ENROLLED
COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 366
(Senators Manchin, Helmick, Blatnik, Chafin, Craigo, Dittmar,
Sharpe, Wagner, Wiedebusch, Wooton, Kimble, Scott and Yoder,
original sponsors)
____________
[Passed March 9, 1996; in effect ninety days from passage.]
____________
AN ACT to repeal article seven, chapter thirty-one of the code of
West Virginia, one thousand nine hundred thirty-one, as
amended; to amend and reenact sections five and six, article
one, chapter thirty-one-a of said code; to amend and reenact
sections five and eight, article two of said chapter; to amend
and reenact section twenty-two, article four of said chapter;
to amend and reenact section two, article seven of said
chapter; to amend and reenact section twelve-a, article eight
of said chapter; to amend and reenact sections one hundred two
and one hundred three, article one, chapter forty-six-a of
said code; to amend and reenact sections one hundred four and one hundred eleven, article three of said chapter; to amend
and reenact sections one hundred one, one hundred two, one
hundred three, one hundred four, one hundred five, one hundred
seven, one hundred eight, one hundred nine, one hundred ten,
one hundred eleven, one hundred twelve and one hundred
thirteen, article four of said chapter; to further amend said
article by adding thereto a new section, designated section
one hundred ten-a; to amend and reenact sections one hundred
one and one hundred three, article five of said chapter; to
amend and reenact sections one hundred three and one hundred
fifteen, article seven of said chapter; to amend and reenact
section one hundred one, article eight of said chapter; and to
amend and reenact section five-d, article six, chapter forty-
seven of said code, all relating to the supervision and
regulation of banking institutions; eliminating separate
licensing requirements for supervised lenders and industrial
loan companies; creating a license requirement for regulated
consumer lenders; defining and redefining terms; making
certain technical revisions consistent with new terminology;
removing obsolete and conflicting language; establishing the
annual assessment for regulated consumer lenders; establishing
limitations on finance charges; requiring the rebate of portion of unearned prepaid finance charges; requiring the
registration and licensing of consumer lending offices other
than mortgage loan companies operating in West Virginia;
setting forth licensure requirements for regulated consumer
lenders and establishing a fee therefor; when license may be
revoked, suspended or forfeited; licensee to maintain records
and file annual report with commissioner; providing for the
examination by the commissioner of loans, business and records
of every licensee at least every eighteen months; limiting
authorized finance charges for regulated consumer lenders;
setting forth restrictions on security interests; permissible
conduct other than making loans; prohibiting certain conduct;
substantial benefit required when refinancing at higher rate;
exceptions; providing for the continuation of and for the
combination of certain licenses; setting forth civil and
criminal liability; establishing civil and criminal penalties;
providing for the division of administrative powers to enforce
consumer credit and protection laws; notification to state tax
commissioner; establishing operative date of legislative
enactment; authorizing certain deductions upon rebate of
unearned finance charges; and clarifying definition of "loan
or credit investigation fees".
Be it enacted by the Legislature of West Virginia:
That article seven, chapter thirty-one of the code of West
Virginia, one thousand nine hundred thirty-one, as amended, be
repealed; that sections five and six, article one, chapter thirty-
one-a of said code be amended and reenacted; that sections five and
eight, article two of said chapter be amended and reenacted; that
section twenty-two, article four of said chapter be amended and
reenacted; that section two, article seven of said chapter be
amended and reenacted; that section twelve-a, article eight of said
chapter be amended and reenacted; that sections one hundred two and
one hundred three, article one, chapter forty-six-a of said code be
amended and reenacted; that sections one hundred four and one
hundred eleven, article three of said chapter be amended and
reenacted; that sections one hundred one, one hundred two, one
hundred three, one hundred four, one hundred five, one hundred
seven, one hundred eight, one hundred nine, one hundred ten, one
hundred eleven, one hundred twelve and one hundred thirteen,
article four of said chapter be amended and reenacted; that said
article be further amended by adding thereto a new section,
designated section one hundred ten-a; that sections one hundred one
and one hundred three, article five of said chapter be amended and
reenacted; that sections one hundred three and one hundred fifteen, article seven of said chapter be amended and reenacted; that
section one hundred one, article eight of said chapter be amended
and reenacted; and that section five-d, article six, chapter forty-
seven of said code be amended and reenacted, all to read as
follows:
CHAPTER 31A. BANKS AND BANKING.
ARTICLE 1. GENERAL PROVISIONS AND DEFINITIONS.
§31A-1-5. Lending and investing powers and authority of
fiduciaries, financial institutions, governmental entities and
other persons.
The state of West Virginia, counties, municipalities,
political subdivisions and agencies and instrumentalities of any of
them, fiduciaries, building and loan associations, regulated
consumer lenders, insurance companies, fraternal benefit societies
and other persons lawfully engaging in the lending and investing
business and services shall have and are hereby authorized and
empowered to exercise the same lawful rights and privileges as are
banking institutions under provisions of sections twenty-seven,
twenty-eight and twenty-nine, article four of this chapter.
§31A-1-6. Deposit insurance required for banking and other
depository institutions.
All credit unions established pursuant to article ten, chapter
thirty-one of this code and all banking institutions governed by the provisions of this chapter shall qualify for and obtain federal
deposit insurance, or shall obtain insurance as approved by the
commissioner of banking in an amount equal to that provided by the
federal deposit insurance corporation for eligible institutions.
Each such institution which fails to obtain deposit insurance
as required herein by the first day of July, one thousand nine
hundred seventy-eight, shall be prohibited from conducting any
business as a lending institution until such insurance is obtained,
except that the commissioner may grant continuances for compliance
with this section for any institution showing good cause for such
a continuance.
ARTICLE 2. DIVISION OF BANKING.
§31A-2-5. Certificate or license to engage in business; filing of
amendments to charter, bylaws and foreign statutes.
