Illinois Compiled Statutes 205 ILCS 670/16 – Disclosure of Terms of Contract
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In any loan transaction under this Act, the licensee must disclose the following items to the obligor of the loan before the transaction is consummated:
(a) The amount and date of the loan contract;
(b) The amount of the loan using the term “amount financed”;
(c) Any deduction from the amount financed or payment made by the obligor for insurance and the type of insurance for which each deduction or payment was made;
(d) Any additional deduction from the loan or payment made by the obligor in connection with obtaining the loan;
(e) The date on which the finance charge begins to accrue if different from the date of the transaction;
(f) The total amount of the loan charge with a description of each amount included using the term “finance charge”;
(g) The finance charge expressed as an annual percentage rate using the term “annual percentage rate”.
“Annual percentage rate” means the nominal annual percentage rate of finance charge determined in accordance with the actuarial method of computation with an accuracy at least to the nearest 1/4 of 1%; or at the option of the licensee by application of the United States rule so that it may be disclosed with an accuracy at least to the nearest 1/4 of 1%;
(h) The number, amount and due dates or periods of payments scheduled to repay the loan and the sum of such payments using the term “total of payments”;
(i) The amount, or method of computing the amount of any default, delinquency or similar charges payable in the event of late payments;
(j) The right of the obligor to prepay the loan in full on any installment date and the fact that such prepayment in full will reduce the insurance charge for the loan;
(k) A description or identification of the type of any security interest held or to be retained or acquired by the licensee in connection with the loan and a clear identification of the property to which the security interest relates. If after-acquired property will be subject to the security interest, or if other or future indebtedness is or may be secured by any such property, this fact shall be clearly set forth in conjunction with the description or identification of the type of security interest held, retained or acquired;
(l) A description of any penalty charge that may be imposed by the licensee for prepayment of the principal of the obligation with an explanation of the method of computation of such penalty and the conditions under which it may be imposed;
(m) Identification and description of the method of computing any unearned portion of the finance charge in the event of prepayment of the loan, and if the licensee uses the “Rule of 78THS” method, including a statement explaining such method substantially as follows:
Unearned finance charges under the Rule of 78ths are
(a) The amount and date of the loan contract;
Terms Used In Illinois Compiled Statutes 205 ILCS 670/16
- Annual percentage rate: The cost of credit at a yearly rate. It is calculated in a standard way, taking the average compound interest rate over the term of the loan so borrowers can compare loans. Lenders are required by law to disclose a card account's APR. Source: FDIC
- Appraisal: A determination of property value.
- Contract: A legal written agreement that becomes binding when signed.
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- Finance charge: The total cost of credit a customer must pay on a consumer loan, including interest. The Truth in Lending Act requires disclosure of the finance charge. Source: OCC
- Month: means a calendar month, and the word "year" a calendar year unless otherwise expressed; and the word "year" alone, is equivalent to the expression "year of our Lord. See Illinois Compiled Statutes 5 ILCS 70/1.10
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Truth in Lending Act: The Truth in Lending Act is a federal law that requires lenders to provide standardized information so that borrowers can compare loan terms. In general, lenders must provide information on Source: OCC
- United States: may be construed to include the said district and territories. See Illinois Compiled Statutes 5 ILCS 70/1.14
(b) The amount of the loan using the term “amount financed”;
(c) Any deduction from the amount financed or payment made by the obligor for insurance and the type of insurance for which each deduction or payment was made;
(d) Any additional deduction from the loan or payment made by the obligor in connection with obtaining the loan;
(e) The date on which the finance charge begins to accrue if different from the date of the transaction;
(f) The total amount of the loan charge with a description of each amount included using the term “finance charge”;
(g) The finance charge expressed as an annual percentage rate using the term “annual percentage rate”.
“Annual percentage rate” means the nominal annual percentage rate of finance charge determined in accordance with the actuarial method of computation with an accuracy at least to the nearest 1/4 of 1%; or at the option of the licensee by application of the United States rule so that it may be disclosed with an accuracy at least to the nearest 1/4 of 1%;
(h) The number, amount and due dates or periods of payments scheduled to repay the loan and the sum of such payments using the term “total of payments”;
(i) The amount, or method of computing the amount of any default, delinquency or similar charges payable in the event of late payments;
(j) The right of the obligor to prepay the loan in full on any installment date and the fact that such prepayment in full will reduce the insurance charge for the loan;
(k) A description or identification of the type of any security interest held or to be retained or acquired by the licensee in connection with the loan and a clear identification of the property to which the security interest relates. If after-acquired property will be subject to the security interest, or if other or future indebtedness is or may be secured by any such property, this fact shall be clearly set forth in conjunction with the description or identification of the type of security interest held, retained or acquired;
(l) A description of any penalty charge that may be imposed by the licensee for prepayment of the principal of the obligation with an explanation of the method of computation of such penalty and the conditions under which it may be imposed;
(m) Identification and description of the method of computing any unearned portion of the finance charge in the event of prepayment of the loan, and if the licensee uses the “Rule of 78THS” method, including a statement explaining such method substantially as follows:
Unearned finance charges under the Rule of 78ths are
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computed by calculating for all fully unexpired monthly installment periods, as originally scheduled or deferred, which follow the day of prepayment, the portion of the precomputed interest that bears the same ratio to the total precomputed interest as the balances scheduled to be outstanding during that monthly installment period bear to the sum of all scheduled monthly outstanding balances originally contracted for.
