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17:9A-59. Penalty for violations
If a bank knowingly violates any provision of this article in the making or collection of an installment loan, the bank shall forfeit the entire interest which the note or other evidence of debt carries with it, or which has been agreed to be paid thereon, and the borrower, or his legal representatives, may recover back, in an action against the bank, twice the amount of interest received by the bank on such loan; provided, such action is commenced within 2 years from the date such violation occurred. The amount of any interest credit allowed pursuant to section 56 shall not be deemed to be interest received by the bank for the purposes of this section.
L.1948, c. 67, p. 239, s. 59. Amended by L.1952, c. 279, p. 950, s. 1; L.1976, c. 128, s. 7, eff. Dec. 21, 1976.
17:9A-59.1. Advance loans
A. Subject to the provisions of this act, a bank may lend money to a borrower by advancing funds to or for the account of the borrower pursuant to the borrower@s written authorizations. Such authorizations may take the form of checks drawn on the bank by the borrower, notwithstanding that the borrower has no funds, or has insufficient funds on deposit in the bank out of which such checks may be paid, may take the form of credit card agreements or they may take such other form as the bank and the borrower agree upon. Loans made pursuant to this act are referred to in this act as ~advance loans~ and persons to whom advance loans are made are referred to as ~advance loan borrowers.~ Accounting periods, referred to in this act as ~billing cycles,~ shall not vary more than four days from one month in duration and the billing date shall not vary more than four days from the billing date of the immediately preceding billing cycle. The term ~monthly~ shall refer in this act to the billing cycle and need not refer to a calendar month.
B. Nothing in this act shall apply to loans otherwise authorized by law or enforceable at law, and except for the provisions of the criminal usury law, N.J.S. 2C:21-19, the provisions of any other loan or credit law of this State with respect to limitations on interest rate, charges, costs, fees, term of loan or collateral shall not apply to loans made hereunder.
C. A borrower may at any time prepay in part or in full the amount owing on advance loans, without penalty or prepayment charge.
L. 1959, c. 91, p. 223, s. 1. Amended by L. 1968, c. 64, s. 1; L. 1981, c. 37, s. 1, eff. Feb. 12, 1981; L. 1985, c. 528, s. 9, eff. Jan. 21, 1986.
17:9A-59.2. Written contract; necessity; effective date; contents
A. No advance loan shall be made except pursuant to a written contract, referred to in this act as an ~advance loan contract,~ between the bank and a borrower or borrowers. An advance loan contract shall become effective when an agreement is signed by the advance loan borrower or when the advance loan borrower or someone authorized by the advance loan borrower effects an advance loan in the manner provided by section 1 of this act. The advance loan contract may contain such provisions, not inconsistent with this act or otherwise prohibited by law, which the bank and the borrower may agree upon, but each such contract shall state:
(a) The amount, exclusive of interest, insurance premiums and other charges, in which the borrower may be indebted to the bank at any one time upon all advance loans made pursuant to one or more advance loan contracts entered into between the bank and such borrower or borrowers;
(b) The number of days or the period, if any, after the closing date of the billing cycle within which payments are required to be made on advance loans;
(c) The amount of each payment required to be made monthly on advance loans. Such amount may be stated in terms of dollars and cents, or in any other terms consistent with the limitations imposed by section 5 of this act;
(d) The rate of interest payable on such loans;
(e) If late charges are to be made on installments in arrears, the amount of the charge which will be imposed, subject to the limitations contained in section 7; and
(f) If service charges are to be made on advance loans, the amount of the charge which will be imposed, subject to the limitation contained in section 8.
B. When an advance loan contract provides that the bank will make advance loans to a depositor for the purpose of covering overdrafts in an account maintained in the bank by the depositor, the contract shall also provide how the amount of such loans shall be determined when overdrafts occur. The advance loan contract may provide that the amount of the advance loan shall equal the amount by which the account is overdrawn, or it may provide that, when the amount of the overdraft is not in a sum equal to an even multiple of $100.00, or an even multiple of such other sum, less than $100.00, as the contract may prescribe, the amount of the loan shall equal the nearest even multiple of $100.00, or the nearest even multiple of such other sum, less than $100.00, as the contract may prescribe, which is greater than the amount of such overdraft.