(a) No person shall engage or continue in the business of a
financial institution in this state without a license or
certificate to do so issued in accordance with this section, or
other applicable law, which license or certificate remains
unsuspended, unexpired and unrevoked except that a corporation
which proposes to apply for such license or certificate may secure
its charter, adopt bylaws, elect its directors and officers and
perfect its organization.
(b) No person shall operate an office in West Virginia which
regularly makes consumer loans in this state other than first
mortgage loans unless they are a financial institution, licensed
pawnbroker or a federally insured depository institution authorized
and qualified to do business in this state. The purchase of
consumer paper does not constitute the making of consumer loans for
the purposes of this subsection, unless the purchase is made by a
business affiliated with the credit provider pursuant to a standing
arrangement.
(c) Application for such license or certificate shall be upon
such forms and contain such information as the commissioner may
prescribe. In connection with such applications every corporate
financial institution shall file a certified copy of its charter
and bylaws, a statement as to the amount of capital that has been
subscribed and paid in and a statement of its financial condition
duly verified under oath by its president or vice president and its
cashier or secretary as the case may be and every financial
institution other than a corporation shall file a verified
statement of its financial condition.
(d) If the application be that of a West Virginia state
banking institution, the commissioner of banking shall examine the
information, documents and statements submitted and, if he finds that such banking institution has adopted bylaws which provide
practical, safe, just and equitable rules and methods for the
management of its business and it has complied in all respects with
the provisions of this chapter and other applicable laws, he shall
issue to it a certificate or license permitting it to engage in
business. If the application be that of a financial institution
other than a banking institution, the commissioner of banking shall
examine the information, documents and statements submitted, and,
if he finds that such financial institution has adequate resources
for the proposed business and has provided practical, safe, just
and equitable rules and methods for the management of its business,
and it has complied in all respects with the provisions of this
chapter and other applicable laws, and that the public convenience
and advantage will be promoted by the issuance of a certificate or
license thereto, he shall issue to it a certificate or license
permitting it to engage in business. Such certificate or license
shall be preserved and the original or copy thereof displayed in
all the places of business of such banking or other financial
institution located in this state.
(e) In addition to the requirements of subsections (b) and (c)
of this section, every foreign corporation applying for a license
or certificate to engage in the business of a financial institution in this state, other than an out-of-state banking institution,
shall file with the commissioner of banking a copy of the bylaws
under which it operates, together with a cite to the statutes of
the jurisdiction where it is organized which pertain to its
organization and powers and the conduct of its business. The
commissioner shall examine the information, documents and
statements submitted by such foreign corporation and if he finds
that they provide practical, safe, just and equitable rules and
methods for the management of the business of the corporation, that
it has adequate resources for the proposed business and it has
complied in all respects with the provisions of this chapter and
other applicable laws, and that the public convenience and
advantage will be promoted by the issuance of a license or
certificate thereto, he shall issue to such corporation a
certificate or license permitting it to engage in business in this
state, which certificate or license shall authorize such
corporation to engage in the business of the type of financial
institution specified therein, until the thirtieth day of the
following June. Thereafter a new certificate or license shall be
secured annually by any such foreign corporation, except where
annual renewal of the license or certificate is specifically not
required for the type of institution involved. The fee for the original and each additional license or certificate issued to a
foreign corporation shall be one hundred dollars, unless otherwise
provided by statute. A verified statement of the financial
condition of every such foreign corporation shall be filed with the
commissioner before the issuance of each annual certificate or
license. Such certificate or license shall be preserved and the
original or copy thereof displayed in the West Virginia place of
business of such corporation.
(f) Unless the institution is a federally insured depository
institution or it is otherwise provided for by statute, a new
certificate or license shall be secured annually by all domestic
state financial institutions, and the fee for the original and each
additional license or certificate shall be one hundred dollars.
(g) No amendment of the charter or bylaws of any domestic or
foreign corporation, other than an out-of-state banking
institution, engaging in business in this state as a financial
institution shall become effective until the proposed change shall
have been submitted to and approved by the commissioner of banking;
but, if the commissioner does not disapprove such proposed change
within twenty days after it is received by him, it shall be deemed
to have been approved.
(h) Unless specifically provided for by this chapter, nothing contained in this code shall authorize any person to engage in the
banking business in this state except corporations chartered to
conduct a banking business under the laws of West Virginia and
which hold a license or certificate to do so issued under this
section or associations authorized to conduct a banking business in
West Virginia under the laws of the United States and having their
principal place of business in this state.
§31A-2-8. Commissioner's assessments and examination fund;
assessments, costs and expenses of examinations; collection.
(a) All moneys collected by the commissioner from financial
institutions and bank holding companies for assessments,
examination fees, investigation fees or other necessary expenses
incurred by the commissioner in administering such duties shall be
paid to the commissioner and paid by the commissioner to the
treasurer of the state to the credit of a special revenue account
to be known as the "Commissioner's Assessment and Examination Fund"
which is hereby established. The assessments and fees paid into
this account shall be appropriated by law and used to pay the costs
and expenses of the division of banking and all incidental costs
and expenses necessary for its operations. At the end of each
fiscal year, if the fund contains a sum of money in excess of
twenty percent of the appropriated budget of the division of banking, the amount of the excess shall be transferred to the
general revenue fund of the state. The Legislature may appropriate
money to start the special revenue account.
