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| Home > Statutes > Usa Arizona |
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USA Statutes : arizona
Title : Banks and Financial Institutions
Chapter : PREMIUM FINANCE COMPANIES
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6-1401 Definitions
In this chapter, unless the context otherwise requires:
1. "Branch office" means any place of business maintained by a licensee in addition
to the principal place of business of a licensee.
2. "Insured" means any person covered under an insurance contract or other evidence
of insurance coverage subject to regulation under title 20.
3. "Insurer" has the same meaning as defined by section 20-104.
4. "Managing general agent" has the same meaning prescribed in section 20-311.
5. "Premium finance agreement" means a written agreement by which an insured or
prospective insured agrees to pay to a premium finance company the amount advanced or to
be advanced under the written agreement to an insurance producer in payment of premiums
of an insurance contract together with interest or discount and a service charge as
authorized and limited by this article.
6. "Premium finance company" means a person engaged in whole or in part in the
business of financing insurance premiums, entering into premium finance agreements with
insureds or otherwise acquiring premium finance agreements from insurance producers or
other premium finance companies.
6-1402 Licensure required; contents of application; fees; nontransferable; branch office permit
A. A person shall not engage in the business of a premium finance company in this
state without first being licensed as a premium finance company by the superintendent. A
person who is not exempt under section 6-1403 and who advertises for, solicits or holds
himself out as willing to finance premiums or enter into or acquire premium finance
agreements is presumed to be engaged in the business as a premium finance company.
B. A licensee shall not establish a branch office without first obtaining a branch
office permit from the superintendent.
C. An application for a license or branch office permit shall be made in writing,
under oath, and in the form prescribed by the superintendent. The superintendent may
require as part of an application such other information as he deems necessary.
D. An applicant at the time of filing an application for a license or branch office
permit shall pay to the superintendent the fee prescribed in section 6-126.
E. Prior to December 31, each licensee may obtain a renewal of a license or branch
office permit by payment of the fee prescribed in section 6-126.
F. A premium finance company license or branch office permit is not transferable or
assignable, and control shall not be acquired 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, revocation or
suspension of a license prescribed by section 6-1404 are applicable to the acquiring
person. For purposes of this subsection, "control" means the power to vote more than
twenty per cent of outstanding voting shares of a licensed corporation, limited liability
company, partnership, association or trust.
6-1403 Exemptions
A. The licensing requirements of this article do not apply to:
1. Any savings and loan association, bank, savings bank, trust company, consumer
lender or credit union authorized to do business in this state.
2. Any agent or broker licensed by the department of insurance who allows an
insured to pay premiums on policies written by the agent or broker in installments if the
agent or broker receives no interest or other fee, except that an agent or broker may
collect a service charge of not more than five per cent of the total premium amount and a
delinquency charge as provided in section 6-1413.
3. Any person who purchases or otherwise acquires premium finance agreements from a
licensee if the licensee retains the right to service the agreements and to collect
payments due under the agreements and remains responsible for the premium finance
agreement being handled in compliance with this article.
4. Any insurer authorized to transact insurance in this state in connection with
the issuance of premium finance agreements relating to commercial insurance policies
issued by the insurer.
B. The exemption from licensing as provided in subsection A of this section does
not authorize the financing of insurance premiums without compliance with the other
requirements of this article.
6-1404 Denial, suspension or revocation of licenses and branch office permits
A. The superintendent may deny a license to a person or suspend or revoke a license
if the superintendent finds that an applicant or licensee:
1. Is insolvent as defined in section 47-1201.
2. Has shown that he is not a person of honesty, truthfulness and good character.
3. Refuses to permit an examination by the superintendent of the licensee's books
and affairs or refuses or fails, within a reasonable time, to furnish any information or
make any report that may be required by the superintendent.
4. Has been convicted in any state of a felony or any crime of breach of trust or
dishonesty.
5. Has had a final judgment entered against him in a civil action on grounds of
fraud, deceit or misrepresentation and the conduct on which the judgment is based
indicates that it would be contrary to the interest of the public to permit that person
to be licensed or to control or manage a licensee.
6. Has had an order entered against him involving fraud, deceit or
misrepresentation by any administrative agency of this state, the federal government or
any other state or territory of the United States and that the facts relating to the
order indicate that it would be contrary to the interest of the public to permit that
person to be licensed or to control or manage a licensee.
7. Has violated any applicable law, rule or order.
8. Has failed to pay the license or annual renewal fees.
9. Has failed to file an annual report when due or within any extension of time
that the superintendent, for good cause, may have granted.