C. If the bank has adopted a program pursuant to which either or both credit life insurance and credit accident and health insurance may be applied for on behalf of advance loan borrowers, and, if an advance loan borrower requests in writing that either or both such insurances be obtained, the contract shall so indicate. If the contract provides that more than one person may borrow under its provisions, the contract shall state the name of the person to be covered by such insurance. Nothing herein shall be construed as requiring that a bank undertake to make such insurance available to advance loan borrowers.
D. No advance loan contract, and no instrument executed in connection therewith, shall contain any power to confess judgment or provide that payment of the advance loan shall be accelerated because the bank deems itself insecure.
L.1959, c. 91, p. 224, s. 2. Amended by L.1968, c. 64, s. 2; L.1981, c. 37, s. 2, eff. Feb. 12, 1981.
17:9A-59.3. Authorization as evidence of loan
Each authorization made by an advance loan borrower, evidenced in any manner provided in a contract between the bank and such borrower, and honored by the bank as provided in section 1 of this act shall be evidence of a loan made by the bank to the advance loan borrower in the amount advanced by the bank. Each authorization so honored shall constitute an advance loan, and the date on which the bank honors the authorization shall be the date of the advance loan.
L.1959, c. 91, p. 224, s. 3. Amended by L.1968, c. 64, s. 3; L.1981, c. 37, s. 3, eff. Feb. 12, 1981.
17:9A-59.4. Statement to borrower; contents
A. For each billing cycle at the end of which there is an outstanding balance on any advance loan made pursuant to a particular advance loan contract, the bank shall render a statement to the borrower which shall show, with respect to all advance loans made pursuant to such contract:
(a) The aggregate balance outstanding on all advance loans at the beginning of the billing cycle;
(b) The amount and date of each advance loan made during such cycle;
(c) The amount of the payments on such loan received by the bank during such cycle;
(d) The amount of all charges made by the bank during such cycle, specifying the nature of each charge; provided that, when there is more than one charge in any category of charges, an aggregate amount may be shown for each such category;
(e) The amount upon which the interest was computed for such cycle;
(f) The aggregate balance owing on all advance loans at the end of such cycle;
(g) The amount required to be paid to keep the borrower@s account current; and
(h) The date by which or the period, if any, within which payment must be made.
Such statement shall contain a notice set in conspicuous type in form as follows: ~This statement represents an accounting between the bank and you. If there is an error in it, call it to the bank@s attention promptly in writing. Failure to do so within 3 months from the date of this statement may bar your right to have the error corrected.~ If the notice is placed on the reverse side of the statement, the face of the statement shall bear the following legend in conspicuous type: ~See the reverse side of this statement for an important notice in respect to your rights.~ or ~NOTICE: See reverse side for important information.~ ~Conspicuous type~ as used herein means type which affords notice in compliance with applicable Federal truth-in-lending statutes and regulations.
B. If, pursuant to an advance loan contract, more than one type of advance loan may be made to a borrower, separate statements may, in the bank@s discretion, be rendered by the bank to the borrower in respect to all advance loans of the same type, or a single statement may be rendered in respect to all advance loans made pursuant to such contract regardless of type. The bank may, at its option, use different billing cycles for different types of advance loans made to a borrower. For the purposes of this act, advance loans made pursuant to a particular advance loan contract shall be treated as separate types from those made pursuant to another advance loan contract.
C. If two or more persons are authorized to borrow under the same advance loan contract, the contract may designate one of such persons as the one to whom statements shall be rendered. In the absence of such a designation, statements shall be rendered to each of such persons, except that a single statement may be rendered to all such persons who have the same address.
D. The rendering of a statement by a bank to an advance loan borrower pursuant to this section shall constitute an accounting by the bank to all borrowers under the same advance loan contract. Such accounting shall, after 3 months from its rendition, be conclusively presumed to be correct, and the borrower or borrowers and all those claiming through him or them shall thereafter be barred from questioning it for any cause, unless, before the expiration of the 3-month period, a borrower, or someone claiming through him gives notice by certified mail to the bank questioning the correctness of the accounting. When such notice is given, the accounting shall, after the lapse of 1 year from the date on which such notice is given, be conclusively presumed to be correct, and the borrower or borrowers and all those claiming under him or them shall thereafter be barred from questioning it for any cause, unless, within such 1-year period, an action is begun by a borrower or someone claiming through him in which the correctness of the account may be determined.
