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| Home > Statutes > Usa Arizona |
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USA Statutes : arizona
Title : Banks and Financial Institutions
Chapter : CONSUMER LENDERS
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6-601 Definitions
In this chapter, unless the context otherwise requires:
1. "Actuarial method" means the method of allocating each payment between finance
charges and principal pursuant to which the payment is applied first to finance charges
computed on the unpaid balance of principal for the time the balance is outstanding, and
the remainder of the payment is subtracted from the unpaid principal amount.
2. "Amount financed" means the amount of credit extended to a consumer on a
consumer loan determined in accordance with the truth in lending act.
3. "Annual percentage rate" means the measure of the cost of credit, expressed as a
yearly rate, that relates the amount and timing of value received by the consumer to the
amount and timing of payments made, determined in accordance with the truth in lending
act.
4. "Consumer" means an individual who obtains a consumer lender loan for personal,
family or household purposes.
5. "Consumer lender" means a person that advertises to make or procure, solicits or
holds itself out to make or procure, or makes or procures consumer lender loans to
consumers in this state.
6. "Consumer lender loans" means consumer loans, consumer revolving loans and home
equity revolving loans.
7. "Consumer loan" means the direct closed end loan of money in an amount of ten
thousand dollars or less that is subject to a finance charge. For the purpose of
determining whether a consumer loan is ten thousand dollars or less only the principal
amount of the loan shall be considered and not any finance charges or other fees allowed
pursuant to section 6-635.
8. "Consumer loan rate" means the periodic rate of finance charges that applies to
the outstanding principal balance of a consumer loan and that remains unpaid. Consumer
loan rate does not include any prepaid finance charges pursuant to section 6-632,
subsection E or any fees pursuant to section 6-635.
9. "Consumer revolving loan" means an open end revolving loan that is established
pursuant to an agreement with an agreed on credit limit that does not exceed ten thousand
dollars, that the consumer may pay in full at any time but has the privilege of paying in
installments and that contemplates or provides that advances may be obtained from time to
time by the consumer, through checks, drafts, items, credit access devices, orders for
the payment of money, evidences of debt or similar means, whether or not negotiable.
10. "Educational loan" means any loan or other aid or assistance for the purpose of
furthering the education of a consumer or a relative of a consumer at an accredited or
approved university, college, community college, junior college, technical, vocational or
professional school, or similar institution.
11. "Finance charge" means the amount payable by a consumer incident to or as a
condition of the extension of a consumer lender loan but does not include other fees
allowed pursuant to section 6-635.
12. "Home equity revolving loan" means an open end revolving loan that is made
pursuant to an agreement with an agreed on credit limit that is not more than ten
thousand dollars, that is secured by the consumer's principal residence and that provides
that advances may be obtained from time to time by the consumer through checks, drafts,
items, credit access devices, orders for the payment of money, evidences of debt or
similar means, whether or not negotiable.
13. "License" means a license issued under the authority of this chapter to make
consumer lender loans in accordance with this chapter.
14. "Licensee" means a person licensed pursuant to this chapter.
15. "Precomputed consumer loan" means a consumer loan that is payable in
substantially equal, consecutive monthly installments that are applied to the unpaid
balance of the principal and precomputed finance charges combined, subject to provisions
for refund or credit in the event of prepayment and for deferral or default charges in
the event of deferral or default.
16. "Regularly engaged in the business" means either:
(a) Advertising to or any other solicitation of a resident of this state that offers
a consumer loan and that occurs within this state.
(b) Making three or more consumer loans within a calendar year to residents of this
state.
17. "Truth in lending act" means title I of the consumer credit protection act (15
United States Code sections 1601 through 1666j), as amended, and the regulations
promulgated under that act (12 Code of Federal Regulations part 226), as amended.
6-602 Exemptions
A. This chapter does not apply to:
1. A person who does business under any other law of this state, or any other state
while regulated by a state agency of that other state, or of the United States, relating
to banks, savings banks, trust companies, savings and loan associations, profit sharing
and pension trusts, credit unions, insurance companies or receiverships if the consumer
lender loan transactions are regulated by the other law or are under the jurisdiction of
a court.
2. A person who is licensed as a pawnbroker pursuant to title 44, chapter 11,
article 3 to the extent that the person's activities are governed by that article.
3. A person who is not regularly engaged in the business of making consumer lender
loans.
4. A person who is licensed pursuant to chapter 9 of this title to the extent that
the person's activities are governed by that chapter.
B. The requirements of this chapter do not apply to:
1. Closed end loans of more than ten thousand dollars.
2. Advances on open end revolving loans that are not secured by the consumer's
principal residence with an agreed on credit limit of more than ten thousand dollars,
regardless of the amount of any advances on these revolving loans.
3. Advances on open end revolving loans that are secured by the consumer's
principal residence with an agreed on credit limit of more than ten thousand dollars,
regardless of the amount of any advances on these revolving loans.
4. Consumer lender loans that are lawfully made to nonresidents of the state in any
other state under and in accordance with a regulatory consumer lender law similar in
principle to this chapter.
5. Educational loans that are either:
(a) Made, insured or guaranteed pursuant to a program authorized by the United
States, this state or any other state.