(b) The commissioner of banking shall charge and collect from
each state banking institution or other financial institution or
bank holding company and pay into a special revenue account in the
state treasury for the division of banking assessments as follows:
(1) For each state banking institution, a semiannual
assessment payable on the first day of January and the first day of
July, each year, computed upon the total assets of the banking
institution shown on the report of condition of the banking
institution filed as of the preceding thirtieth day of June and the
thirty-first day of December, respectively, as follows:
Total Assets
But NotOf Excess
OverOverThisOver
MillionMillionAmountPlusMillion
$0$2$0.0016450200
2203,290.0002056282
201006,991.00016450220
10020020,151.000106926100
2001,00030,844.000090476200
1,0002,000103,225.0000740261,000
2,0006,000177,251.0000658012,000
6,00020,000440,454.0000559886,000
20,00040,0001,224,292.00005267020,000
(2) For each regulated consumer lender an annual assessment
payable on the first day of July, each year, computed upon the
total outstanding gross loan balances and installment sales
contract balances net of unearned interest of the regulated
consumer lender shown on the report of condition of the regulated
consumer lender as of the preceding thirty-first day of December,
respectively, as follows:
Total Outstanding Balances
But NotThisOf Excess
OverOverAmountPlusOver
$0$1,000,000800 - -
1,000,0005,000,000800.0004001,000,000
5,000,00010,000,0002,400.0002005,000,000
10,000,000 - 4,200.00010010,000,000
If a regulated consumer lender's records or documents are
maintained in more than one location in this state, then eight
hundred dollars may be added to the assessment for each additional
location.
(3) For each credit union, an annual assessment as provided
for in section six, article ten, chapter thirty-one of this code as
follows:
Total Assets
But NotThisOf Excess
OverOverAmountPlusOver
$0$100,000100--
100,000500,000300--
500,0001,000,000500--
1,000,0005,000,000500.0004001,000,000
5,000,00010,000,0002,100.0002005,000,000
10,000,000-3,100.00010010,000,000
(4) For each bank holding company, an annual assessment as
provided for in section five, article eight-a of this chapter. The
annual assessment shall not exceed ten dollars per million dollars
in deposits rounded off to the nearest million dollars.
(c) The commissioner shall each December and each June prepare
and send to each state banking institution a statement of the
amount of the assessment due. The commissioner shall, further,
each June, prepare and send to each regulated consumer lender and
each state credit union a statement of the amount of the assessment due. The commissioner shall, annually, during the month of
January, prepare and send to each bank holding company a statement
of the amount of the assessment due.
Assessments shall be prescribed annually, not later than the
fifteenth day of June, by written order of the commissioner, but
shall not exceed the maximums as set forth in subsection (b) of
this section. In setting the assessments the primary consideration
shall be the amount appropriated by the Legislature for the
division of banking for the corresponding annual period.
Reasonable notice of the assessments shall be made to all
interested parties. All orders of the commissioner for the purpose
of setting assessments are not subject to the provisions of the
West Virginia administrative procedures act, under chapter
twenty-nine-a of this code.
(d) For making an examination within the state of any other
financial institution for which assessments are not provided by
this code, the commissioner of banking shall charge and collect
from such other financial institution and pay into the special
revenue account for the division of banking the actual and
necessary costs and expenses incurred in connection therewith, as
fixed and determined by the commissioner.
(e) If the records of an institution are located outside this state, the institution at its option shall make them available to
the commissioner at a convenient location within the state, or pay
the reasonable and necessary expenses for the commissioner or his
or her representatives to examine them at the place where they are
maintained. The commissioner may designate representatives,
including comparable officials of the state in which the records
are located, to inspect them on his or her behalf.
(f) The commissioner of banking may maintain an action for the
recovery of all assessments, costs and expenses in any court of
competent jurisdiction.
ARTICLE 4. BANKING INSTITUTIONS AND SERVICES GENERALLY.
§31A-4-22. Reserves required of banking institutions; reports;
penalties.
Each state banking institution shall at all times maintain on
hand as a reserve in lawful money of the United States of America
an amount equal to at least seven percent of the aggregate of all
of its deposits which are subject to withdrawal on demand and three
percent of its time deposits. Whenever the commissioner of banking
shall determine that the maintenance of sound banking practices or
the prevention of injurious credit expansion or contraction makes
such action advisable, he may by rule from time to time change such
requirements as to reserves against demand or time deposits, or both, but the reserves so prescribed shall in no event be less than
those specified in this section nor more than twice those
specified. Whenever such reserve shall fall below that required,
the institution shall not thereafter make any new loan or
investment until the required reserve shall be restored. For the
purpose of computing such reserve, all deposits requiring notice of
thirty days or more for withdrawal and time certificates of deposit
and Christmas savings shall be deemed time deposits, and all
checking accounts, certified checks, cashier's checks, demand
certificates of deposit and balances due other banks shall be
deemed demand deposits. But in lieu of lawful money on hand, four
fifths of such reserve may consist of balances payable on demand
from any national or state bank doing business in this state or
solvent banking institutions in other states. The reserve balances
required herein shall be computed on the basis of average daily net
deposit balances and average daily currency and coin during
biweekly periods. The required reserve balance of each bank shall
be computed at the close of business each day based upon its net
deposit balances and currency and coin at the opening of business
on the same day. The biweekly period shall end at the close of
business on days to be fixed by the commissioner in his promulgated
rules. When, however, the reserve computation period ends with a nonbusiness day, or two or more consecutive nonbusiness days, such
nonbusiness day or days may, at the option of the banking
institution, and whether or not it had a deficiency in reserve
balances in such computation period, be included in the next
biweekly computation period.
The commissioner shall, by rule and regulation, require
regular reports from such banking institutions, which reports shall
be submitted at such times and contain such information as will
enable the commissioner to adequately supervise the maintenance of
reserves under this section. Penalties for any deficiencies in the
required reserves of any banking institution shall be assessed
monthly by the commissioner on the basis of average daily
deficiencies during each of the computation periods ending in the
preceding calendar month. Such penalties shall be assessed at a
rate of two percent per annum above the lowest rate applicable to
borrowings by member banks from the federal reserve bank of the
district in which such deficient institution is located on the
first day of the calendar month in which the deficiencies occurred.
Such penalties shall be paid by the commissioner into the treasury
of the state of West Virginia and credited to the general fund.
Compliance on the part of any banking institution with the
reserve requirements of the federal reserve act, as amended prior to the thirty-first day of January, one thousand nine hundred
eighty-one, shall be considered full compliance with the provisions
of this section. No such bank may be required to carry or maintain
a reserve other than such as required under terms of the federal
reserve act, as amended prior to the thirty-first day of January,
one thousand nine hundred eighty-one.