L.1959, c. 91, p. 224, s. 4. Amended by L.1968, c. 64, s. 4; L.1981, c. 37, s. 4, eff. Feb. 12, 1981.
17:9A-59.5. Periodic payments; amount; application
A. The amount of the payment required to be made on advance loans made to a particular borrower in reduction thereof shall at least equal 1/72 nd of the aggregate amount owing at the end of a billing cycle by such borrower on each advance loan contract between bank and borrower. No monthly payment shall be in an amount less than $10.00 on each advance loan contract between bank and borrower unless the amount owing at the end of a billing cycle is less than $10.00 with respect to the particular contract, in which case the amount of the payment shall be the amount owing. Nothing in this subsection shall be construed as preventing a bank from rendering separate statements using different billing cycles as provided in subsection B of section 4 of this act.
B. Unless the contract provides otherwise, monthly payments shall be applied in the following order: (1) to interest; (2) to premiums on credit life or credit accident and health insurance, or both; (3) to late charges imposed pursuant to section 7 of this act; (4) to service charges imposed pursuant to section 8 of this act; and (5) to principal.
L.1959, c. 91, p. 224, s. 5. Amended by L.1968, c. 64, s. 5; L.1981, c. 37, s. 5, eff. Feb. 12, 1981.
17:9A-59.6. Interest rate; insurance premiums; credit cards; annual fee
A. Notwithstanding the provisions of R.S. 31:1-1 or any other law to the contrary, the rate or rates on advance loans shall be as agreed to by the bank and the borrower. Interest may be reckoned according to any method authorized by R.S. 31:1-1.
The contract may provide that the interest rate may be increased, or may be decreased, or both, from time to time; provided, however, that no increase in interest shall be effective unless: (a) at least 90 days prior to the effective date of the first such increase, or 30 days prior to the effective date of any subsequent increase, a written notice has been mailed or delivered to the borrower that clearly and conspicuously describes such change and the indebtedness to which it applies and states that the incurrence by the borrower or another person authorized by him of any further indebtedness under the plan to which the agreement relates on or after the effective date of the increase specified in the notice shall constitute acceptance of the increase and (b) either the borrower agrees in writing to the increase or the borrower or another person authorized by him incurs such further indebtedness on or after the effective date of the increase stated in the notice. The provisions of this paragraph permitting an increase in a rate of interest shall not apply in the case of an agreement which expressly prohibits changing of interest rates or which provides limitations on changing of interest rates which are more restrictive than the requirements of this paragraph. If the contract provides for the possibility of an increase or decrease, or both, in the rate, that fact shall be clearly described in plain language, in at least 8-point bold face type on the face of the contract.
B. For the purposes of this section, charges for premiums advanced by the bank for credit life insurance, or credit accident and health insurance, or both, shall be treated as part of the principal balance owing on an advance loan, but no such charge shall be included in determining the maximum permissible indebtedness as limited by section 11 of this act.
C. Notwithstanding the provisions of any other law to the contrary, a bank which issues a credit card in connection with an advance loan contract in effect between the bank and the borrower as authorized by this act may charge the borrower a fee not exceeding $15.00 per annum on an annual or monthly basis; except that, if under the advance loan contract, the bank may lend the borrower an amount of $5,000.00 or more, the bank may charge the borrower a fee not exceeding $50.00 per annum on an annual or monthly basis. The charge so made (1) may be collected in advance, (2) shall be in addition to and not in substitution of any other fee or charge authorized by this act, and (3) shall not be deemed to be an interest charge.
L.1959, c. 91, p. 224, s. 6. Amended by L.1968, c. 64, s. 6; L.1981, c. 37, s. 6, eff. Feb. 12, 1981; L.1981, c. 103, s. 4, eff. March 31, 1981; L.1984, c. 225, s. 1, eff. Dec. 26, 1984.
17:9A-59.7. Late charges
A. If any payment on an advance loan remains unpaid for a period of more than 15 days after such payment falls due pursuant to a contract between the bank and the borrower governing such loan, the bank may make and collect a late charge in such amount as may be provided for in such contract between the bank and the borrower, but no such late charge shall exceed 5% of the amount of the payment so in default, or $5.00, whichever is the lesser, and not more than one late charge shall be made on any one payment in arrears.