10. Fails to have or maintain at least twenty-five thousand dollars in liquid assets
available for use in the conduct of the business.
B. If any person to whom a license is issued or who has applied for a license is
indicted or informed against for forgery, embezzlement, obtaining money under false
pretenses, extortion, criminal conspiracy to defraud, or a like offense or offenses, and
a certified copy of the indictment or information or other proper evidence of that
indictment or information is filed with the superintendent, the superintendent may
suspend the license issued to the licensee or refuse to grant a license to an applicant
pending trial on the indictment or information.
C. It is sufficient cause for the suspension or revocation of the license if an
owner, officer, director, member, partner, trustee or employee, while acting in the
course of the premium finance business, or a person who is entitled to vote more than
twenty per cent of the outstanding voting shares of the licensed corporation or a person
who has a controlling interest in a licensed limited liability company, partnership,
association or trust has acted or failed to act in the same manner as would be cause for
suspending or revoking a license of the person to whom the license was issued.
D. The superintendent may deny a branch office permit to a person or suspend or
revoke a branch office permit for the same reasons sufficient under this section for
denial, suspension or revocation of a license.
6-1405 Issuance of license or branch office permit; license year; requirements
A. If no grounds for denial of a license or branch office permit are found to
exist, the superintendent shall, within one hundred twenty days of receiving a complete
application, grant the application and issue a license or branch office permit to the
applicant.
B. The license or branch office permit year for a licensee begins January 1 and
ends December 31 of each year.
C. All licenses and branch office permits issued shall remain in full force and
effect until surrendered, revoked or suspended.
D. A license or branch office permit 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 or branch office permit to the
superintendent.
6-1406 Books and records of premium finance company; access to records
A. A licensee shall maintain books, accounts and records as prescribed by the
superintendent that will enable the superintendent to determine whether the licensee is
complying with the provisions of this article.
B. A licensee shall preserve its books, accounts and records of premium finance
transactions for at least three years after making the final entry with respect to any
premium finance agreement. The preservation of records in any form authorized by the
superintendent constitutes compliance with this section.
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 or the superintendent may choose to perform the examination or
investigation at the office of the licensee located outside of this state.
E. For purposes of this article, the superintendent or his duly authorized
representatives shall have access 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 during business hours.
6-1407 Removal of place of business
A licensee may change the licensed place of business by giving written notice to the
superintendent, who shall amend the license accordingly.
6-1408 Annual report of licensee; civil penalty for failure to file
A. On or before February 1, the licensee shall annually file a report under oath
and in the form prescribed by the superintendent concerning the business and operations
during the preceding calendar year. On good cause shown by a licensee, the
superintendent may extend the time for filing the report for a period not to exceed sixty
days.
B. If a licensee fails to file the annual report, the superintendent or any person
designated by him may examine the books, accounts and records of the licensee and prepare
the annual report and the licensee shall be assessed 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 unless an extension of
time is granted by the superintendent in writing prior to the due date of the annual
report. The penalty shall not be more than twenty-five dollars per day. The licensee
shall pay the penalty to the superintendent within thirty days of the assessment.
6-1409 Effect of revocation, suspension or surrender on preexisting contracts; impairment of contracts
A. A revocation, suspension or surrender of any license does not impair or affect
the obligation of any preexisting premium finance agreement between any licensee and
insured.
B. If any provision of this article is amended or repealed in a manner that results
in a cancellation of any license or right of a licensee to service premium finance
agreements the cancellation does not impair or affect the obligation of any preexisting
premium finance agreement between the licensee and the insured.
6-1410 Form of premium finance agreement; notice
A. A premium finance agreement shall:
1. Be dated and signed by the insured and the printed portion of the agreement
shall be in at least eight point type.
2. Contain the name, place of business and mailing address of the agent or broker
who is negotiating the related insurance contract, the name and residence or mailing
address of the insured as specified by the insured, the name, place of business or
mailing address of the premium finance company, a brief description of the insurance
contract involved and the amount of the premium.
3. Set forth the following items if applicable:
(a) The total amount of the premiums.
(b) The amount of the down payment.
(c) The principal balance.
(d) The amount of the interest or discount.
(e) The balance payable by the insured.
(f) The number of installments required, the amount of each installment expressed
in dollars and the due date or period of the installments.
(g) The amount of any service charge and if the charge is refundable.
B. Notwithstanding the provisions of subsection A, paragraph 1, if a premium
finance agreement is for a renewal contract, the agreement may be signed by the insured
or by an authorized person on behalf of the insured. The superintendent may adopt rules
identifying persons authorized to sign premium finance agreements on behalf of the
insured.