(b) Made by a nonprofit organization that is exempt from taxation under section
501(c)(3) of the internal revenue code to students who attend postsecondary educational
institutions in this state. 6-603 License; contents of application; fees;nontransferable
A. Unless exempt under section 6-602, a person, whether located in this state or in
another state, shall not engage in the business of a consumer lender without first being
licensed as a consumer lender by the superintendent.
B. This chapter applies to any person who seeks to avoid its application by any
device, subterfuge or pretense.
C. Each applicant for a license shall submit an application in writing, under oath
and in the form prescribed by the superintendent. The superintendent may require as part
of an application any other information that the superintendent deems necessary.
D. At the time of filing an application for a license, an applicant shall pay to
the superintendent the fee prescribed in section 6-126.
E. Before June 30 of each year, each licensee may obtain a renewal of a license by
filing an application in the form prescribed by the superintendent and paying the fee
prescribed in section 6-126.
F. The superintendent may deny a license to a person if the superintendent finds
that an applicant:
1. Is insolvent as defined in section 47-1201.
2. Has failed to demonstrate the financial responsibility, experience, character
and general fitness to command the confidence of the public and to warrant the belief
that the business will be operated lawfully, honestly, fairly and efficiently within the
purposes of this chapter.
3. Has failed to pay the license fee.
4. Has failed to have at least twenty-five thousand dollars in assets readily
available for use in the conduct of the business of each licensed office and branch
office.
G. A consumer lender license is not transferable or assignable, and no person may
acquire control of a licensee through stock purchase or other device without the prior
written consent of the superintendent. The superintendent may refuse consent if the
superintendent finds that any of the grounds for denial of renewal, revocation or
suspension of a license prescribed in section 6-605 are applicable to the acquiring
person. For purposes of this subsection, "control" means the power to vote more than
twenty per cent of the outstanding voting shares of a licensed corporation, limited
liability company, partnership, association or trust.
6-604 Issuance of license; license year;requirements
A. If the superintendent finds no grounds for denial of a license, within one
hundred twenty days after receiving a complete application, the superintendent shall
grant the application and issue a license to the applicant.
B. The license year for a licensee begins on July 1 and ends on June 30 of each
year.
C. All licenses issued remain in full force until surrendered, revoked or
suspended.
D. A license remains the property of this state. On termination at the request of
the licensee or revocation by the superintendent, the licensee shall immediately deliver
the license to the superintendent. Termination of the license does not affect any other
liability of the licensee.
E. The licensee shall designate the principal location of the licensed office
within or outside this state. If a licensee wishes to maintain more than one office
location the licensee shall first obtain a branch office license for each branch office
from the superintendent. The licensee shall submit an application in the form prescribed
by the superintendent and pay the fee prescribed in section 6-126 for each branch office
license. If the superintendent determines that the applicant is qualified, the
superintendent shall issue a branch office license indicating the address of the branch
office.
F. A licensee shall prominently display the consumer lender license in the office
of the consumer lender and any branch office license in that branch office.
6-605 Denial of renewal; suspension;revocation
A. The superintendent may deny renewal of a license or suspend or revoke a license
if the superintendent finds that a licensee:
1. Is insolvent as defined in section 47-1201.
2. Has shown that the licensee is not a person of honesty, truthfulness and good
character.
3. Has failed to pay the annual renewal fees.
4. Has failed to file an annual report when due or within any extension of time
granted by the superintendent for good cause.
5. Has failed to have or maintain at least twenty-five thousand dollars in assets
used or readily available for use in the conduct of the business of each licensed office
and branch office.
6. Either knowingly or without the exercise of due care to prevent a violation, has
violated any provision of this title or any rule or order adopted or made pursuant to
this title.
7. Has failed to operate the business of making consumer lender loans for a
continuous period of twelve months or more, except that the superintendent, on good cause
shown, may extend the time for operating that business for a single fixed period of not
more than twelve months.
B. The superintendent may also deny renewal of a license or suspend or revoke a
license if the superintendent finds that any fact or condition exists that, if it had
existed at the time of the original application for the license, would have clearly
warranted the superintendent to refuse to issue the license.
6-606 Business limited to licensed locations;restrictions
A. Except as provided in subsection B of this section, no licensee may conduct the
business of making consumer lender loans pursuant to this chapter under any name or at
any place of business in this state other than the name and place stated in the
licensee's consumer lender license or branch office license.
B. Subsection A of this section does not prohibit a licensee from:
1. Making consumer lender loans by mail or electronic means.
2. On request, making accommodations to consumers at any location requested by the
consumer.
3. Conducting any administrative, loan servicing or record keeping activity at any
other location not open to the public, if the superintendent is notified in advance of
that activity.
4. Closing a consumer lender loan secured by real property at an office of a
financial institution, title company, licensed escrow agent, licensed mortgage broker or
licensed mortgage banker.
5. Giving a consumer an advance on a consumer revolving loan or home equity
revolving loan from any location.
C. On approval by the superintendent, The licensee may conduct any of the
activities listed in subsection B of this section outside of this state.
D. A licensee may change the location of its licensed office or licensed branch
office by giving written notice to the superintendent, who shall amend the license
accordingly.