B. Upon institution of proceedings for the collection of an advance loan in default, a bank may charge a collection fee, in addition to court costs, according to the following schedule:
(a) on the first $750.00 of indebtedness, 15%;
(b) on the excess over $750.00, 10%, but in no case shall such collection fee exceed $500.00.
C. When there is in effect more than one advance loan contract between the bank and a particular borrower, the provisions of this section shall apply to each contract individually and not to all advance loan contracts collectively.
L.1959, c. 91, p. 225, s. 7. Amended by L.1968, c. 64, s. 7; L.1981, c. 37, s. 7, eff. Feb. 12, 1981.
17:9A-59.8. Service charges
In addition to the other charges which are authorized to be made by this act, a bank may collect a service charge from each advance loan borrower for each billing cycle in which any part of an advance loan remains unpaid. Such service charge shall not exceed a sum equal to (a) the number of advance loans to such borrower during such billing cycle multiplied by $0.25 or (b) the number of advance loan contracts between the bank and the borrower multiplied by $0.50, whichever is the greater.
L.1959, c. 91, p. 225, s. 8. Amended by L.1968, c. 64, s. 8; L.1981, c. 37, s. 8, eff. Feb. 12, 1981.
17:9A-59.10. Security
A. A bank which makes an advance loan shall not, prior to default in such loan, take any kind of security therefor except an interest in tangible personal property.
B. Nothing in this act shall be construed as prohibiting a bank from obtaining or providing credit life insurance or credit accident and health insurance, or both, for a borrower@s benefit and at the borrower@s written request.
L.1959, c. 91, p. 225, s. 10. Amended by L.1968, c. 64, s. 10; L.1981, c. 37, s. 9, eff. Feb. 12, 1981.
17:9A-59.11. Limitation upon liability to bank on advance loans
No bank shall make any advance loan for the payment of which any person shall be liable in any capacity to the bank if the making of such loan would cause the liability in any capacity of such person to the bank on all advance loans to exceed $25,000.00, exclusive of interest, insurance premiums and other charges.
L.1959, c. 91, p. 225, s. 11. Amended by L.1968, c. 64, s. 11; L.1981, c. 37, s. 10, eff. Feb. 12, 1981; L.1984, c. 225, s. 2, eff. Dec. 26, 1984.
17:9A-59.12. Violation of limitations upon liability; penalty
For a violation of section 11 of this act, the bank shall forfeit all interest on so much of the aggregate of all advance loans made to any one person as exceeds the limitations imposed by the said sections.
L.1959, c. 91, p. 226, s. 12. Amended by L.1968, c. 64, s. 12.
17:9A-59.13. Collection of excess interest rates or unlawful taking of security; penalty
If a bank knowingly collects interest on advance loans at a rate in excess of that authorized by section 6 of this act, or if a bank knowingly violates section 10 of this act, the bank shall forfeit the entire interest on such advance loans, and the borrower, or his legal representatives may recover back, in an action against the bank, twice the amount of interest paid to the bank on such loans; provided such action is commenced within 2 years from the date such excess interest was collected, or the date when security for such loan was taken, as the case may be.
L.1959, c. 91, p. 226, s. 13. Amended by L.1968, c. 64, s. 13.
17:9A-59.14. Bank defined
As used in this act, ~bank~ includes banking institutions as defined in section 1 of P.L.1948, c. 67 (C. 17:9A-1).
L.1959, c. 91, p. 226, s. 14. Amended by L.1981, c. 37, s. 12, eff. Feb. 12, 1981.
17:9A-59.15. Effective date
This act shall take effect immediately, but shall not be operative for 60 days thereafter.
L.1959, c. 91, p. 226, s. 15.
17:9A-59.16. Guarantee of payment
A bank which enters into a contract with a borrower to make advance loans pursuant to the act of which this act is amendatory and supplementary may contract with merchants to guarantee to them the payment of checks which are drawn on it by advance loan borrowers. A guarantee so made shall not be deemed to be a violation of section 213.1 of ~An Act concerning banking and banking institutions~ (Revision of 1948), approved April 29, 1948 (P.L.1948, c. 67).
L.1968, c. 64, s. 14. Amended by L.1981, c. 37, s. 11, eff. Feb. 12, 1981.