ARTICLE 7. REGULATION OF FAILING FINANCIAL INSTITUTIONS.
§31A-7-2. Definitions.
As used in this article:
(a) "Commissioner" means the commissioner of banking of West
Virginia and any authorized deputy or employee thereof;
(b) "Federal law" means all the provisions of Title XII of the
United States Code and all rules and regulations promulgated
pursuant thereto;
(c) "Financial institution" means any bank, building and loan
association, industrial bank, regulated consumer lender, credit
union and any other person, firm or corporation doing business
under the jurisdiction and supervision of the commissioner of
banking of West Virginia;
(d) A financial institution is "about to be insolvent" when it
would be unable to meet the demands of its depositors or to make
adequate provision for the timely payment of its depositors if it were immediately closed for the purpose of liquidation;
(e) A financial institution is "insolvent" when it is unable
to pay its debts to its depositors and other creditors in the
ordinary and usual course of business or when it is in a state of
balance sheet insolvency; and
(f) "Balance sheet insolvency" exists when the assets of a
financial institution are less than its liabilities, exclusive of
capital. For the purposes of ascertaining balance sheet
insolvency, assets shall be valued at their book value, unless the
commissioner of banking determines that the assets are insufficient
to meet liabilities within a reasonable time making probable the
liquidation of assets; and if any such determination is made, the
assets shall be valued at fair market value.
ARTICLE 8. HEARINGS; ADMINISTRATIVE PROCEDURES; JUDICIAL REVIEW;
UNLAWFUL ACTS; PENALTIES.
§31A-8-12a. Banking from mobile units prohibited; prohibition not
to include messenger services; limitation of messenger
services.
It is illegal for any banking institution, building and loan
association, or regulated consumer lender to conduct its business
in a facility that is a mobile unit not permanently attached to the
real estate upon which it is located, except that such mobile units may be used as temporary banking quarters pending construction of
a permanent bank building on the same or adjacent property thereto
if a charter for said bank has previously been approved. This
section shall not be construed or interpreted to prohibit a
financial institution from providing messenger services to its
customers by which items are received by mail, armored car service
or other courier or delivery service for subsequent deposit:
Provided, That all such messenger services are confined to the
territorial boundaries of the county in which the principal office
of such financial institution is located or within twenty-five
miles of the principal office of such financial institution.
CHAPTER 46A. WEST VIRGINIA CONSUMER CREDIT AND PROTECTION ACT.
ARTICLE 1. SHORT TITLE, DEFINITIONS AND GENERAL PROVISIONS.
§46A-1-102. General definitions.
In addition to definitions appearing in subsequent articles,
in this chapter:
(1) "Actuarial method" means the method, defined by rules
adopted by the commissioner, of allocating payments made on a debt
between principal or amount financed and loan finance charge or
sales finance charge pursuant to which a payment is applied first
to the accumulated loan finance charge or sales finance charge and
the balance is applied to the unpaid principal or unpaid amount financed.
(2) "Agreement" means the bargain of the parties in fact as
found in their language or by implication from other circumstances
including course of dealing or usage of trade or course of
performance. A "consumer credit agreement" is an agreement where
credit is granted.
(3) "Agricultural purpose" means a purpose related to the
production, harvest, exhibition, marketing, transportation,
processing or manufacture of agricultural products by a natural
person who cultivates, plants, propagates or nurtures the
agricultural products. "Agricultural products" includes
agricultural, horticultural, viticultural and dairy products,
livestock, wildlife, poultry, bees, forest products, fish and
shellfish, and any products thereof, including processed and
manufactured products, and any and all products raised or produced
on farms and any processed or manufactured products thereof.
(4) "Amount financed" means the total of the following items
to the extent that payment is deferred:
(a) The cash price of the goods, services or interest in land,
less the amount of any down payment whether made in cash or in
property traded in;
(b) The amount actually paid or to be paid by the seller pursuant to an agreement with the buyer to discharge a security
interest in or a lien on property traded in; and
(c) If not included in the cash price:
(i) Any applicable sales, use, privilege, excise or
documentary stamp taxes;
(ii) Amounts actually paid or to be paid by the seller for
registration, certificate of title or license fees; and
(iii) Additional charges permitted by this chapter.
(5) "Average daily balance" in a billing cycle for which a
sales finance charge or loan finance charge is made is the sum of
the amount unpaid each day during that cycle divided by the number
of days in that cycle. The amount unpaid on a day is determined by
adding to the balance, if any, unpaid as of the beginning of that
day all purchases and other debits and deducting all payments and
other credits made or received as of that day.
(6) The "cash price" of goods, services or an interest in land
means the price at which the goods, services or interest in land
are offered for sale by the seller to cash buyers in the ordinary
course of business, and may include: (a) Applicable sales, use,
privilege, and excise and documentary stamp taxes; (b) the cash
price of accessories or related services such as delivery,
installation, servicing, repairs, alterations and improvements; and (c) amounts actually paid or to be paid by the seller for
registration, certificate of title or license fees.
(7) "Closing costs" with respect to a debt secured by an
interest in land include:
(a) Fees or premiums for title examination, title insurance or
similar purposes including surveys;
(b) Fees for preparation of a deed, deed of trust, mortgage,
settlement statement or other documents;
(c) Escrows for future payments of taxes and insurance;
(d) Official fees and fees for notarizing deeds and other
documents;
(e) Appraisal fees; and
(f) Credit reports.
(8) "Code" means the official code of West Virginia, one
thousand nine hundred thirty-one, as amended.
(9) "Commercial facsimile transmission" means the electronic
or telephonic transmission in the state to a facsimile device to
encourage a person to purchase goods, realty or services.
(10) "Commissioner" means the commissioner of banking of West
Virginia.