E. All consumer lender loans that are made at the location of a licensed office or
branch office are subject to the requirements of article 2 of this chapter, whether made
by a licensee, any person otherwise exempt from this chapter pursuant to section 6-602 or
any other person.
F. No licensee may conduct the business of making consumer lender loans pursuant to
this chapter from within any licensed office or branch office in which any other business
not licensed pursuant to this title is solicited or engaged in, or in association or
conjunction with any other business not licensed pursuant to this title, without giving
prior notice to the superintendent. If it appears to the superintendent that the other
business is of such a nature or is being conducted in such a manner as to conceal an
evasion of this chapter or is contrary to the public interest or otherwise being
conducted in an unlawful manner, the superintendent may act pursuant to section 6-137 to
restrict the licensee from conducting its business in conjunction with that other
business. For the purposes of this subsection "public interest" means the laws of this
state or of the United States or rules adopted by the superintendent.
6-607 Books; accounts; records; access
A. A licensee shall maintain books, accounts and records that enable the
superintendent to determine whether the licensee is in compliance with this chapter.
B. A licensee shall preserve its books, accounts and records of consumer lender
loans for at least two years after making the final entry for any consumer lender
loan. A licensee that uses an electronic record keeping system is not required to keep a
written copy of the accounts and records if the licensee is able to generate all of the
information required by this section in a timely manner for examination or other
purposes.
C. Every licensee shall observe generally accepted accounting principles and
practices.
D. A licensee shall make any books, accounts and records that are kept outside of
this state available to the superintendent in this state not more than three business
days after demand is made by the superintendent, or the superintendent may choose to
perform the examination or investigation at the office of the licensee located outside
this state.
E. For the purposes of this chapter, the superintendent or the superintendent's
duly authorized representatives shall have access during normal business hours to the
offices and places of business, files, safes and vaults of all licensees regarding that
business or the subject matter of any examination, investigation or hearing.
6-608 Annual report of licensee; civil penaltyfor failure to file
A. On or before October 1 of each year, the licensee shall file a report under oath
and in the form prescribed by the superintendent concerning the business and operations
during the twelve month period ending the preceding June 30. On good cause shown by a
licensee, the superintendent may extend the time for filing the report for a period of
not more than sixty days.
B. If a licensee fails to file the annual report, the superintendent or any person
designated by the superintendent may examine the books, accounts and records of the
licensee, prepare the annual report and charge the licensee an examination fee as
prescribed in section 6-125.
C. If a licensee fails to file the annual report within the specified time, the
superintendent may assess a civil penalty for the failure to file the annual report
unless an extension of time is granted by the superintendent in writing before the due
date of the annual report. The superintendent shall not assess a penalty of more than
five dollars per day. The licensee shall pay the penalty to the superintendent within
thirty days of the assessment.
6-609 Reporting rates; change in rates;quarterly report of superintendent
A. At the time of making its annual report to the superintendent, each licensee
shall report the licensee's standard annual percentage rate or range of annual percentage
rates in effect at that time on the following types of loans:
1. A five hundred dollar unsecured consumer loan, payable in twelve equal monthly
installments.
2. A two thousand five hundred dollar consumer loan secured by a motor vehicle,
payable in thirty-six equal monthly installments.
3. A nine thousand dollar consumer loan secured in full by real property, payable
in one hundred twenty equal monthly installments.
4. A consumer revolving loan with an agreed on credit limit of three thousand
dollars.
5. A home equity revolving loan with an agreed on credit limit of fifteen thousand
dollars.
B. The amount of each of the consumer loans described in subsection A refers to the
amount financed as computed in accordance with the truth in lending act. The licensee
shall also report the range of the percentage amount of any prepaid finance charges
charged in connection with a home equity revolving loan described in subsection A,
paragraph 5.
C. Within thirty days after effectuating a change in the standard rate of charge
for any of the types of loans described in subsection A, the licensee shall report that
change to the superintendent.
D. On at least a quarterly basis the superintendent shall compile a report of the
standard annual percentage rate or range of annual percentage rates of each licensee for
the types of loans described in subsection A. The superintendent shall disseminate this
report in a manner deemed appropriate by the superintendent, and the superintendent shall
make the report available to the public for inspection and copying.
6-610 Effect of revocation, suspension orsurrender on preexisting contract; impairment of contracts
A. The revocation, suspension or surrender of a consumer lender license does not
impair or affect:
1. The obligation of any preexisting consumer lender loan between the consumer
lender and any consumer.
2. The ability or right of the consumer lender to service existing consumer lender
loans from outside this state.
B. If this chapter or any part of this chapter is modified, amended or repealed,
resulting in a cancellation or alteration of any consumer lender license or right of a
licensee under this chapter, that cancellation or alteration does not impair or affect
the obligation of any preexisting contract between a consumer lender and any consumer.
6-611 Prohibited acts
A. A licensee shall not knowingly advertise, display, distribute, broadcast or
televise, or cause or permit to be advertised, displayed, distributed, broadcast or
televised, in any manner, any false, misleading or deceptive statement or representation
with regard to the rates, terms or conditions for a consumer lender loan. To the extent
applicable, all advertising shall comply with the advertising requirements of the truth
in lending act.
