When a borrower is refinancing his/her mortgage with another lender and a written payof letter is requested our bank does not currently charge a fee. We are looking into charging a "payoff processing fee" to provide this payoff letter. Is this fee allowed in Illinois?

We are not aware of any Illinois statute that prohibits the assessment of a processing fee for issuing a payoff letter.

Having said that, there are a number of issues that should be taken into consideration, particularly with respect to a first request for a payoff letter. For example, if this fee is not provided for in the underlying loan agreement, an argument could be made that there is an implicit contractual right to obtain information that would enable the borrower to pay off the loan that is being violated when the lender refuses to provide this information without being paid an additional sum. Conversely, if such a fee is provided for in the agreement, another question that deserves consideration is whether such a fee should be disclosed as part of the finance charge pursuant to the Truth in Lending Act or related state laws.

Needless to say, you should not view this response as legal advice. As helpful as these boards are in providing guidance, we would recommend that you consult with your bank counsel on questions like this one.

Bruce Jay Baker, Executive Vice President & General Counsel, Illiois Bankers Association
Visit us at http://www.ilbanker.com