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    AN ACT concerning business.

 
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    Be it enacted by the People of the State of Illinois,
 
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represented in the General Assembly:



 
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    Section 5. The Interest Act is amended  by changing Section 
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4 as follows:
 
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    (815 ILCS 205/4)  (from Ch. 17, par. 6404)
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    Sec. 4. General interest rate. 
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    (1) Except as otherwise provided in Section 4.05, in all 
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written contracts it shall be lawful for the parties to

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stipulate or agree that 9% per annum, or any less sum of 
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interest, shall be
taken and paid upon every $100 of money 
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loaned or in any manner due and
owing from any person to any 
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other person or corporation in this state, and
after that rate 
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for a greater or less sum, or for a longer or shorter time,

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except as herein provided.
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    The maximum rate of interest that may lawfully be 
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contracted for is
determined by the law applicable thereto at 
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the time the contract is
made.  Any provision in any contract, 
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whether made before or after July
1, 1969, which provides for 
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or purports to authorize, contingent upon a
change in the 
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Illinois law after the contract is made, any rate of
interest 
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greater than the maximum lawful rate at the time the contract

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is made, is void.
 


 






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    It is lawful for a state bank or a branch of an 
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out-of-state bank, as those
terms are defined in Section 2 of 
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the Illinois Banking Act, to receive or to
contract to receive

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and collect interest and charges at any rate or rates agreed 
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upon by
the bank or branch and the borrower.
It is lawful for a 
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savings bank chartered under the Savings Bank Act or a
savings 
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association chartered under the Illinois Savings and Loan Act 
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of 1985
to receive or contract to receive and collect interest 
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and charges at any rate
agreed upon by the savings bank or 
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savings association and the borrower.
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    It is lawful to receive or to contract to receive and 
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collect
interest and charges as authorized by this Act and as 
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authorized by the
Consumer Installment Loan Act and by the 
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"Consumer Finance Act", approved July
10,
1935, as now or 
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hereafter amended, or by the Payday Loan Reform Act.  It is 
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lawful to charge, contract
for, and receive any rate or amount 
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of interest or compensation with
respect to the following 
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transactions:
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        (a) Any loan made to a corporation;
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        (b) Advances of money, repayable on demand, to an 
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    amount not less
than $5,000, which are made upon warehouse 
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    receipts, bills of lading,
certificates of stock, 
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    certificates of deposit, bills of exchange, bonds
or other 
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    negotiable instruments pledged as collateral security for 
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    such
repayment, if evidenced by a writing;
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        (c) Any credit transaction between a merchandise 
 


 






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    wholesaler and
retailer; any business loan to a business 
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    association or copartnership
or to a person owning and 
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    operating a business as sole proprietor or to
any persons 
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    owning and operating a business as joint venturers, joint

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    tenants or tenants in common, or to any limited 
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    partnership, or to any
trustee owning and operating a 
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    business or whose beneficiaries own and
operate a business, 
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    except that any loan which is secured (1) by an
assignment 
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    of an individual obligor's salary, wages, commissions or

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    other compensation for services, or (2) by his household 
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    furniture or
other goods used for his personal, family or 
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    household purposes shall be
deemed not to be a loan within 
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    the meaning of this subsection; and
provided further that a 
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    loan which otherwise qualifies as a business
loan within 
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    the meaning of this subsection shall not be deemed as not 
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    so
qualifying because of the inclusion, with other security 
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    consisting of
business assets of any such obligor, of real 
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    estate occupied by an
individual obligor solely as his 
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    residence.  The term "business" shall
be deemed to mean a 
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    commercial, agricultural or industrial enterprise
which is 
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    carried on for the purpose of investment or profit, but 
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    shall
not be deemed to mean the ownership or maintenance of 
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    real estate
occupied by an individual obligor solely as his 
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    residence;
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        (d) Any loan made in accordance with the provisions of 
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    Subchapter I
of Chapter 13 of Title 12 of the United States 
 


 






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    Code, which is designated
as "Housing Renovation and 
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    Modernization";
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        (e) Any mortgage loan insured or upon which a 
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    commitment to insure
has been issued under the provisions 
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    of the National Housing Act,
Chapter 13 of Title 12 of the 
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    United States Code;
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        (f) Any mortgage loan guaranteed or upon which a 
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    commitment to
guaranty has been issued under the provisions 
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    of the Veterans' Benefits
Act, Subchapter II of Chapter 37 
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    of Title 38 of the United States Code;
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        (g) Interest charged by a broker or dealer registered 
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    under the
Securities Exchange Act of 1934, as amended, or 
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    registered under the
Illinois Securities Law of 1953, 
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    approved July 13, 1953, as now or
hereafter amended, on a 
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    debit balance in an account for a customer if
such debit 
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    balance is payable at will without penalty and is secured 
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    by
securities as defined in Uniform Commercial 
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    Code-Investment Securities;
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        (h) Any loan made by a participating bank as part of 
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    any loan
guarantee program which provides for loans and for 
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    the refinancing of
such loans to medical students, interns 
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    and residents and which are
guaranteed by the American 
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    Medical Association Education and Research
Foundation;
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        (i) Any loan made, guaranteed, or insured in accordance 
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    with the
provisions of the Housing Act of 1949, Subchapter 
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    III of Chapter 8A of
Title 42 of the United States Code and 
 


 