B. A licensee shall not pay a fee, commission or bonus or give anything of value to
any merchant, dealer, consumer or other person for the purpose of attracting applications
for consumer lender loans or as consideration for referring consumer lender loan
business, other than the fees permitted pursuant to the real estate settlement procedures
act (12 United States Code sections 2601 through 2617), as amended, and the regulations
promulgated under that act (24 Code of Federal Regulations part 3500), as amended, or to
persons exempt from licensing pursuant to section 6-602 in connection with any consumer
loan or consumer revolving loan that is secured by the consumer's principal residence or
any home equity revolving loan.
6-612 Rules
The superintendent may adopt rules that are necessary to regulate the proper conduct
of a licensee.
6-613 Restrictions; voidable loans
A. Except as the result of an accidental or bona fide error, if the licensee
charges, contracts for or receives any amount in excess of the finance charges and other
fees permitted by this chapter the following restrictions apply:
1. If the original principal amount of a consumer loan is five thousand dollars or
less, that consumer loan is voidable and the licensee has no right to collect or receive
any principal, finance charges or other fees in connection with that consumer loan.
2. If the original principal amount of a consumer loan is more than five thousand
dollars, the licensee has no right to collect or receive any finance charges in
connection with that consumer loan.
3. If the aggregate amount of advances borrowed on a consumer revolving loan or
home equity revolving loan is five thousand dollars or less, that consumer revolving loan
or home equity revolving loan is voidable and the licensee has no right to collect or
receive any principal, finance charges or other fees in connection with that consumer
revolving loan or home equity revolving loan.
4. If the aggregate amount of advances borrowed on a consumer revolving loan or
home equity revolving loan is more than five thousand dollars, the licensee has no right
to collect or receive any finance charges in connection with that consumer revolving loan
or home equity revolving loan.
B. Any consumer lender loan that is made by a person who is required to be licensed
pursuant to this chapter but who is not licensed is void, and the person making that
consumer lender loan has no right to collect, receive or retain any principal, finance
charges or other fees in connection with that consumer lender loan.
6-614 Noncompliance
Except as provided in section 6-613, a failure to comply with this chapter does not
affect the validity or enforceability of any consumer lender loan or any security
interest or lien on personal or real property.
6-615 Foreign loans; reciprocity
If a consumer lender loan subject to this chapter is made at a location outside this
state to a consumer who is a resident of this state at the time that the consumer lender
loan is made and the annual percentage rate of finance charges and other fees charged,
contracted for or received are greater than permitted by this chapter, that consumer
lender loan is enforceable in this state only to the extent of the finance charges and
other fees permitted by this chapter. This section does not apply to consumer lender
loans that are solicited in this state from outside this state and that are subject to
this chapter.
6-631 Disclosures; penalty
A. To the extent applicable, a licensee shall comply with the disclosure
requirements of the truth in lending act.
B. Each note or agreement evidencing a consumer lender loan shall contain the
following disclosure statement in at least ten point type that is in English and in
Spanish and in close proximity to the consumer's signature line:
Notice: You may request that the initial disclosures prescribed in the truth
in lending act (15 United States Code sections 1601 through 1666j) be provided
in Spanish before signing any loan documents.
C. A licensee shall continuously and conspicuously display a sign printed in at
least twelve point bold type containing the notice prescribed by subsection B and the
following notice at each desk in each licensed office or branch office at which consumer
lender loans are usually and normally closed:
Notice
Before signing any loan documents or otherwise committing to a loan, you may
take copies of those documents away from the consumer lender's place of
business for review.
D. A licensee shall give to the consumer a receipt or another written record of the
amount of any payment made in currency on any consumer lender loan, either at the time
the payment is made or within ten days after the payment is made, or the licensee may
reflect the payment on the periodic statement sent to the consumer for the billing period
that includes the date of that payment.
E. A licensee shall mail periodic statements for consumer revolving loans and home
equity revolving loans to the consumer within fourteen days after the end of each monthly
billing cycle period. A billing cycle period is considered monthly if the closing date
of the billing cycle period is the same day each month or does not vary by more than four
days from that day.
F. If the licensee fails to make the disclosure statement prescribed in subsection
B, the superintendent shall assess the licensee a one-time penalty of up to three hundred
dollars for every violation.
6-632 Finance charges
A. A licensee may contract for and receive finance charges on consumer loans that
are not more than the following amounts:
1. On a consumer loan in an original principal amount of one thousand dollars or
less, a consumer loan rate of thirty-six per cent.
2. On a consumer loan in an original principal amount of more than one thousand
dollars either:
(a) A consumer loan rate of thirty-six per cent on the initial five hundred dollars
of the original principal amount, and a consumer loan rate of twenty-four per cent on
that part of the principal amount greater than five hundred dollars.
(b) The single blended consumer loan rate that results from the total amount of
finance charges that the licensee would receive through the scheduled maturity of the
consumer loan at the consumer loan rates that otherwise would be applicable pursuant to
subdivision (a) of this paragraph to the different portions of the unpaid principal
balance, assuming that the consumer loan will be paid according to its agreed terms.
B. A licensee may contract for and receive periodic finance charges on consumer
revolving loans and home equity revolving loans that are not more than the following
amounts:
1. On consumer revolving loans with credit limits of one thousand dollars or less,
a periodic rate corresponding to an annual percentage rate of thirty-six per cent on the
outstanding balance each monthly billing cycle.
