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.