(11) "Conspicuous": A term or clause is conspicuous when it
is so written that a reasonable person against whom it is to operate ought to have noticed it. Whether a term or clause is
conspicuous or not is for decision by the court.
(12) "Consumer" means a natural person who incurs debt
pursuant to a consumer credit sale or a consumer loan, or debt or
other obligations pursuant to a consumer lease.
(13) (a) Except as provided in paragraph (b), "consumer credit
sale" is a sale of goods, services or an interest in land in which:
(i) Credit is granted either by a seller who regularly engages
as a seller in credit transactions of the same kind or pursuant to
a seller credit card;
(ii) The buyer is a person other than an organization;
(iii) The goods, services or interest in land are purchased
primarily for a personal, family, household or agricultural
purpose;
(iv) Either the debt is payable in installments or a sales
finance charge is made; and
(v) With respect to a sale of goods or services, the amount
financed does not exceed forty-five thousand dollars or the sale is
of a factory-built home as defined in section two, article fifteen,
chapter thirty-seven of this code.
(b) "Consumer credit sale" does not include a sale in which
the seller allows the buyer to purchase goods or services pursuant to a lender credit card or similar arrangement.
(14) (a) "Consumer lease" means a lease of goods:
(i) Which a lessor regularly engaged in the business of
leasing makes to a person, other than an organization, who takes
under the lease primarily for a personal, family, household or
agricultural purpose;
(ii) In which the total of payments under the lease, excluding
payments for options to renew or buy, do not exceed forty-five
thousand dollars or in which the lease is of a factory-built home
as defined in section two, article fifteen, chapter thirty-seven of
this code; and
(iii) Which is for a term exceeding four months.
(b) "Consumer lease" does not include a lease made pursuant to
a lender credit card or similar arrangement.
(15) "Consumer loan" is a loan made by a person regularly
engaged in the business of making loans in which:
(a) The debtor is a person other than an organization;
(b) The debt is incurred primarily for a personal, family,
household or agricultural purpose;
(c) Either the debt is payable in installments or a loan
finance charge is made; and
(d) Either the principal does not exceed forty-five thousand dollars or the debt is secured by an interest in land or a factory-
built home as defined in section two, article fifteen, chapter
thirty-seven of this code.
(16) "Cosigner" means a natural person who assumes liability
for the obligation on a consumer credit sale or consumer loan
without receiving goods, services or money in return for the
obligation or, in the case of a revolving charge account or
revolving loan account of a consumer, without receiving the
contractual right to obtain extensions of credit under the account.
The term cosigner includes any person whose signature is requested
as a condition to granting credit to a consumer or as a condition
for forbearance on collection of a consumer's obligation that is in
default. The term cosigner does not include a spouse whose
signature is required to
perfect a security interest. A person who
meets the definition in this paragraph is a "cosigner" whether or
not the person is designated as such on the credit obligation.
(17) "Credit" means the privilege granted by a creditor to a
debtor to defer payment of debt or to incur debt and defer its
payment.
(18) "Earnings" means compensation paid or payable to an
individual or for his account for personal services rendered or to
be rendered by him, whether denominated as wages, salary, commission, bonus or otherwise, and includes periodic payments
pursuant to a pension, retirement or disability program.
(19) "Facsimile device" means a machine that receives and
copies reproductions or facsimiles of documents or photographs that
have been transmitted electronically or telephonically over
telecommunications lines.
(20) "Federal Consumer Credit Protection Act" means the
"Consumer Credit Protection Act" (Public Law 90-321; 82 Stat. 146),
as amended, and includes regulations issued pursuant to that act.
(21) "Goods" includes goods not in existence at the time the
transaction is entered into and gift and merchandise certificates,
but excludes money, chattel paper, documents of title and
instruments.
(22) "Home solicitation sale" means a consumer credit sale in
excess of twenty-five dollars in which the buyer receives a
solicitation of the sale at a place other than the seller's
business establishment at a fixed location and the buyer's
agreement or offer to purchase is there given to the seller or a
person acting for the seller. The term does not include a sale
made pursuant to a preexisting open-end credit account with the
seller in existence for at least three months prior to the
transaction, a sale made pursuant to prior negotiations between the parties at the seller's business establishment at a fixed location,
a sale of motor vehicles, mobile homes or farm equipment or a sale
which may be rescinded under the federal Truth in Lending Act
(being Title I of the federal Consumer Credit Protection Act). A
sale which would be a home solicitation sale if credit were
extended by the seller is a home solicitation sale although the
goods or services are paid for, in whole or in part, by a consumer
loan in which the creditor is subject to claims and defenses
arising from the sale.
(23) Except as otherwise provided, "lender" includes an
assignee of the lender's right to payment but use of the term does
not in itself impose on an assignee any obligation of the lender.
(24) "Lender credit card or similar arrangement" means an
arrangement or loan agreement, other than a seller credit card,
pursuant to which a lender gives a debtor the privilege of using a
credit card, letter of credit or other credit confirmation or
identification in transactions out of which debt arises:
(a) By the lender's honoring a draft or similar order for the
payment of money drawn or accepted by the consumer;
(b) By the lender's payment or agreement to pay the consumer's
obligations; or
(c) By the lender's purchase from the obligee of the consumer's obligations.
(25) "Loan" includes:
(a) The creation of debt by the lender's payment of or
agreement to pay money to the consumer or to a third party for the
account of the consumer other than debts created pursuant to a
seller credit card;
(b) The creation of debt by a credit to an account with the
lender upon which the consumer is entitled to draw immediately;
(c) The creation of debt pursuant to a lender credit card or
similar arrangement; and
(d) The forbearance of debt arising from a loan.
