and provided further that a
    loan which otherwise qualifies as a business loan within
    the meaning of this subsection shall not be deemed as not
    so qualifying because of the inclusion, with other security
    consisting of business assets of any such obligor, of real
    estate occupied by an individual obligor solely as his
    residence. The term "business" shall be deemed to mean a
    commercial, agricultural or industrial enterprise which is
    carried on for the purpose of investment or profit, but
    shall not be deemed to mean the ownership or maintenance of
    real estate occupied by an individual obligor solely as his
    residence;
        (d) Any loan made in accordance with the provisions of
    Subchapter I of Chapter 13 of Title 12 of the United States
    Code, which is designated as "Housing Renovation and
    Modernization";
        (e) Any mortgage loan insured or upon which a
    commitment to insure has been issued under the provisions
    of the National Housing Act, Chapter 13 of Title 12 of the
    United States Code;
        (f) Any mortgage loan guaranteed or upon which a
    commitment to guaranty has been issued under the provisions
    of the Veterans' Benefits Act, Subchapter II of Chapter 37
    of Title 38 of the United States Code;
        (g) Interest charged by a broker or dealer registered
    under the Securities Exchange Act of 1934, as amended, or
    registered under the Illinois Securities Law of 1953,
    approved July 13, 1953, as now or hereafter amended, on a
    debit balance in an account for a customer if such debit
    balance is payable at will without penalty and is secured
    by securities as defined in Uniform Commercial
    Code-Investment Securities;
        (h) Any loan made by a participating bank as part of
    any loan guarantee program which provides for loans and for
    the refinancing of such loans to medical students, interns
    and residents and which are guaranteed by the American
    Medical Association Education and Research Foundation;
        (i) Any loan made, guaranteed, or insured in accordance
    with the provisions of the Housing Act of 1949, Subchapter
    III of Chapter 8A of Title 42 of the United States Code and
    the Consolidated Farm and Rural Development Act,
    Subchapters I, II, and III of Chapter 50 of Title 7 of the
    United States Code;
        (j) Any loan by an employee pension benefit plan, as
    defined in Section 3 (2) of the Employee Retirement Income
    Security Act of 1974 (29 U.S.C.A. Sec. 1002), to an
    individual participating in such plan, provided that such
    loan satisfies the prohibited transaction exemption
    requirements of Section 408 (b) (1) (29 U.S.C.A. Sec. 1108
    (b) (1)) or Section 2003 (a) (26 U.S.C.A. Sec. 4975 (d)
    (1)) of the Employee Retirement Income Security Act of
    1974;
        (k) Written contracts, agreements or bonds for deed
    providing for installment purchase of real estate;
        (1) Loans secured by a mortgage on real estate;
        (m) Loans made by a sole proprietorship, partnership,
    or corporation to an employee or to a person who has been
    offered employment by such sole proprietorship,
    partnership, or corporation made for the sole purpose of
    transferring an employee or person who has been offered
    employment to another office maintained and operated by the
    same sole proprietorship, partnership, or corporation;
        (n) Loans to or for the benefit of students made by an
    institution of higher education.
    (2) Except for loans described in subparagraph (a), (c),
(d), (e), (f) or (i) of subsection (1) of this Section, and
except to the extent permitted by the applicable statute for
loans made pursuant to Section 4a or pursuant to the Consumer
Installment Loan Act:
        (a) Whenever the rate of interest exceeds 8% per annum
    on any written contract, agreement or bond for deed
    providing for the installment purchase of residential real
    estate, or on any loan secured by a mortgage on residential
    real estate, it shall be unlawful to provide for a
    prepayment penalty or other charge for prepayment.
        (b) No agreement, note or other instrument evidencing a
    loan secured by a mortgage on residential real estate, or
    written contract, agreement or bond for deed providing for
    the installment purchase of residential real estate, may
    provide for any change in the contract rate of interest
    during the term thereof. However, if the Congress of the
    United States or any federal agency authorizes any class of
    lender to enter, within limitations, into mortgage
    contracts or written contracts, agreements or bonds for
    deed in which the rate of interest may be changed during
    the term of the contract, any person, firm, corporation or
    other entity not otherwise prohibited from entering into
    mortgage contracts or written contracts, agreements or
    bonds for deed in Illinois may enter into mortgage
    contracts or written contracts, agreements or bonds for
    deed in which the rate of interest may be changed during
    the term of the contract, within the same limitations.
    (3) In any contract or loan which is secured by a mortgage,
deed of trust, or conveyance in the nature of a mortgage, on
residential real estate, the interest which is computed,
calculated, charged, or collected pursuant to such contract or
loan, or pursuant to any regulation or rule promulgated
pursuant to this Act, may not be computed, calculated, charged
or collected for any period of time occurring after the date on
which the total indebtedness, with the exception of late
payment penalties, is paid in full.
    (4) For purposes of this Section, a prepayment shall mean
the payment of the total indebtedness, with the exception of
late payment penalties if incurred or charged, on any date
before the date specified in the contract or loan agreement on
which the total indebtedness shall be paid in full, or before
the date on which all payments, if timely made, shall have been
made. In the event of a prepayment of the indebtedness which is
made on a date after the date on which interest on the
indebtedness was last computed, calculated, charged, or
collected but before the next date on which interest on the
indebtedness was to be calculated, computed, charged, or
collected, the lender may calculate, charge and collect
interest on the indebtedness for the period which elapsed
between the date on which the prepayment is made and the date
on which interest on the indebtedness was last computed,
calculated, charged or collected at a rate equal to 1/360 of
the annual rate for each day which so elapsed, which rate shall
be applied to the indebtedness outstanding as of the date of
prepayment. The lender shall refund to the borrower any
interest charged or collected which exceeds that which the
lender may charge or collect pursuant to the preceding
sentence. The provisions of this amendatory Act of 1985 shall
apply only to contracts or loans entered into on or after the
effective date of this amendatory Act, but shall not apply to
contracts or loans entered into on or after that date that are
subject to Section 4a of this Act, the Consumer Installment
Loan Act, the Payday Loan Reform Act, or the Retail Installment
Sales Act, or that provide for the refund of precomputed
interest on prepayment in the manner provided by such Act.
    (5) For purposes of items (a) and (c) of subsection (1) of
this Section, a rate or amount of interest may be lawfully
computed when applying the ratio of the annual interest rate
over a year based on 360 days. The provisions of this
amendatory Act of the 96th General Assembly are declarative of
existing law.
(Source: P.A. 94-13, eff. 12-6-05; 94-635, eff. 8-22-05;
95-331, eff. 8-21-07.)
 
    Section 99. Effective date. This Act takes effect upon
becoming law.