2. On consumer revolving loans with credit limits of more than one thousand dollars
and home equity revolving loans either:
(a) A periodic rate corresponding to an annual percentage rate of thirty-six per
cent on that portion of the outstanding balance each monthly billing cycle that is not
more than five hundred dollars and a periodic rate corresponding to an annual percentage
rate of twenty-four per cent on that portion of the outstanding balance each monthly
billing cycle that is more than five hundred dollars.
(b) A periodic rate corresponding to the single blended annual percentage rate that
would result in a periodic finance charge during a monthly billing cycle that is not more
than the finance charges that result from the application of the multiple periodic rates
authorized by subdivision (a) of this paragraph.
C. A licensee may charge a fixed or variable rate of periodic finance charges on a
consumer revolving loan or a home equity revolving loan, as provided by the agreement
that establishes the consumer revolving loan or home equity revolving loan. The licensee
shall not base a variable rate of periodic finance charges on an index that is under the
control of the licensee. Unless the consumer can readily verify the index on which an
adjustment in the rate of periodic finance charges is based, the licensee shall provide
conspicuous notice of the rate adjustment at least one monthly billing cycle before the
effective date of the rate adjustment. The licensee may include a rate adjustment notice
on or with a periodic statement to the consumer. The corresponding annual percentage rate
of periodic finance charges may not increase or decrease more than three percentage
points in any period of twelve consecutive months and the corresponding annual percentage
rate of periodic finance charges may not increase or decrease more than seven percentage
points above or below the initial annual percentage rate of periodic finance charges at
the time the consumer revolving loan or home equity revolving loan is established.
D. Except as permitted by subsection E, prepaid finance charges commonly referred
to as points are prohibited.
E. In addition to the finance charges authorized in subsections A, B and C, a
licensee may contract for and receive, and collect finance charges on, nonrefundable
prepaid finance charges or fees commonly referred to as points in an amount of not more
than:
1. Four per cent of the original principal amount of a consumer loan of at least
five thousand dollars secured by the consumer's principal residence.
2. Four per cent of the agreed on credit limit of a home equity revolving loan.
6-633 Computation of finance charges
A. A licensee shall compute and measure finance charges on consumer loans on unpaid
balances outstanding from time to time. A licensee may also precompute finance charges
on consumer loans on scheduled unpaid principal balances as provided in section
6-634. For the purposes of computing finance charges on consumer loans that are not
precomputed, a licensee may calculate the finance charges on an annual basis of twelve
months of thirty days each month or on a daily basis if a day is counted either as
1/360th, 1/365th or 1/366th of a year, as the licensee and consumer may agree in writing.
B. A licensee shall compute periodic finance charges on consumer revolving loans or
home equity revolving loans on the unpaid balance of the consumer revolving loan or home
equity revolving loan by either of the following methods:
1. By multiplying the daily periodic rate by the actual unpaid balance of the
consumer revolving loan or home equity revolving loan each day during the billing cycle
period. The daily periodic rate shall be determined by dividing the annual percentage
rate by three hundred sixty-five.
2. By multiplying the monthly periodic rate by the average daily balance of the
consumer revolving loan or home equity revolving loan during the billing cycle. The
average daily balance is the sum of the unpaid balances of the consumer revolving loan or
home equity revolving loan each day during the billing cycle period divided by the number
of days in the billing cycle period. The monthly periodic rate is determined by dividing
the annual percentage rate by twelve. The unpaid balance on any day is determined by
adding to any balance unpaid as of the beginning of that day all advances and allowed
additional fees and deducting all payments and other credits to the consumer revolving
loan or home equity revolving loan that day.
C. A licensee may compute finance charges only on the unpaid principal balance,
allowed additional fees and prepaid finance charges. A licensee shall not compound
finance charges. Precomputation of the finance charges on a consumer loan does not
constitute compounding of finance charges.
D. If part or all of the principal of a consumer loan is the unpaid principal
balance of a prior precomputed consumer loan, the principal amount payable under such
consumer loan may include any unpaid finance charges on the prior loan that have accrued
within sixty days before the making of that consumer loan.
6-634 Precomputation of consumer loan
A. A precomputed consumer loan shall require repayment in substantially equal
consecutive monthly installments of principal and finance charges combined. The first
installment of a precomputed consumer loan is due not less than fifteen days but not more
than forty-five days after the precomputed consumer loan is made. The licensee may
precompute finance charges at the agreed consumer loan rate on scheduled unpaid principal
balances and add those charges to the principal amount of the precomputed consumer loan.
The licensee shall calculate the finance charges on precomputed loans on an annual basis
of twelve months of thirty days per month. All computations are based on the assumption
that all payments are made as scheduled. The licensee may round the consumer loan rate
to the nearest one-quarter of one per cent.