C. The licensee may include additional information regarding computations made in
determining the amount to be paid by the insured.
D. The agent or broker who submits the premium finance agreement to the licensee
shall list any managing general agent to whom the submitting agent or broker is required
to pay insurance premiums for the policies listed on the premium finance agreement.
E. If a managing general agent's name and address are listed on a premium finance
agreement submitted to a licensee, the licensee shall notify the managing general agent
that a premium finance agreement has been executed no later than thirty days after the
licensee accepts the premium finance agreement.
F. If an insurer or the managing general agent of an insurer gives notice in
writing that an agent or broker is not authorized to receive premiums on behalf of the
insurer, the licensee shall pay all future monies advanced on policies purchased from the
agent or broker to the insurer or managing general agent of the insurer as directed in
the notice.
G. A licensee or an employee of a licensee shall not pay, allow or offer to pay or
allow any other person to pay valuable consideration or a rebate of any kind which
exceeds a value of ten dollars to an insurer, agent, broker or managing general agent, or
any of its employees, as an inducement to arrange the financing of an insurance policy
providing coverage for an individual, family or household purpose directly or indirectly
either before or after the issuance of the policy. Office equipment loaned for the
purpose of preparing and servicing premium finance agreements or an article of
merchandise not exceeding two dollars in value that bears the advertisement of the
licensee shall not be deemed an inducement or rebate in violation of this
subsection. This subsection does not apply to financing of policies providing coverage
for any entity involved in transactions solely for business purposes.
H. Nothing in this section shall prevent a licensee from purchasing or otherwise
acquiring a premium finance agreement which otherwise conforms to this article in all
respects if the acquisition is from another premium finance company with recourse against
the agent, broker or insurer on such terms and conditions as may be mutually agreed on.
I. No premium finance agreement shall contain any provision by which:
1. In the absence of default of the insured or insolvency of the insurer, the
licensee holding the agreement may, arbitrarily and without reasonable cause, accelerate
the maturing of any part or all of the amount owing under the premium finance agreement.
2. The insured relieves the agent or broker from liability for any legal rights or
remedies which the insured may otherwise have against the agent or broker.
J. A licensee shall comply with title I of the consumer credit protection act (15
United States Code sections 1601 through 1667) and the regulations of the act.
6-1411 Disclosure requirements
Every licensee shall make available to agents, brokers and managing general agents
disclosures as prescribed by title I of the consumer credit protection act (15 United
States Code sections 1601 through 1667) in both English and Spanish. All premium finance
agreements shall disclose in English and Spanish, in close proximity to the signature
lines, that the borrower may request the Spanish language disclosure before signing any
documents.
6-1412 Limitation on interest and other charges
A. It is unlawful for a licensee to charge, contract for, receive or collect an
interest charge other than as permitted by this article.
B. The interest is to be computed on the balance of the premiums due, after
subtracting the down payment made by the insured in accordance with the premium finance
agreement, from the effective date of the earliest insurance contract for which the
premiums are being advanced to and including the date when the final installment of the
premium finance agreement is payable.
C. On any premium finance agreement in any original principal amount not exceeding
one thousand dollars, a licensee may contract for and receive an interest charge at a
rate not exceeding three per cent per month or thirty-six per cent per annum.
D. On any premium finance agreement in which the original principal amount exceeds
one thousand dollars, a licensee may contract for and receive an interest charge at a
rate not exceeding three per cent per month on that part of the original principal amount
not exceeding one thousand dollars, and two per cent per month on that part of the
principal exceeding one thousand dollars.
E. A licensee may contract for and receive an interest charge on the entire amount
of the unpaid principal balance of the premium finance agreement at the single annual
percentage rate which would earn not more than the total amount of interest charges at
the scheduled maturity of the premium finance agreement as would the several different
rates that otherwise would be applicable under subsection D, to different portions of the
unpaid principal balance, if the premium finance agreement is paid according to the
agreed terms.
F. For the purposes of computing an interest charge, it is permissible to calculate
the interest charges on an annual basis of twelve months of thirty days each 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 insured may agree in writing.