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    the Consolidated Farm and Rural
Development Act, 
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    Subchapters I, II, and III of Chapter 50 of Title 7 of
the 
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    United States Code;
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        (j) Any loan by an employee pension benefit plan, as 
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    defined in Section
3 (2) of the Employee Retirement Income 
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    Security Act of 1974 (29 U.S.C.A.
Sec. 1002), to an 
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    individual participating in such plan, provided that such

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    loan satisfies the prohibited transaction exemption 
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    requirements of Section
408 (b) (1) (29 U.S.C.A. Sec. 1108 
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    (b) (1)) or Section 2003 (a) (26 U.S.C.A.
Sec. 4975 (d) 
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    (1)) of the Employee Retirement Income Security Act of 
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    1974;
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        (k) Written contracts, agreements or bonds for deed 
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    providing for
installment purchase of real estate;
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        (1) Loans secured by a mortgage on real estate;
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        (m) Loans made by a sole proprietorship, partnership, 
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    or corporation to
an employee or to a person who has been 
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    offered employment by such sole
proprietorship, 
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    partnership, or corporation made for the sole purpose of

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    transferring an employee or person who has been offered 
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    employment to another
office maintained and operated by the 
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    same sole proprietorship, partnership,
or corporation;
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        (n) Loans to or for the benefit of students made by an 
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    institution of
higher education.
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    (2) Except for loans described in subparagraph (a), (c), 
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(d),
(e), (f) or (i) of subsection (1) of this Section, and 
 


 






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except to the
extent permitted by the applicable statute for 
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loans made pursuant to
Section 4a or pursuant to the Consumer 
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Installment Loan Act:
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        (a) Whenever the rate of interest exceeds 8% per annum 
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    on any
written contract, agreement or bond for deed 
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    providing for the installment
purchase of residential real 
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    estate, or on any loan secured by a mortgage
on residential 
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    real estate, it shall be unlawful to provide for a

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    prepayment penalty or other charge for prepayment.
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        (b) No agreement, note or other instrument evidencing a 
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    loan
secured by a mortgage on residential real estate, or 
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    written contract,
agreement or bond for deed providing for 
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    the installment purchase of
residential real estate, may 
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    provide for any change in the contract rate of
interest 
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    during the term thereof.  However, if the Congress of the 
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    United
States or any federal agency authorizes any class of 
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    lender to enter, within
limitations, into mortgage 
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    contracts or written contracts, agreements or
bonds for 
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    deed in which the rate of interest may be changed during 
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    the
term of the contract, any person, firm, corporation or 
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    other entity
not otherwise prohibited from entering into 
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    mortgage contracts or
written contracts, agreements or 
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    bonds for deed in Illinois may enter
into mortgage 
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    contracts or written contracts, agreements or bonds
for 
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    deed in which the rate of interest may be changed during 
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    the term
of the contract, within the same limitations.
 


 






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    (3) In any contract or loan which is secured by a mortgage, 
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deed of
trust, or conveyance in the nature of a mortgage, on 
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residential real
estate, the interest which is computed, 
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calculated, charged, or collected
pursuant to such contract or 
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loan, or pursuant to any regulation or rule
promulgated 
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pursuant to this Act, may not be computed, calculated, charged

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or collected for any period of time occurring after the date on 
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which the
total indebtedness, with the exception of late 
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payment penalties, is paid
in full.
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    (4) For purposes of this Section, a prepayment shall mean 
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the payment of the
total indebtedness, with the exception of 
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late payment penalties if
incurred or charged, on any date 
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before the date specified in the contract
or loan agreement on 
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which the total indebtedness shall be paid in full, or
before 
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the date on which all payments, if timely made, shall have been

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made.  In the event of a prepayment of the indebtedness which is 
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made on a
date after the date on which interest on the 
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indebtedness was last
computed, calculated, charged, or 
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collected but before the next date on
which interest on the 
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indebtedness was to be calculated, computed, charged,
or 
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collected, the lender may calculate, charge and collect 
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interest on the
indebtedness for the period which elapsed 
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between the date on which the
prepayment is made and the date 
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on which interest on the indebtedness was
last computed, 
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calculated, charged or collected at a rate equal to 1/360 of

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the annual rate for each day which so elapsed, which rate shall 
 


 






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be applied
to the indebtedness outstanding as of the date of 
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prepayment.  The lender
shall refund to the borrower any 
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interest charged or collected which
exceeds that which the 
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lender may charge or collect pursuant to the
preceding 
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sentence. The provisions of this amendatory Act of 1985 shall

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apply only to contracts or loans entered into on or after the 
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effective
date of this amendatory Act, but shall not apply to 
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contracts or loans
entered into on or after that date that are 
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subject to Section 4a of this
Act, the Consumer Installment 
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Loan Act, the Payday Loan Reform Act, or the Retail Installment 
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Sales
Act, or that provide for the refund of precomputed 
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interest on prepayment
in the manner provided by such Act.
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    (5) For purposes of items (a) and (c) of subsection (1) of 
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this Section, a rate or amount of interest may be lawfully 
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computed when applying the ratio of the annual interest rate 
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over a year based on 360 days.  The provisions of this 
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amendatory Act of the 96th General Assembly are declarative of 
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existing law. 
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(Source: P.A. 94-13, eff. 12-6-05; 94-635, eff. 8-22-05; 
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95-331, eff. 8-21-07.)

 
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    Section 99. Effective date. This Act takes effect upon 
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becoming law.