B. If a precomputed consumer loan is prepaid in full, the licensee shall provide
the consumer with a refund or credit of the precomputed finance charges that apply to all
of the fully unexpired months of the precomputed consumer loan as originally scheduled,
or if deferred, as deferred, and that follow the installment date nearest to the date of
the prepayment. For this purpose the applicable finance charge is the total of those
finance charges that would have been made for each unexpired month by applying scheduled
payments to unpaid balances of principal according to the actuarial method at that single
consumer loan rate that would result in the original amount of precomputed finance
charges on the consumer loan, assuming finance charges had not been precomputed at the
agreed to consumer loan rate but had been computed by the actuarial method at the agreed
to single consumer loan rate from the inception of the consumer loan.
C. The licensee may agree to defer payment of all wholly unpaid installments for
one or more full months and extend the due date of each installment and the maturity of
the precomputed consumer loan for the same amount of time. The deferment period is the
month or months in which the consumer makes no scheduled payment or in which no payment
is required by reason of the deferment. If a deferment is made, the licensee may charge
and collect a deferral fee that is not more than the agreed to consumer loan rate applied
to the amount or amounts deferred for the period of deferral without regard to
differences in the lengths of months, but applied proportionately for a part of a month
by counting each day as one-thirtieth of a month. The licensee may collect a deferral
fee at the time the licensee assesses the deferral fee or at any time after the
assessment. No rebate of deferral fees is required unless prepayment occurs before the
due date of the first deferred installment.
D. If the maturity of a precomputed consumer loan is accelerated, the licensee
shall reduce the outstanding balance of that precomputed consumer loan by the refund or
credit of precomputed finance charges that the consumer would be entitled to receive
pursuant to subsection B on prepayment in full on the date of acceleration. After
application of that refund or credit, the licensee may charge and receive finance charges
at the agreed to consumer loan rate computed on the unpaid balances of the consumer loan
for the actual time outstanding from the installment date nearest the date of
acceleration until paid in full.
E. The note or agreement evidencing a precomputed consumer loan may provide that
the licensee, with or without accelerating maturity, may recompute the entire consumer
loan on a per cent per month basis or may reduce the outstanding balance as of any
installment date by the refund or credit of precomputed finance charges that the consumer
would be entitled to receive pursuant to subsection B on prepayment in full on the
installment date. After recomputing the loan or applying the refund or credit of
precomputed finance charges, the licensee may charge and receive finance charges at the
agreed to consumer loan rate computed on unpaid balances of the consumer loan for the
actual time outstanding from the installment date until the consumer loan is paid in
full.
6-635 Other allowable fees
A. In addition to the finance charges authorized by section 6-632, a licensee may
contract for and receive, and collect finance charges on, the following fees:
1. A delinquency charge in an amount equal to five per cent of the amount of any
installment not paid in full within seven days after its due date.
2. The actual costs of charges that are paid to a third party who is not an
employee of the licensee and that are incurred in making consumer lender loans secured in
whole or in part by real property, including the charges for a preliminary title search,
title examination and report, title insurance premiums, property survey and appraisal
fees.
3. Lawful fees for the acknowledging, filing and recording, continuing or releasing
in any public office of any instrument or financing statement evidencing or perfecting a
lien or security interest in real or personal property securing a consumer lender loan or
the premiums paid for insurance in lieu of filing or recording that shall not exceed the
filing or recording fee.
4. A loan origination fee of not more than five per cent of a closed end consumer
loan or the agreed credit limit of a consumer revolving loan but in no event in an amount
that is more than seventy-five dollars. A licensee shall not charge a loan origination
fee:
(a) For the refinancing of a closed end consumer loan or the renegotiating of an
agreed credit limit of a consumer revolving loan if the refinancing or renegotiating
occurs within one year of the collection of a prior loan origination fee.
(b) If the licensee charges prepaid finance charges pursuant to section 6-632,
subsection E, paragraph 1.
5. Deferral fees authorized in section 6-634 for precomputed consumer loans.
6. Insurance premiums as provided in section 6-636.
7. Court costs.
8. Reasonable attorney fees if the consumer lender loan is referred for collection
to an attorney other than a salaried employee of the licensee.
9. Costs, expenses and fees authorized in section 33-813, subsection B for
reinstatement of a deed of trust encumbering real property that secures a consumer lender
loan.
10. Costs and expenses of exercising the power of sale in a deed of trust
encumbering real property that secures a consumer lender loan and costs and expenses of a
sale that are included in a credit bid or that are applied from the proceeds of a
trustee's sale pursuant to section 33-812, including the payment of trustee fees and
reasonable attorney fees actually incurred.
11. Costs and expenses of retaking, holding, preparing for sale and selling any
personal property in accordance with title 47, chapter 9, article 6.
B. If a licensee receives a check, draft, negotiable order of withdrawal or similar
instrument drawn on a depository institution that is offered by a consumer in full or
partial payment on a consumer lender loan and the instrument is not paid or is dishonored
by the depository institution, the licensee may charge and collect from the consumer a
dishonored check service fee pursuant to section 44-6852.
C. In addition to the finance charges and fees provided in this article, the
licensee shall not directly or indirectly charge, contract for or receive any further or
other amount in connection with a consumer lender loan.
D. In conjunction with the reporting requirements prescribed in section 6-609, on
or before October 1, 2003 and every year thereafter, a licensee shall report to the
superintendent the number of closed end consumer loans and consumer revolving loans under
one thousand dollars made in the prior two years.