(26) (a) "Loan finance charge" means the sum of: (i) All
charges payable directly or indirectly by the debtor and imposed
directly or indirectly by the lender as an incident to the
extension of credit, including any of the following types of
charges which are applicable: Interest or any amount payable under
a point, discount or other system of charges, however denominated,
premium or other charge for any guarantee or insurance protecting
the lender against the consumer's default or other credit loss; and
(ii) charges incurred for investigating the collateral or credit
worthiness of the consumer or for commissions or brokerage for
obtaining the credit, irrespective of the person to whom the charges are paid or payable, unless the lender had no notice of the
charges when the loan was made. The term does not include charges
as a result of default, additional charges, delinquency charges or
deferral charges.
(b) If a lender makes a loan to a consumer by purchasing or
satisfying obligations of the consumer pursuant to a lender credit
card or similar arrangement, and the purchase or satisfaction is
made at less than the face amount of the obligation, the discount
is not part of the loan finance charge.
(27) "Merchandise certificate" or "gift certificate" means a
writing issued by a seller or issuer of a seller credit card, not
redeemable in cash and usable in its face amount in lieu of cash in
exchange for goods or services.
(28) "Official fees" means:
(a) Fees and charges prescribed by law which actually are or
will be paid to public officials for determining the existence of
or for perfecting, releasing, terminating or satisfying a security
interest related to a consumer credit sale or consumer loan; or
(b) Premiums payable for insurance or fees escrowed in a
special account for the purpose of funding self-insurance or its
equivalent in lieu of perfecting a security interest otherwise
required by the creditor in connection with the sale, lease or loan, if such premium or fee does not exceed the fees and charges
described in paragraph (a) of this subdivision which would
otherwise be payable.
(29) "Organization" means a corporation, government or
governmental subdivision or agency, trust, estate, partnership,
cooperative or association.
(30) "Payable in installments" means that payment is required
or permitted by agreement to be made in: (a) Two or more periodic
payments, excluding a down payment, with respect to a debt arising
from a consumer credit sale pursuant to which a sales finance
charge is made; (b) four or more periodic payments, excluding a
down payment, with respect to a debt arising from a consumer credit
sale pursuant to which no sales finance charge is made; or (c) two
or more periodic payments with respect to a debt arising from a
consumer loan. If any periodic payment other than the down payment
under an agreement requiring or permitting two or more periodic
payments is more than twice the amount of any other periodic
payment, excluding the down payment, the consumer credit sale or
consumer loan is "payable in installments".
(31) "Person" or "party" includes a natural person or an
individual, and an organization.
(32) "Person related to" with respect to an individual means: (a) The spouse of the individual; (b) a brother, brother-in-law,
sister or sister-in-law of the individual; (c) an ancestor or
lineal descendant of the individual or his spouse; and (d) any
other relative, by blood or marriage, of the individual or his
spouse who shares the same home with the individual. "Person
related to" with respect to an organization means: (a) A person
directly or indirectly controlling, controlled by or under common
control with the organization; (b) an officer or director of the
organization or a person performing similar functions with respect
to the organization or to a person related to the organization; (c)
the spouse of a person related to the organization; and (d) a
relative by blood or marriage of a person related to the
organization who shares the same home with him.
(33) "Precomputed loan". A loan, refinancing or consolidation
is "precomputed" if:
(A) The debt is expressed as a sum comprising the principal
and the amount of the loan finance charge computed in advance; or
(B) The loan is expressed in terms of the principal amount;
the loan installment payments are a scheduled, fixed amount
including principal and interest and assume payment on the
installment due date; and interest payments will not vary or result
in an adjustment during the term of the loan or at its final payment as a result of the actual installment payment dates.
(34) "Precomputed sale". A sale, refinancing or consolidation
is "precomputed" if:
(A) The debt is expressed as a sum comprising the amount
financed and the amount of the sales finance charge computed in
advance; or
(B) The debt is expressed in terms of the principal amount;
the debt installment payments are a scheduled, fixed amount
including principal and interest and assume payment on the
installment due date; and interest payments will not vary or result
in an adjustment during the term of the debt or at its final
payment as a result of the actual installment payment dates.
(35) "Presumed" or "presumption" means that the trier of fact
must find the existence of the fact presumed unless and until
evidence is introduced which would support a finding of its
nonexistence.
(36) "Principal" of a loan means the total of:
(a) The net amount paid to, receivable by or paid or payable
for the account of the debtor;
(b) The amount of any discount excluded from the loan finance
charge; and
(c) To the extent that payment is deferred:
(i) Amounts actually paid or to be paid by the lender for
registration, certificate of title or license fees if not included
in paragraph (a) of this subdivision; and
(ii) Additional charges permitted by this chapter.
(37) "Regulated consumer lender" means a person authorized to
make or take assignments of regulated consumer loans.
(38) "Regulated consumer loan" means a consumer loan,
including a loan made pursuant to a revolving loan account, in
which the rate of the loan finance charge exceeds eighteen percent
per year as determined according to the actuarial method, except
where the loan qualifies for federal law preemption from state
interest rate limitations, including federal law bank parity
provisions, or where the lender is specifically permitted by state
law other than article four of this chapter to make the loan at
that rate without a requirement the lender hold a regulated
consumer lender license.
(39) "Revolving charge account" means an agreement between a seller
and a buyer by which: (a) The buyer may purchase goods or services
on credit or a seller credit card; (b) the balances of amounts
financed and the sales finance and other appropriate charges are
debited to an account; (c) a sales finance charge if made is not
precomputed but is computed periodically on the balances of the account from time to time; and (d) there is the privilege of paying
the balances in installments.
(40) "Revolving loan account" means an arrangement between a lender
and a consumer including, but not limited to, a lender credit card
or similar arrangement, pursuant to which: (a) The lender may
permit the consumer to obtain loans from time to time; (b) the
unpaid balances of principal and the loan finance and other
appropriate charges are debited to an account; (c) a loan finance
charge if made is not precomputed but is computed periodically on
the outstanding unpaid balances of the principal of the consumer's
account from time to time; and (d) there is the privilege of paying
the balances in installments.