17:9A-59.17. Short title
The act of which this act is amendatory and supplementary shall be known and may be cited as ~The Advance Loan Law of 1968.~
L.1968, c. 64, s. 15.
17:9A-59.25. Definitions
As used in this act, unless the context requires otherwise,
(a) ~Concern~ means any trade, business or professional entity conducted for profit, and includes, but is not limited to, individuals, partnerships, corporations, joint ventures, associations and cooperatives;
(b) ~Bank~ means a bank as defined in section 1 of the act of which this act is a supplement and also means a national bank having its principal office in this State; ~bank~ excludes savings banks;
(c) ~Small business concern~ means a concern whose gross income from operations during its most recently completed fiscal year, as represented in writing by the concern, totaled not more than $1,000,000.00, but nothing herein shall prevent a bank from making a small business loan to a small business concern at any time during the first year of its existence, and such loan shall be enforceable by the bank according to its terms notwithstanding that it subsequently develops that the small business concern@s gross income from operations during its first fiscal year totals more than $1,000,000.00;
(d) ~Small business loan~ means a loan which is made to a small business concern pursuant to this act and the purpose of which, as represented to the bank in writing by the small business concern, is to furnish the concern with funds for use in the conduct of the concern@s trade, business or profession;
(e) ~Payment-period~ means the period of time scheduled by the terms of the note evidencing a small business loan to elapse between the days upon which installment payments are required to be made on such loan; except that, in a case where installment payments are omitted pursuant to subsection b of section 4 of this act, ~payment-period~ means the period of time scheduled to elapse between the days upon which installment payments are required to be made during that portion of the term of such loan in which no installment payment may be omitted;
(f) ~Actuarial method~ means the method of applying payments made on a loan between principal and interest pursuant to which a payment is applied first to accumulated interest on the principal amount of the loan and the remainder is applied to the unpaid principal balance of the loan in reduction thereof;
(g) ~Precomputed finance charge~ means an amount equal to the whole amount of interest payable on a small business loan for the period from the making of the loan to the date scheduled by the terms of the loan for the payment of the final installment;
(h) ~Precomputed loan~ means a small business loan which is evidenced by a note the face amount of which consists of the aggregate of the principal amount of the loan so evidenced, and the precomputed interest thereon;
(i) ~Nonprecomputed loan~ means a small business loan which is evidenced by a note the face amount of which consists solely of the principal amount of the loan so evidenced;
(j) ~Unpaid balance~ of a small business loan means the aggregate of the following:
(1) The face amount of the note evidencing such loan; and
(2) All amounts paid by the bank and added to such loan as provided in paragraph (c) of section 6 of this act; and
(3) All interest charges accrued and unpaid; and
(4) Such further charges as the bank may make pursuant to law in protecting or enforcing a security interest in any property securing the payment of such loan or otherwise; and
(5) In the case of precomputed loans, the amount of all late charges imposed pursuant to section 8 of this act;
less the aggregate of the following:
(6) All installment payments made in the case of a precomputed loan, or all payments made in reduction of principal in the case of a nonprecomputed loan; and
(7) All payments made on account of or in payment in full of any charges or amounts referred to in subparagraphs (2), (3), (4) and (5) of this paragraph (j) and
(8) In the case of a precomputed loan, the amount of the credit to which the borrower is entitled pursuant to section 11 of this act.
(k) ~Legal rate~ means a rate of interest not in excess of the rate authorized by section 3 to be paid on small business loans.
L.1964, c. 162, s. 1. Amended by L.1979, c. 319, s. 1, eff. Jan. 18, 1980.
17:9A-59.26. Authority to make small business loans; terms and conditions; reliance upon representations
A bank may make small business loans upon the terms and conditions prescribed by this act. In making loans pursuant to this act, a bank may in good faith rely upon the written representations of the small business concern, or of its accountant, in respect to (a) the purpose of such loan, and (b) the amount of its gross income from operations during its most recently completed fiscal year.
L.1964, c. 162, s. 2.
