State of Illinois
90th General Assembly
Legislation

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90_SB0538

      205 ILCS 305/46           from Ch. 17, par. 4447
      205 ILCS 305/50           from Ch. 17, par. 4451
          Amends the Illinois  Credit  Union  Act.   Provides  that
      extensions  of credit made by credit unions, other than those
      secured by residential real estate, need only comply with the
      Illinois Credit Union Act.  Provides that an advance under  a
      line of credit constitutes a loan.  Effective immediately.
                                                     LRB9002845JSgc
                                               LRB9002845JSgc
 1        AN ACT to amend the Illinois Credit Union Act by changing
 2    Sections 46 and 50.
 3        Be  it  enacted  by  the People of the State of Illinois,
 4    represented in the General Assembly:
 5        Section 5.  The Illinois Credit Union Act is  amended  by
 6    changing Sections 46 and 50 as follows:
 7        (205 ILCS 305/46) (from Ch. 17, par. 4447)
 8        Sec. 46.  Loans and interest rate.
 9        (1)  A  credit  union  may  make loans to its members for
10    such purpose and upon  such  security  and  terms,  including
11    rates  of  interest, as the Credit Committee, credit manager,
12    or loan officer approves. Notwithstanding the  provisions  of
13    any  other  law  in  connection  with extensions of credit, a
14    credit union may elect to contract for and  receive  interest
15    and  fees  and other charges for extensions of credit subject
16    only to the provisions of  this  Act  and  rules  promulgated
17    under  this  Act, except that extensions of credit secured by
18    residential  real  estate  shall  be  subject  to  the   laws
19    applicable  thereto.  The  rates of interest to be charged on
20    loans to members shall be set by the Board  of  Directors  of
21    each individual credit union and such rates may be less than,
22    but  may  not  exceed,  the  maximum  rate  set forth in this
23    Section.  A borrower may repay his loan prior to maturity, in
24    whole or in part, without penalty. The  credit  contract  may
25    provide  for  the  payment  by  the member and receipt by the
26    credit  union  of  all  costs  and  disbursements,  including
27    reasonable attorney's fees  and  collection  agency  charges,
28    incurred  by  the credit union to collect or enforce the debt
29    in the event of a delinquency by the member, or in the  event
30    of  a breach of any obligation of the member under the credit
31    contract.  A contingency or  hourly  arrangement  established
                            -2-                LRB9002845JSgc
 1    under  an  agreement  entered  into by a credit union with an
 2    attorney or collection agency to collect a loan of  a  member
 3    in default shall be presumed prima facie reasonable.
 4        (2)  Credit unions may make loans based upon the security
 5    of  any  interest  or equity in real estate, subject to rules
 6    and regulations promulgated by the Director. In any  contract
 7    or  loan  which  is  secured by a mortgage, deed of trust, or
 8    conveyance in the nature of a mortgage, on  residential  real
 9    estate,  the interest which is computed, calculated, charged,
10    or collected pursuant to such contract or loan,  or  pursuant
11    to  any  regulation or rule promulgated pursuant to this Act,
12    may not be computed, calculated, charged or collected for any
13    period of time occurring after the date on  which  the  total
14    indebtedness,  with  the exception of late payment penalties,
15    is paid in full.
16        For purposes of this subsection (2) of this Section 46, a
17    prepayment shall mean the payment of the total  indebtedness,
18    with  the  exception of late payment penalties if incurred or
19    charged, on  any  date  before  the  date  specified  in  the
20    contract  or  loan  agreement on which the total indebtedness
21    shall be paid in full,  or  before  the  date  on  which  all
22    payments, if timely made, shall have been made.  In the event
23    of  a  prepayment of the indebtedness which is made on a date
24    after the date on which interest on the indebtedness was last
25    computed, calculated, charged, or collected  but  before  the
26    next  date  on  which  interest on the indebtedness was to be
27    calculated, computed, charged, or collected, the  lender  may
28    calculate,  charge  and  collect interest on the indebtedness
29    for the period which elapsed between the date  on  which  the
30    prepayment  is  made  and  the  date on which interest on the
31    indebtedness  was  last  computed,  calculated,  charged   or
32    collected  at  a  rate  equal to 1/360 of the annual rate for
33    each day which so elapsed, which rate shall be applied to the
34    indebtedness outstanding as of the date of  prepayment.   The
                            -3-                LRB9002845JSgc
 1    lender  shall  refund to the borrower any interest charged or
 2    collected which exceeds that which the lender may  charge  or
 3    collect  pursuant  to the preceding sentence.  The provisions
 4    of this amendatory Act of 1985 shall apply only to  contracts
 5    or  loans entered into on or after the effective date of this
 6    amendatory Act.  Any loan secured by a first mortgage on real
 7    estate shall be contracted for at a rate of interest  not  to
 8    exceed  the  maximum  rate allowed by Section 4 of "An Act in
 9    relation to  the  rate  of  interest  and  other  charges  in
10    connection  with  sales  on credit and the lending of money",
11    approved May 24, 1879, as amended.