(41) "Sale of goods" includes any agreement in the form of a
bailment or lease of goods if the bailee or lessee agrees to pay as
compensation for use a sum substantially equivalent to or in excess
of the aggregate value of the goods involved and it is agreed that
the bailee or lessee will become, or for no other or a nominal
consideration has the option to become, the owner of the goods upon
full compliance with his obligations under the agreement.
(42) "Sale of an interest in land" includes a lease in which the
lessee has an option to purchase the interest and all or a
substantial part of the rental or other payments previously made by him are applied to the purchase price.
(43) "Sale of services" means furnishing or agreeing to furnish
services and includes making arrangements to have services
furnished by another.
(44) "Sales finance charge" means the sum of: (a) All charges
payable directly or indirectly by the buyer and imposed directly or
indirectly by the seller or issuer of a seller credit card as an
incident to the extension of credit, including any of the following
types of charges which are applicable: Time-price differential,
however denominated, including service, carrying or other charge,
premium or other charge for any guarantee or insurance protecting
the seller against the buyer's default or other credit loss; and
(b) charges incurred for investigating the collateral or credit
worthiness of the buyer or for commissions or brokerage for
obtaining the credit, irrespective of the person to whom the
charges are paid or payable; unless the seller had no notice of the
charges when the credit was granted. The term does not include
charges as a result of default, additional charges, delinquency
charges or deferral charges. If the seller or issuer of a seller
credit card purchases or satisfies obligations of the consumer and
the purchase or satisfaction is made at less than the face amount
of the obligation, the discount is not part of the sales finance charge.
(45) Except as otherwise provided, "seller" includes an assignee of
the seller's right to payment but use of the term does not in
itself impose on an assignee any obligation of the seller.
(46) "Seller credit card" means an arrangement pursuant to which a
person gives to a buyer or lessee the privilege of using a credit
card, letter of credit, or other credit confirmation or
identification primarily for the purpose of purchasing or leasing
goods or services from that person, that person and any other
person or persons, a person related to that person, or others
licensed or franchised or permitted to do business under his
business name or trade name or designation or on his behalf.
(47) "Services" includes: (a) Work, labor and other personal
services; (b) privileges with respect to transportation, use of
vehicles, hotel and restaurant accommodations, education,
entertainment, recreation, physical culture, hospital
accommodations, funerals, cemetery accommodations, and the like;
and (c) insurance.
(48) "Supervised financial organization" means any organization,
corporation or person, other than an insurance company or other
organization primarily engaged in an insurance business, which is
required under state law to register or obtain a license from the commissioner of banking before conducting business in this state;
or which is authorized under federal law to make consumer loans
without a license from the state commissioner of banking, provided
such loans are subject to supervision and examination by an
official or agency of the United States.
§46A-1-103. Effect of chapter on powers of persons making consumer
credit sales and consumer loans, and others; consumer
protection generally.
(1) This chapter prescribes maximum charges for all creditors,
except lessors and those excluded, making consumer credit sales and
consumer loans, and sales and loans made subject to the provisions
of this chapter by agreement, and except as otherwise provided by
this chapter displaces any existing limitations and provisions
regulating maximum interest and charges, minimum charges,
additional charges, delinquency charges, deferral charges,
allocation of charges and methods of computing rebates upon
prepayment, refinancing or consolidation with respect to consumer
credit sales and consumer loans, and the debtors' remedies and
penalties provided by this chapter displace all existing provisions
relating to remedies, penalties and forfeitures for usury and
usurious contracts as to transactions covered by this chapter.
(2) Except as provided in subsection (1) of this section or elsewhere in this chapter, this chapter does not displace powers or
limitation on powers which supervised financial organizations are
authorized to exercise under the laws of the United States or other
laws of this state in effect after the operative date of this
chapter.
(3) This chapter also prescribes in various articles
protective measures for consumers in transactions not necessarily
involving consumer credit.
ARTICLE 3. FINANCE CHARGES AND RELATED PROVISIONS.
§46A-3-104. Finance charge for loans other than loans made
pursuant to revolving loan accounts; finance charge on
assigned contracts; exceptions.
(1) With respect to a consumer loan, other than a consumer
loan made pursuant to a revolving loan account: (a) A bank, as
defined in section two, article one, chapter thirty-one-a of this
code, may contract for and receive a loan finance charge not
exceeding the charge or interest permitted by the provisions of
section thirty, article four, chapter thirty-one-a or by the
provisions of section five, five-a or five-b, article six, chapter
forty-seven of this code, or that allowed under section sixteen,
article ten, chapter thirty-one of this code; (b) a regulated
consumer lender may contract for and receive a loan finance charge not exceeding the aggregate of the interest and charges permitted
by section one hundred seven, article four, chapter forty-six-a of
this code or by the provisions of section five, five-a or five-b,
article six, chapter forty-seven of this code; (c) a credit union,
as defined in section one, article ten, chapter thirty-one of this
code, may contract for and receive a loan finance charge not
exceeding the charge or interest permitted by the provisions of
section sixteen, article ten, chapter thirty-one of this code, or
by the provisions of section five, article six, chapter forty-seven
of this code; and (d) any other lender may contract for and receive
a loan finance charge not exceeding the charge or interest
permitted by the provisions of section five, five-a or five-b,
article six, chapter forty-seven of this code.
(2) This section does not limit or restrict the manner of
calculating the loan finance charge, whether by way of add-on,
discount or otherwise, so long as the rate of loan finance charge
does not exceed that permitted by this section.
(3) If the loan is precomputed:
(a) The loan finance charge may be calculated on the
assumption that all scheduled payments will be made when due; and
(b) The effect of prepayment, refinancing or consolidation is
governed by the provisions on rebate upon prepayment, refinancing or consolidation contained in section one hundred eleven of this
article.
(4) Notwithstanding subsection (1) of this section, the lender
may contract for and receive a minimum loan finance charge of not
more than five dollars when the amount loaned does not exceed
seventy-five dollars, or seven dollars and fifty cents when the
amount loaned exceeds seventy-five dollars.