17:9A-59.27. Interest rate
(a) Notwithstanding the provisions of R.S. 31:1-1 or any other law to the contrary, a bank may contract for and receive interest on a small business loan calculated according to the actuarial method, at a rate or rates agreed on by the bank and the borrower. This subsection shall not limit or restrict the manner of contracting for the interest charge, whether by way of add-on, discount or otherwise, so long as such charge does not exceed the limitation imposed by this section. In the case of a precomputed loan, the interest charge may be computed on the assumption that all scheduled payments will be made when due, and all scheduled installment payments made on a precomputed loan may be applied as if they were received on their scheduled due dates. In the case of nonprecomputed loans, all installment payments shall be applied no later than the next day, other than a public holiday, after the date of receipt, and a day shall be counted as one three-hundred-sixty-fifth of a year.
(b) (Deleted by amendment.)
L.1964, c. 162, s. 3. Amended by L.1968, c. 36, s. 1, eff. May 9, 1968; L.1972, c. 119, s. 1, eff. Aug. 4, 1972; L.1979, c. 319, s. 2, eff. Jan. 18, 1980; L.1981, c. 103, s. 5, eff. March 31, 1981.
17:9A-59.28. Note; amount; installment payments; repayment in advance; refund
(a) Every small business loan shall be evidenced by a note which shall be dated the day of the making of such loan, and the face amount of which shall be in an amount determined pursuant to paragraph (h) or (i) of section 1, of this act as the case may require.
(b) Each such note shall provide that the amount thereof shall be payable in installments on dates separated by payment-periods of equal duration measured in terms of months. Any such note may provide for the omission of installments, including the first installment, during any period not exceeding 93 days in any one 12-month period. Except as herein otherwise provided, no note shall provide for payment-periods shorter than 1 month or longer than 3 months. No such note shall provide that the final installment shall be payable more than 7 years and 3 months from the date of such note.
(c) Effective on the first day of the twelfth month following the effective date of this act, notwithstanding the provisions of section 11 of P.L.1964, c. 162 (C. 17:9A-59.35), when the unpaid balance owing upon a precomputed loan is repaid in full or the maturity of the unpaid balance of such loan is accelerated before the date scheduled for the payment of the final installment, the bank shall allow a credit on account of the precomputed interest, calculated according to the actuarial refund method, as if all payments were made as scheduled, or if deferred, as deferred; provided, however, that if the loan is prepaid within 12 months after the first payment is due, a bank may charge a prepayment penalty of not more than (1) $20.00 on any loan greater than $2,000.00; (2) an amount equal to 1% of the loan on any loan greater than $2,000.00 and up to and including $5,000.00; and (3) $100.00 on any loan exceeding $5,000.00.
L.1964, c. 162, s. 4. Amended by L.1979, c. 319, s. 3, eff. Jan. 18, 1980; L.1981, c. 103, s. 6, eff. March 31, 1981.
17:9A-59.29. Limitation on loans
No bank shall make a small business loan in a sum in excess of $50,000.00, nor shall a bank make any such loan for the payment of which a small business concern will be liable to it in any capacity, if the amount of such loan, exclusive of the interest thereon, when added to the principal balances owing on all other small business loans made by such bank for the payment of which such small business concern is liable in any capacity, will, in the aggregate, exceed $50,000.00.
L.1964, c. 162, s. 5. Amended by L.1968, c. 36, s. 2, eff. May 9, 1968; L.1972, c. 119, s. 2, eff. Aug. 4, 1972; L.1979, c. 319, s. 4, eff. Jan. 18, 1980.
