The process of negotiating a loan can often lead to a disagreement between a borrower and a lender over whether a loan has been accepted or what the terms of the loan are. In Illinois, the Credit Agreements Act is designed to ensure the security of the parties in the credit negotiation process. The credit contracts law is not new. It has been around for almost 25 years. But both borrowers and lenders should be aware that the Illinois courts have strictly complied with the requirements of the law and have refused to enforce credit contracts unless they scrupulously comply with the provisions of the law. The scope of the law is broad insofar as any agreement or obligation of a creditor is to lend money or extend credits or to delay or account for the repayment of the money for commercial purposes. It ultimately provides protection to a lender, since a borrower does not maintain any action in connection with a credit contract or in any way, unless the credit contract is written: (1); (2) expresses an agreement or obligation to grant credits or extend credits or delays or repay funds; (3) defines the applicable terms and conditions; and (3) be signed by the creditor and the debtor. With respect to commercial financing, the Illinois Credit Agreements Act, 815 ILCS 160/0.01, and seq., is an important law that borrowers and lenders must understand when trading credit terms. The Illinois Credit Agreements Act («Act») was passed in 1990 in response to concerns that borrower and loan disputes would be tainted by reckless claims and defences by borrowers. The Illinois Fraud Act has offered limited protection against these claims and defences, as it requires that contracts that cannot be concluded within one year and oral agreements as guarantors of the guilt of another party be written.
However, borrowers could continue to assert rights and defences based on oral statements from a lender. The law changed that. In establishing a loan contract in Illinois, there is a big difference between private and commercial loans. Individuals or spouses take out personal credits to pay for family or household expenses – the most common example is home mortgages. Commercial loans are credit contracts with contractors for the purpose of setting up or expanding a business. In Illinois, commercial loans are more advantageous to lenders than private loans under the Illinois Credit Agreements Act. Thus, the guarantee of classifying a loan as a credit contract could protect you from a long dispute. Times are good.