6-636 Insurance securing loan; cancellation;notice
A. The following types of insurance may be sold to the consumer in connection with
a consumer lender loan and the consumer may contract for:
1. Property insurance covering any property securing a consumer lender loan.
2. Life insurance insuring the life of one or more consumers obligated on a
consumer lender loan.
3. Credit disability insurance that provides indemnity for payments due on a
consumer lender loan while any covered consumer is disabled.
4. Credit involuntary unemployment insurance that provides indemnity for payments
due on a consumer lender loan while one or more consumers are involuntarily unemployed.
B. Any insurance purchased by a consumer from or through a licensee, except
insurance on property securing a consumer lender loan, is optional, and a licensee shall
not refuse to make a consumer lender loan based on the consumer's refusal to purchase the
insurance. The consumer may cancel any insurance purchased in connection with a consumer
lender loan for any reason at any time within thirty days after the consumer lender loan
is made and shall mail or deliver a written notice of the cancellation to the licensee's
place of business. If the consumer cancels the insurance pursuant to this subsection,
the consumer is entitled to a full refund of any premiums paid for the insurance. Before
executing the note or agreement evidencing a consumer lender loan that includes a premium
for insurance, the licensee shall give the consumer the disclosures required to exclude
those insurance premiums from the finance charge in accordance with the truth in lending
act.
C. At the time the insurance is sold the licensee shall mail or deliver a written
receipt or binder to the consumer. Within thirty days after mailing or delivering the
written receipt or binder, the licensee shall deliver to the consumer, or if more than
one, to any one of them, a policy or certificate of insurance covering any insurance
purchased by or through the licensee or any employee or affiliate of the licensee in
connection with the consumer lender loan that sets forth the amount of any premium that
the consumer has paid or is obligated to pay, the amount of insurance, the term of
insurance and a description of the coverage. The policy or certificate may contain a
mortgagee clause or other appropriate provisions to protect the insurable interest of the
licensee.
D. All property insurance sold pursuant to this section shall bear a reasonable
bona fide relation to the existing hazard or risk of loss and shall be written by an
agent licensed in this state and by an insurance company authorized to conduct property
insurance business in this state. A licensee shall not require the purchase of property
insurance from the licensee or any employee, affiliate or associate of the licensee as a
condition precedent to the making of a consumer lender loan. The licensee may otherwise
designate the company in which the insurance shall be placed as long as the insurance
company is authorized to conduct business in this state.
E. Property insurance, if sold by a licensee in connection with a consumer loan, is
at the option of the consumer in an amount not exceeding the greater of the reasonable
value of the property insured as designated in writing by the consumer or the approximate
amount of the consumer loan and shall be for a term not exceeding the approximate term of
the consumer loan. However, the amount of this property insurance may not exceed the
designated value of the property insured.
F. If a licensee sells property insurance in connection with a consumer revolving
loan or a home equity revolving loan, the amount of the property insurance shall not
exceed the greater of the reasonable value of the property insured as designated in
writing by the consumer or the agreed on credit limit. However, the amount of property
insurance shall not exceed the designated value of the insured property. The licensee
may sell property insurance for renewable terms of not more than two
years. Alternatively, the amount of property insurance may be equal to the balance
outstanding on a consumer revolving loan or a home equity revolving loan from time to
time with the premiums calculated on the basis of the actual daily unpaid balance or the
average daily balance of the account during each billing cycle period. Premiums for
property insurance may be charged as an advance on a consumer revolving loan or a home
equity revolving loan.
G. If the licensee sells the consumer property insurance for a renewable term, the
licensee shall mail a notice to the consumer at least thirty days before the renewal date
that states all of the following:
1. The consumer's property insurance is about to expire.
2. The consumer may obtain property insurance from any source chosen by the
consumer subject to the licensee's right to reasonably reject the insurer chosen by the
consumer by providing written notice to the consumer of those reasons for rejection.
3. The term, coverage and premium for the renewal of property insurance.
4. The property insurance will be renewed on expiration unless the consumer
provides the licensee before the expiration date with evidence that the consumer has
obtained other property insurance.
H. Notwithstanding any other provision of this chapter, any advantage, commission,
dividend, gain or identifiable charge for insurance authorized by this section, or
otherwise, to the licensee or any employee or affiliate of the licensee from that
insurance or its sale is not an additional finance charge or other allowed fee in
connection with the consumer lender loan. If the licensee provides a new consumer lender
loan or renews a contract of a consumer lender loan and the licensee sells the consumer
new insurance, the licensee shall apply the insurance provided for in this section to the
new loan or renewal, or the licensee shall cancel the prior insurance and provide the
consumer with a refund or credit of the unearned premium or identifiable charge before
selling the new insurance to the consumer.
I. The licensee shall determine the refund of unearned premiums for credit life
insurance and credit disability insurance on prepayment in full according to title 20,
chapter 6, article 10.
J. Except as otherwise specifically provided in this chapter, insurance
transactions pursuant to this chapter are subject in all respects to the applicable laws
pertaining to that insurance pursuant to title 20 and to the applicable rules adopted
pursuant to title 20.
6-637 Term; payments
A. The scheduled term of a consumer loan shall not be longer than the following:
1. Twenty-four months and fifteen days from the date of making a consumer loan of
one thousand dollars or less.