G. If the premium finance agreement requires repayment in substantially equal and
consecutive monthly installments of principal and interest charges combined and the first
installment falls due no less than fifteen nor more than forty-five days after the
effective date of the policy, the interest charges may be precomputed at the agreed rate
on scheduled unpaid principal balances and added to the principal amount advanced under
the premium finance agreement, subject to the following requirements:
1. Any insured may prepay the obligation in full at any time. If prepayment in
full occurs by a new premium finance agreement, renewal or refinancing, or by cash, the
insured shall be refunded or credited with the precomputed charges which are applicable
to all fully unexpired months of the premium finance agreement as originally
scheduled. For this purpose the applicable interest charge is the total of those charges
which would have been made for each such unexpired month by applying scheduled payments
to unpaid balances of principal according to the actuarial method at that single annual
interest rate which would earn the original amount of precomputed interest charges on the
premium finance agreement, assuming interest charges had not been precomputed at the
contract rate but had been computed by actuarial method at that single annual interest
rate from the inception of the premium finance agreement. All computations shall be
based on the assumption that all payments are made as scheduled. The licensee may round
the annual interest rate to the nearest one-quarter of one per cent. In this paragraph,
"actuarial method" means the method of allocating each payment between interest charges
and principal pursuant to which the payment is applied first to interest 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. If the maturity of the premium finance agreement is accelerated, the contract
balance shall be reduced by the refund or credits of precomputed interest charges which
would be required for prepayment in full on the date of acceleration, and thereafter the
licensee may receive the interest charges authorized in this section computed on unpaid
balances of the premium finance agreement for the time actually outstanding from the
installment date nearest the date of acceleration until paid. The premium finance
agreement may provide that the premium finance company, with or without accelerating
maturity, may recompute the entire amount due under the premium finance agreement on a
per cent per month basis or reduce the premium finance agreement balance as of any
installment date by the refund or credit of precomputed interest charges which would be
required for prepayment in full on such installment date and receive the interest charges
authorized by this section computed on unpaid balances of the premium finance agreement
for the time actually outstanding from such installment date until the premium finance
agreement is fully paid.
6-1413 Other charges allowed
A. A licensee may contract for, and if so contracted for, may collect a service
charge for financing or arranging the financing of premiums under the agreement in an
amount not to exceed ten dollars for each premium finance agreement. The service charge
need not be refunded on cancellation, prepayment or acceleration of the agreement.
B. A premium finance agreement on a contract providing insurance coverage for an
individual, family or household purpose, may provide for the payment by the insured of a
delinquency charge of five per cent of the delinquent installment or ten dollars,
whichever is less, on any installment which is in default for a period of five days or
more.
C. A premium finance agreement on a contract providing insurance coverage for any
entity involved in transactions solely for business purposes may provide for the payment
by the insured of a delinquency charge of five per cent of the delinquent installment on
any installment which is in default for a period of five days or more.
D. If the default results in the cancellation of any insurance contract listed in
the premium finance agreement, the premium finance agreement may provide for the payment
by the insured of a cancellation charge of fifteen dollars.
E. A licensee that receives a check, draft, negotiable order of withdrawal or
similar instrument drawn on a bank or other depository institution which is offered by an
insured in full or partial payment on a premium finance agreement and the instrument is
not paid or is dishonored by the institution, may charge and collect from the insured a
bad check charge in the amount of ten dollars or the actual charge made to the premium
finance company by the depository institution for the return of the unpaid or dishonored
instrument, whichever is more.
F. A premium finance agreement may provide for payment of collection costs,
attorney fees equal to twenty per cent of the outstanding indebtedness and any other
charges which arise because of breach of the contract.
G. The charges referred to in this section shall not be considered directly or
indirectly to be interest or prepaid finance charges for entering into a premium finance
agreement.
H. A premium finance company shall not, except as otherwise provided by law,
impose, take, receive from, reserve or charge an insured greater charges than are
permitted by this article.
6-1414 Splitting of premium finance agreement prohibited
No agent or broker or premium finance company shall induce an insured to become
obligated under more than one premium finance agreement for the purpose of obtaining a
higher rate of interest than would otherwise be permitted by this chapter or obtaining
more than one service charge.
6-1415 Cancellation of insurance contract upon default
A. If a premium finance agreement contains a power of attorney enabling the
licensee to cancel any insurance contract or contracts listed in the agreement, the
insurance contract or contracts shall not be cancelled by the licensee unless the
cancellation is in accordance with this section.
B. The licensee shall mail written notice to the insured at his last known address
as shown on the records of the licensee not less than ten days in advance to notify the
insured of its intent to cancel the insurance contract unless the default is cured within
the ten day period.