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The description shall also include an example of its application solely for purposes of illustration in substantially the following form:
PREPAYMENT – “RULE OF 78THS”
Sum of balances due every month after
Unearned = Original x prepayment
Charge Charge* Sum of balances due every month of
contract
*for Finance Charge (excluding any charges added for a first payment period of more than one month) or credit insurance charges.
Example: 12 monthly payments of $10 (balance is $120 1st month, $110 2nd month, and so on), $20 Finance Charge. If 5 payments are prepaid in full, unearned Finance Charge is:
$20 x _____________50+40+30+20+10___________ = $3.85
120+110+100+90+80+70+60+50+40+30+20+10
The terms “finance charge” and “annual percentage rate” shall be printed more conspicuously than other terminology required by this Section.
At the time disclosures are made, the licensee shall deliver to the obligor a duplicate of the instrument or statement by which the required disclosures are made and on which the licensee and obligor are identified and their addresses stated. All of the disclosures shall be made clearly, conspicuously and in meaningful sequence and made together on either:
(i) the note or other instrument evidencing the
PREPAYMENT – “RULE OF 78THS”
Sum of balances due every month after
Unearned = Original x prepayment
Charge Charge* Sum of balances due every month of
contract
*for Finance Charge (excluding any charges added for a first payment period of more than one month) or credit insurance charges.
Example: 12 monthly payments of $10 (balance is $120 1st month, $110 2nd month, and so on), $20 Finance Charge. If 5 payments are prepaid in full, unearned Finance Charge is:
$20 x _____________50+40+30+20+10___________ = $3.85
120+110+100+90+80+70+60+50+40+30+20+10
The terms “finance charge” and “annual percentage rate” shall be printed more conspicuously than other terminology required by this Section.
At the time disclosures are made, the licensee shall deliver to the obligor a duplicate of the instrument or statement by which the required disclosures are made and on which the licensee and obligor are identified and their addresses stated. All of the disclosures shall be made clearly, conspicuously and in meaningful sequence and made together on either:
(i) the note or other instrument evidencing the
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obligation. Where a creditor elects to combine disclosures with the contract, security agreement, and evidence of a transaction in a single document, the disclosures required under Section 16 shall be made on the face of the document, on the reverse side, or on both sides, provided that the amount of the finance charge and the annual percentage rate shall appear on the face of the document, and, if the reverse side is used, the printing on both sides of the document shall be equally clear and conspicuous, both sides shall contain the statement, “NOTICE: See other side for important information”, and the place for the obligor’s signature shall be provided following the full content of the document; or
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(ii) One side of a separate statement which
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identifies the transaction.
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The amount of the finance charge shall be determined as the sum of all charges, payable directly or indirectly by the obligor and imposed directly or indirectly by the licensee as an incident to or as a condition to the extension of credit, whether paid or payable by the obligor, any other person on behalf of the obligor, to the licensee or to a third party, including any of the following types of charges:
(1) Interest, time price differential, and any amount
(1) Interest, time price differential, and any amount
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payable under a discount or other system of additional charges.
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(2) Service, transaction, activity, or carrying
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charge.
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(3) Loan fee, points, finder’s fee, or similar charge.
(4) Fee for an appraisal, investigation, or credit
(4) Fee for an appraisal, investigation, or credit
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report.
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(5) Charges or premiums for credit life, accident,
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health, or loss of income insurance, written in connection with any credit transaction unless:
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(i) the insurance coverage is not required by the
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licensee and this fact is clearly and conspicuously disclosed in writing to the obligor; and
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(ii) any obligor desiring such insurance coverage
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gives specific dated and separately signed affirmative written indication of such desire after receiving written disclosure to him of the cost of such insurance.
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(6) Charges or premiums for insurance, written in
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connection with any credit transaction, against loss of or damage to property or against liability arising out of the ownership or use of property unless a clear, conspicuous, and specific statement in writing is furnished by the licensee to the obligor setting forth the cost of the insurance if obtained from or through the licensee and stating that the obligor may choose the person through which the insurance is to be obtained.
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(7) Premium or other charge for any other guarantee
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or insurance protecting the licensee against the obligor’s default or other credit loss.
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(8) Any charge imposed by a licensee upon another
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licensee for purchasing or accepting an obligation of an obligor if the obligor is required to pay any part of that charge in cash, as an addition to the obligation, or as a deduction from the proceeds of the obligation.
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A late payment, delinquency, default, reinstatement or other charge is not a finance charge if imposed for actual unanticipated late payment, delinquency, default or other occurrence.
A licensee who complies with the federal Truth in Lending Act, amendments thereto, and any regulations issued or which may be issued thereunder, shall be deemed to be in compliance with the provisions of this Section, except with respect to the disclosure in paragraph (m), which may be set forth in any manner.
A licensee who complies with the federal Truth in Lending Act, amendments thereto, and any regulations issued or which may be issued thereunder, shall be deemed to be in compliance with the provisions of this Section, except with respect to the disclosure in paragraph (m), which may be set forth in any manner.