2. Thirty-six months and fifteen days from the date of making a consumer loan of
more than one thousand dollars but not more than two thousand five hundred dollars.
3. Forty-eight months and fifteen days from the date of making a consumer loan of
more than two thousand five hundred dollars but not more than four thousand dollars.
4. Sixty months and fifteen days from the date of making a consumer loan of more
than four thousand dollars but not more than six thousand dollars.
5. Any agreed on time period for a consumer loan of more than six thousand dollars.
B. The note evidencing a consumer loan shall provide for the scheduled repayment of
principal and finance charges in approximately equal periodic installments.
C. Pursuant to the provisions of 12 United States Code section 3804, subsections A
and B of this section shall not be superseded by the provisions of 12 United States Code
section 3803.
D. Balloon payments, prepayment penalties, call options and other contract
provisions that permit a consumer lender to accelerate payment of a consumer revolving
loan or home equity revolving loan for any reason other than the consumer's default as
provided in the agreement evidencing the consumer revolving loan or home equity revolving
loan are prohibited, except that a licensee may include a call option to be exercised at
least fifteen years after the date of the agreement. If the licensee exercises this call
option and the consumer revolving loan or home equity revolving loan is not in default,
the licensee shall amortize the amount due on the account over at least sixty monthly
installments.
E. Except as provided in subsection D of this section, an agreement evidencing a
consumer revolving loan or home equity revolving loan shall provide that on termination
of the right to obtain advances the outstanding principal balance and finance charges at
the time of termination of the right to obtain advances are repayable in installments if
a consumer is not in default as provided in the agreement. These installments shall
provide for the scheduled repayment of principal and finance charges in approximately
equal periodic installments except as a result of an adjustment in the index on which a
variable rate of periodic finance charges is based. These installments are payable
within the following time limits:
1. Twenty-four months and fifteen days from the date of termination of the right to
obtain advances for an outstanding principal balance on that date of one thousand
dollars or less.
2. Thirty-six months and fifteen days from the date of termination of the right to
obtain advances for an outstanding principal balance on that date that is more than one
thousand dollars but not more than two thousand five hundred dollars.
3. Forty-eight months and fifteen days from the date of termination of the right to
obtain advances for an outstanding principal balance on that date that is more than two
thousand five hundred dollars but not more than four thousand dollars.
4. Sixty months and fifteen days from the date of termination of the right to
obtain advances for an outstanding principal balance on that date that is more than four
thousand dollars but not more than six thousand dollars.
5. Any agreed on time period for an outstanding principal balance that is more than
six thousand dollars on the date of termination of the right to obtain advances.
F. A licensee shall permit a consumer to prepay any scheduled installment or
additional amount due on any consumer lender loan in advance at any time during the
licensee's regular business hours, but the licensee may apply that prepayment first to
all finance charges accrued through the date of that prepayment.
G. On payment in full or renewal of a consumer lender loan, the licensee shall
provide written notice of payment and release to the consumer, or if more than one
consumer is obligated on the consumer lender loan, to any one of the consumers. The
notice of payment and release shall include the date of the original note or agreement
evidencing the consumer lender loan and the date of payment in full. In lieu of the
notice of payment and release, the licensee may return the original note or agreement
evidencing the consumer lender loan marked paid or renewed, as applicable. The licensee
shall release any lien or security interest on property securing a consumer lender loan
that is paid in full as provided in section 33-707 for real property and section 47-9513
for personal property. This subsection does not apply to a consumer revolving loan or
home equity revolving loan on which there is no unpaid balance if the consumer's right to
receive advances on the account continues in effect.
6-638 Other insurance
A. A licensee who is licensed to sell life insurance pursuant to title 20 may sell
and include in the principal amount of a consumer lender loan the cost of the premium for
life insurance that is not for credit if the insurance policy or certificate is approved
by the director of the department of insurance, the purchase of the insurance is not a
condition of the consumer lender loan and the consumer signs an application for the
insurance that is separate from the consumer lender loan application. The licensee shall
not offer or discuss with the consumer the option of life insurance until after the
consumer lender loan application is completed and the consumer lender loan is approved.
B. Any insurance purchased by the consumer pursuant to this section is optional and
the licensee shall disclose in writing to the consumer that the insurance is optional.
C. The consumer may cancel the insurance for any reason at any time within thirty
days after the date of purchase and the consumer shall receive a full refund of the
premium within five days of the date of cancellation. If the consumer cancels the
insurance after thirty days from the date of purchase, the consumer shall receive a
refund of the unearned premium in accordance with the insurance policy. In the event the
consumer cancels the insurance, the licensee shall give the consumer the amount of any
refund of premium or shall credit the consumer's lender loan at the option of the
consumer.
D. For the purposes of this section, the date of cancellation is defined as the
date the licensee receives the receipt for the notice of cancellation for the insurance
policy.
E. If the consumer decides to cancel the policy, the consumer shall either:
1. Return the policy to the insurer or to the licensee at the licensee's place of
business.
2. Provide written notice of cancellation to the insurer or to the licensee at the
licensee's place of business.
F. The licensee shall give the consumer a written copy of the provisions of this
section.
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