C. After expiration of the ten day period, the licensee may cancel the insurance
contract or contracts by mailing a notice of cancellation to the insurer. The insurance
contract shall be cancelled as if the notice of cancellation had been submitted by the
insured himself but without requiring the return of the insurance contract. The licensee
shall also mail a notice of cancellation to the insured at his last known address as
shown on the records of the licensee. If the provisions of subsection D do not apply to
the cancellation of coverage, the effective date of cancellation under this subsection is
the date on which the licensee mails a notice of cancellation to the insurer and the
insured. The licensee shall maintain a log or any other record that documents compliance
with this section.
D. If statutory, regulatory and contractual restrictions provide that the insurance
contract may not be cancelled unless notice is given to a governmental agency, mortgagee
or other third party, the insurer shall give the prescribed notice on behalf of itself or
the insured to any governmental agency, mortgagee or other third party on or before the
fifth business day after the day it receives the notice of cancellation from the
licensee. The effective date of cancellation under this subsection shall be as stated in
the insurance policy. The insurer shall maintain a log or any other record that
documents its receipt of any notice from a licensee as provided by this section.
6-1416 Return premiums
A. Except as provided in subsection B, if a financed insurance policy is cancelled
by any party, the insurer shall return the gross unearned premiums due under the policy
directly to the premium finance company for the account of the insured as soon as
reasonably possible, but not more than twenty days after the effective date of
cancellation of a policy providing insurance coverage for an individual, family or
household purpose or not more than forty-five days after the effective date of
cancellation of a policy providing insurance coverage for any entity involved in
transactions solely for business purposes. The licensee shall maintain a list of all
insurers that fail to return gross unearned premiums due under the insurance policy
within the period specified by this subsection. The list shall include the name of the
insurer, the name of the insured, the applicable insurance policy number, the date of
cancellation of the insurance policy and the date the licensee received the gross
unearned premium due under the insurance policy.
B. If a financed insurance policy is cancelled by any party in connection with a
policy that provides insurance coverage for any entity involved in transactions solely
for business purposes in which the policy is subject to an audit to calculate the actual
premium of the policy, the insurer shall return any gross unearned premiums due under the
policy directly to the premium finance company for the account of the insured as soon as
reasonably possible, but not more than forty-five days after the effective date of
cancellation. If an audit is required to calculate the actual premium due, the insurer
shall notify the licensee not more than forty-five days after the effective date of
cancellation and specify the time to complete the audit and make the payment to the
licensee. The licensee shall maintain a list of all insurers that fail to return gross
unearned premiums due under the insurance policy within the period specified by this
subsection. The list shall include the name of the insurer, the name of the insured, the
applicable insurance policy number, the date of cancellation of the insurance policy, the
final premium determined as a result of the audit and the date the licensee received the
gross unearned premium due under the insurance policy.
C. If an insurer returns any unearned premium to a person other than the premium
finance company named in the premium finance agreement, the insurer is liable to that
premium finance company for any and all unearned premiums due as a result of the
cancellation. The insurer shall furnish to the agent or broker placing the insurance a
report setting forth an itemization of the unearned premiums under the policy.
D. If the crediting of return premiums to the account of the insured results in a
surplus over the amount due from the insured, the licensee shall refund the excess within
ten working days of receipt of the return premium by mailing to the agent or broker
placing the insurance a check for the excess made payable jointly to the insured and the
agent or broker, and shall furnish the agent or broker a report setting forth an
itemization of the unearned finance charge and other charges under the premium finance
agreement. A refund is not required when the excess due the insured is less than one
dollar.
E. On receipt of the refund check from the licensee, the agent or broker shall
return any unearned premiums to the insured either in person or by depositing the refund
in the mail within ten working days of receipt of the refund.
F. Failure to refund any surplus or return any unearned premium or to furnish any
reports required under subsection D shall not invalidate a notice of cancellation given
in accordance with this chapter.
6-1417 Servicing of premium finance agreements
A. A licensee may receive and disburse monies in the servicing of premium finance
agreements. All monies received in the process of servicing these agreements shall be
kept separate, distinct and apart from funds belonging to the licensee and shall be
deposited with a financial institution located in this state or a financial institution
in another state that maintains insurance on its deposits by the federal deposit
insurance corporation. All funds collected shall remain in the financial institution
until remitted to the person entitled to the funds.
B. The licensee shall keep a record of all monies collected and the remittance of
the monies.
6-1418 Exemption from any filing requirements
No filing is necessary to perfect the validity of the premium finance agreement as a
secured transaction as against creditors, subsequent purchasers, pledgees, encumbrancers,
trustees in bankruptcy or their successors or assigns or any other insolvency proceeding
under any law.
6-1419 Rules
The superintendent may adopt rules necessary for the proper conduct of a premium
finance company.
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