State High Court Rules on Lending Fee Limitations

In a ruling that has significant impact for banks, mortgage lenders, and trustees of securitized mortgage loans, the Illinois state Supreme Court unanimously rejected a state law that severely restricted the fees that lenders can charge and imposed crippling penalties on companies that exceeded the restriction.

The court held that the 30-year old Illinois Interest Act's limitations provision, which prohibits lenders from charging more than 3% of the principal in points and fees when the interest is in excess of 8%, was preempted by federal law. The court's ruling in the case (U.S. Bank National Association et. al. v. Michael Clark et al.) reversed an appellate court decision that …