We are considering charging a prepayment penalty on our HELOC's if the loan is paid off within the first 3 years after origination. This prepayment penalty is because we do not charge an origination fee or other costs at the time of approval/closing, and the intention of the prepayment fee is to recoup these costs. It is possible we may waive these fees if the borrower is not refinancing, would this make a difference (i.e. they are selling their home for example).

I do not find anything in the WA state law that prohibits this, am I correct?

There is a limitation under the Consumer Loan act RCW 31.04 however, as a bank I do not beleive this applies to us. I appreciate your help.