17:9A-59.30. Security for payment; costs and insurance
A bank which makes a small business loan may
(a) require one or more comakers or endorsers of the note evidencing the loan, or one or more guarantors of payment of the note;
(b) take an interest in property, real or personal, or both, to secure payment of the loan. When an interest in real property is taken as such security, it shall not be subject to any provision of article 14, sections 64 through 70, of the act of which this act is a supplement;
(c) when the payment of the loan is secured, require that the property constituting the security by insured for the benefit of the bank, against such loss or damage as the bank may require, and may retain out of the proceeds of such loan the premium for such insurance. If such insurance expires, lapses, or is canceled, and other insurance by insurers and in amounts satisfactory to the bank is not furnished to the bank without lapse of coverage, the bank may obtain insurance upon such property, and the cost thereof, less the amount of the return premium, if any, received by the bank on cancellation of prior insurance paid for by the borrower or the cost of which was retained out of the proceeds of the loan, shall be added to and become part of such loan, payable upon demand with interest at the legal rate; and, in default of such payment after such demand, the entire unpaid balance of the loan shall, at the election of the bank, become immediately due and payable;
(d) when the payment of such loan is secured, and provision is made by law for the filing or recording of the instrument of security or notice or statement thereof, require compliance with such provision and retain the cost of such recording or filing out of the proceeds of the loan;
(e) when the payment of such loan is secured, and the property constituting such security is appraised by a person not an officer, director, employee or other agent of the bank, pay the cost of such appraisal and may retain such cost out of such loan, but in no event shall the amount so retained, or the amount charged the borrower for such appraisal, exceed the amount paid by the bank for such appraisal or 1% of the sum borrowed, whichever is less;
(f) at the written request of a borrower who is an individual, obtain or provide insurance on the life of the borrower pursuant to the provisions of ~An act to provide for the regulation of credit life insurance and credit accident and health insurance, as defined, and supplementing Title 17 of the Revised Statutes~ (P.L.1958, c. 169); and the bank may deduct and retain from the proceeds of the loan an amount equal to the premium lawfully charged by the insurer issuing such insurance. If insurance is obtained or provided as herein provided, the bank shall deliver or cause to be delivered to the insured borrower at the time when the loan is made, a copy of the insurance policy, or a certificate therefor, or a copy of the application for such policy, or a notice of proposed insurance as required by law. If there is more than one person liable for the payment of any such loan, whether as borrower or otherwise, insurance may be obtained or provided as authorized herein on the life of only one such person. Nothing in any other law of this State shall prohibit a bank, or any employee of a bank, from collecting the premium or identifiable charge for life insurance obtained or provided as authorized herein, or prevent a bank from receiving or retaining any dividend or other gain or advantage resulting from such insurance. Nothing herein shall be construed as prohibiting a bank from taking an assignment of any other type of life insurance policy as security for the payment of any such loan.
L.1964, c. 162, s. 6.
17:9A-59.31. Collection fee schedule
Upon institution of proceedings for the collection of a small business loan in default, a bank may charge a collection fee, in addition to court costs, according to the following schedule:
(a) on the first $750 of indebtedness, 15%;
(b) on the excess over $750 of indebtedness, 10%, but in no case shall such collection fee exceed $500.00.
L.1964, c. 162, s. 7.
17:9A-59.32. Acceleration of maturity
(a) The note evidencing a small business loan may provide that
(1) Upon default in the payment of any installment on its due date, the entire unpaid balance owing thereon shall, at the election of the bank, become immediately due and payable;
(2) When the maturity of the unpaid balance owing on a note is accelerated as provided by this section, the bank may charge interest at the legal rate, as defined in section 1 of this act from the date such acceleration takes place upon the unpaid principal balance thereof;
(3) On any installment of a precomputed loan in arrears for more than 10 days, the bank may make a late charge which shall not exceed 5% of such installment, or $5, whichever is the lesser; provided, (A) (deleted by amendment) (B) that only one such late charge shall be made on any one installment; and (C) that no such late charge shall be made upon any installment scheduled, by the terms of such note, to fall due upon a date subsequent to the date upon which the maturity of the unpaid balance of the loan is accelerated as provided by this section;
(4) No party to such note shall be released or discharged from liability to the bank by reason of the bank@s extending the time for the payment of an installment or installments owing or due upon such note, or by reason of the bank@s waiver of any term or condition of such note, or of the instrument intended to secure payment thereof;
(5) All parties to such note shall waive presentation for payment, demand for payment, protest and notice of protest, nonpayment, dishonor, and the bank@s election to accelerate the maturity of the unpaid balance owing thereon.
(b) (Deleted by amendment.)
(c) In addition to the provisions expressly authorized by subsection (a) of this section, the note evidencing a small business loan, or the agreement pursuant to which such loan is made, may contain such provisions, not contrary to law or inconsistent with the provisions of this act, as the bank and the small business concern may agree upon, but no such note or agreement shall provide that payment of the note shall be accelerated because the bank, or other holder of the note, deems itself insecure. No bank shall take any power of attorney to confess judgment on any note evidencing a small business loan.
L.1964, c. 162, s. 8. Amended by L.1979, c. 319, s. 5, eff. Jan. 18, 1980.
17:9A-59.33. Unauthorized charges prohibited
A bank which makes a small business loan shall not make any further finance, interest or other charge in connection with such loan, other than those expressly authorized by this act.