12        (3)  Notwithstanding any other provision of this  Act,  a
13    credit  union authorized under this Act to make loans secured
14    by an interest or equity in real estate may engage in  making
15    "reverse mortgage" loans to persons for the purpose of making
16    home  improvements  or  repairs, paying insurance premiums or
17    paying real estate taxes on the homestead properties of  such
18    persons.  If made, such loans shall be made on such terms and
19    conditions  as  the credit union shall determine and as shall
20    be consistent with the provisions of this  Section  and  such
21    rules  and  regulations  as  the  Director  shall  promulgate
22    hereunder.    For   purposes  of  this  Section,  a  "reverse
23    mortgage" loan shall be a  loan  extended  on  the  basis  of
24    existing  equity  in  homestead  property  and  secured  by a
25    mortgage on such property.  Such loans shall be  repaid  upon
26    the  sale  of the property or upon the death of the owner or,
27    if the property is in joint tenancy, upon the  death  of  the
28    last  surviving  joint tenant who had such an interest in the
29    property at  the  time  the  loan  was  initiated,  provided,
30    however,  that  the credit union and its member may by mutual
31    agreement, establish other repayment terms.  A credit  union,
32    in  making  a  "reverse  mortgage"  loan,  may  add  deferred
33    interest  to  principal or otherwise provide for the charging
34    of  interest  or  premiums   on   such   deferred   interest.
                            -4-                LRB9002845JSgc
 1    "Homestead" property, for purposes of this Section, means the
 2    domicile and contiguous real estate owned and occupied by the
 3    mortgagor.    The   Director   shall   promulgate  rules  and
 4    regulations under this Section; provided that such rules  and
 5    regulations  need  not  be promulgated jointly with any other
 6    administrative agency of this State.
 7        (4)  Notwithstanding any other provisions of this Act,  a
 8    credit  union authorized under this Act to make loans secured
 9    by an interest or equity  in  real  property  may  engage  in
10    making  revolving  credit loans secured by mortgages or deeds
11    of trust on such real property or by security assignments  of
12    beneficial interests in land trusts.
13        For  purposes of this Section, "revolving credit" has the
14    meaning defined in Section 4.1 of the Interest Act "An Act in
15    relation to  the  rate  of  interest  and  other  charges  in
16    connection  with  sales  on credit and the lending of money",
17    approved May 24, 1879, as amended.
18        Any mortgage or deed of trust given to secure a revolving
19    credit loan may, and when so expressed therein shall,  secure
20    not  only  the  existing  indebtedness  but  also such future
21    advances, whether such advances are obligatory or to be  made
22    at the option of the lender, or otherwise, as are made within
23    twenty  years from the date thereof, to the same extent as if
24    such future advances were made on the date of  the  execution
25    of  such  mortgage or deed of trust, although there may be no
26    advance made at the time of execution  of  such  mortgage  or
27    other  instrument,  and although there may be no indebtedness
28    outstanding at the time any advance is  made.   The  lien  of
29    such  mortgage  or deed of trust, as to third persons without
30    actual  notice  thereof,  shall  be  valid  as  to  all  such
31    indebtedness and future advances form the time said  mortgage
32    or  deed  of  trust  is filed for record in the office of the
33    Recorder of Deeds or the Registrar of Titles  of  the  county
34    where  the  real  property described therein is located.  The
                            -5-                LRB9002845JSgc
 1    total amount of indebtedness  that  may  be  so  secured  may
 2    increase  or decrease from time to time, but the total unpaid
 3    balance so secured at any one time shall not exceed a maximum
 4    principal amount which must be specified in such mortgage  or
 5    deed  of  trust, plus interest thereon, and any disbursements
 6    made for  the  payment  of  taxes,  special  assessments,  or
 7    insurance  on  said  real  property,  with  interest  on such
 8    disbursements.
 9        Any such mortgage or deed of trust  shall  be  valid  and
10    have  priority  over  all  subsequent liens and encumbrances,
11    including  statutory  liens,  except  taxes  and  assessments
12    levied on said real property.
13    (Source: P.A. 85-427.)
14        (205 ILCS 305/50) (from Ch. 17, par. 4451)
15        Sec. 50.  Line of credit.
16        (1)  A credit union may grant a self-replenishing line of
17    credit to a member up to a stated maximum amount.  The  terms
18    and conditions upon which a line of credit is extended to any
19    member  may  be  different  from  the  terms  and  conditions
20    established  for  another  member. Where a line of credit has
21    been approved, no additional loan applications  are  required
22    as  long  as the total outstanding advances under the line of
23    credit do not exceed the maximum amount as stated in the line
24    of credit agreement.
25        (2)  The term "line of credit" means  a  type  of  credit
26    agreement   including,  without  limitation,  a  credit  card
27    agreement.  Each line of credit advance constitutes  a  loan,
28    and  provisions  in  this  Act  regarding  loans  are equally
29    applicable to lines of credit.
30    (Source: P.A. 81-329.)
31        Section 99.  Effective date.  This Act takes effect  upon
32    becoming law.

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