L.1964, c. 162, s. 9.
17:9A-59.34. Use of proceeds for repayment of other loan
Nothing in this act shall prevent a bank from making a small business loan, the proceeds of which will be applied in whole or in part to the repayment at or before final maturity of a loan theretofore made under the provisions of this act or otherwise.
L.1964, c. 162, s. 10.
17:9A-59.35. Credit on precomputed interest charges; prepayment or acceleration; formula; prepayment on non-precomputed small business loan without penalty
(a) When the unpaid balance owing on a precomputed small business loan is repaid in full, or when the maturity of the unpaid balance of such loan is accelerated before the date scheduled for the payment of the final installment, the bank shall allow a credit on account of the precomputed interest charge made on such loan, the amount of which shall not be less than the amount determined by the application of the formula C = AN / D ( ~the rule of 78@s~ ) in which ~C~ represents the amount of the credit to be given; ~A~ represents the amount of the precomputed interest charge; and ~D~ is determined by ascribing to each month included in the period for which the precomputed interest charge was computed, reckoning from the day upon which the loan was made, the cardinal number descriptive of the number of months scheduled, by the terms of the loan, to elapse from the beginning of each such month, to the date to which the precomputed interest charge was computed, and the total of all the cardinal numbers so ascribed constitutes the quantity ~D~ ; and ~N~ represents the difference between the quantity ~D~ and the total of all the cardinal numbers ascribed to the months which have elapsed, in whole or in part, from the making of the loan, to the day upon which such repayment is made, or to the day upon which the maturity of the unpaid balance of such loan is accelerated, as the case may be.
(b) The Commissioner of Banking may prepare and distribute to such banks as shall make a request therefor, a schedule or schedules based upon the formula stated in subsection (a) of this section, and credits allowed as provided in such schedule shall constitute a complete compliance with such subsection. A copy of such schedule, duly certified by the commissioner, shall be evidence in all courts and places.
(c) This section shall not apply where the amount of the credit to be allowed is less than $5.00.
(d) The unpaid balance owing on a nonprecomputed small business loan may be repaid in full at any time without penalty.
L.1964, c. 162, s. 11. Amended by L.1979, c. 319, s. 6, eff. Jan. 18, 1980.
17:9A-59.36. Statement that loan was made pursuant to small business loan act required
Every note evidencing a small business loan shall contain a statement that such loan was made pursuant to this act. If this act or any section hereof shall be amended, no reference to such amendment need be made in such statement.
L.1964, c. 162, s. 12.
17:9A-59.37. Violation; penalty; civil action
If a bank knowingly violates any provision of this act in the making or collection of a small business loan, the bank shall forfeit the entire finance charge made on such loan, and the borrower, or his legal representatives, successors or assigns, may recover back, in an action against the bank, twice the amount of the finance charge made by the bank on such loan; provided, such action is commenced within 2 years from the date such violation occurred. The amount of any credit allowed pursuant to section 11 of this act shall be credited against the finance charge made on such loan for the purposes of this section.
L.1964, c. 162, s. 13.
17:9A-59.38. Application of act
Nothing in this act applies to any loan or extension of credit which a bank may make pursuant to any other law of this State or any regulation promulgated pursuant to such law, nor does this act apply to any loan or extension of credit otherwise authorized or not prohibited by law, or otherwise enforceable at law.
L.1964, c. 162, s. 14. Amended by L.1979, c. 319, s. 7, eff. Jan. 18, 1980.
17:9A-59.39. Short title
This act shall be known and may be cited as the ~Small Business Loan Act.~
L.1964, c. 162, s. 15.
17:9A-59.40. Loan to depositor in amount of and guaranteed by deposit
Notwithstanding any other provision of law, a banking institution may contract with a depositor for the loan of money in an amount not to exceed such depositor@s deposit and secured by a pledge of such deposit, upon such terms and conditions as may be mutually agreed upon between the banking institution and such depositor; provided, however, that the rate of interest charged with respect to any such loan shall not exceed the maximum permitted under the provisions of R.S. 31:1-1 or 2% in excess of the interest rate then paid with respect to the deposit which secures such loan whichever is greater.
L.1977, c. 64, s. 1, eff. April 18, 1977.
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