(5) An assignee of a consumer credit sale contract may
collect, receive or enforce the sales finance charge provided in
said contract, and any such charge so collected, received or
enforced by an assignee shall not be deemed usurious or in
violation of this chapter or any other provision of this code if
such sales finance charge does not exceed the limits permitted to
be charged by a seller under the provisions of this chapter.
(6) Notwithstanding subsection (5) of this section, a resident
lender who is the assignee of a consumer credit sales contract from
a credit grantor in another state, and said contract was executed
in such other state to finance a retail purchase made by the
consumer when the consumer was in that other state, may collect,
receive or enforce the sales finance charge and other charges
including late fees provided in said contract under the laws of the
state where executed. Such charge shall not be deemed to be usurious or in violation of the provisions of this chapter or any
other provisions of this code.
§46A-3-111.Application of payments on account; rebate upon
prepayment, refinancing or consolidation; judgments and
interest on judgments.
(1) When a consumer credit sale or consumer loan is
precomputed all payments on account shall be applied to
installments in the order in which they fall due, except as
provided in subsection (3), section one hundred twelve of this
article. When the total amount is payable in substantially equal
consecutive monthly installments, the portion of the sales finance
charge or loan finance charge attributable to any particular
monthly installment period shall be that proportion of the sales
finance charge or loan finance charge originally contracted for, as
the balance scheduled to be outstanding on the last day of the
monthly installment period before deducting the payment, if any,
scheduled to be made on that day bears to the sum of all the
monthly installment balances under the original schedule of
payments. (This method of allocation is the sum of the digits
method, commonly referred to as the "Rule of 78").
(2) Upon prepayment in full of a precomputed consumer credit
sale or consumer loan by cash, a new loan, refinancing, consolidation or otherwise, the creditor shall rebate to the
consumer that portion of the sales finance charge or loan finance
charge in the manner specified in section five-d, article six,
chapter forty-seven of this code:
Provided, That no rebate of less
than one dollar need be made.
(3) Upon prepayment in full of a precomputed or nonprecomputed
consumer credit sale or consumer loan by cash, execution of a new
loan, refinancing, consolidation or otherwise, except where the
loan is a purchase money loan secured by a first lien mortgage on
residential property, or is made by a federally-insured depository
institution, the creditor shall rebate to the consumer that portion
of the unearned prepaid finance charges attributable to loan or
credit investigations fees, origination fees or points in the
manner specified in subsection (c), section five-d, article six,
chapter forty-seven of this code:
Provided, That no rebate of less
than one dollar need be made:
Provided, however, That if the loan
was made in furtherance of aiding or abetting a person to whom the
loan is assigned, evade this rebate, then the rebate required
herein shall apply.
(4) If the maturity of a precomputed consumer credit sale or
consumer loan is accelerated for any reason and judgment is
obtained, the debtor is entitled to the same rebate as if the payment had been made on the date judgment is entered and such
judgment shall bear interest until paid at the rate of ten percent
per annum.
ARTICLE 4. REGULATED CONSUMER LENDERS.
§46A-4-101. Authority to make loans.
Unless a person has first obtained a license from the
commissioner authorizing him to make regulated consumer loans, he
shall not engage in the business of:
(1) Making regulated consumer loans; or
(2) Taking assignments of and undertaking direct collection of
payments from or enforcement of rights against consumers arising
from regulated consumer loans.
§46A-4-102. License to make regulated consumer loans.
(1) The commissioner shall receive and act on all applications
for licenses to make regulated consumer loans under this chapter.
Applications shall be under oath, be filed in the manner prescribed
by the commissioner, and contain the information the commissioner
requires to make an evaluation of the financial responsibility,
experience, character and fitness of the applicant, and the
findings required of him before he may issue a license. At the
time of the filing of the application, the sum of seven hundred
fifty dollars shall be paid to the commissioner as an investigation fee.
(2) No license shall be issued to a supervised financial
organization other than to one primarily engaged in the business of
making consumer loans through offices located within this state, or
to one licensed under the provisions of the West Virginia secondary
mortgage loan act as contained in article seventeen, chapter
thirty-one of this code, or to any banking institution as defined
by the provisions of section two, article one, chapter thirty-one-a
of this code. No license will be granted to any office located
outside this state:
Provided, That the limitation of licensing
contained in this subsection shall not prevent any supervised
financial organization from making regulated consumer loans when
the applicable state or federal statute, law, rule or regulation
permits. No license shall be issued to any person unless the
commissioner, upon investigation, finds that the financial
responsibility, experience, character and fitness of the applicant,
and of the members thereof (if the applicant is a copartnership or
association) and of the officers and directors thereof (if the
applicant is a corporation), are such as to command the confidence
of the community and to warrant belief that the business will be
operated honestly, fairly and efficiently, within the purposes of
this chapter, and the applicant has available for the operation of the business at least ten thousand dollars in capital and has, for
each specified location of operation assets of at least two
thousand dollars.
(3) Upon written request, the applicant is entitled to a
hearing on the question of his qualifications for a license if:
(a) The commissioner has notified the applicant in writing that his
application has been denied; or (b) the commissioner has not issued
a license within sixty days after the application for the license
was filed. A request for a hearing may not be made more than
fifteen days after the commissioner has mailed a writing to the
applicant notifying him that the application has been denied and
stating in substance the commissioner's findings supporting denial
of the application.
(4) Not more than one place of business shall be maintained
under the same license, but the commissioner may issue more than
one license to the same licensee upon compliance with all the
provisions of this article governing an original issuance of a
license, for each such new license. Each license shall remain in
full force and effect until surrendered, forfeited, suspended or
revoked.
(5) Upon giving the commissioner at least fifteen days' prior
written notice, a licensee may: (a) Change the location of any place of business located within a municipality to any other
location within that same municipality; or (b) change the location
of any place of business located outside of a municipality to a
location no more than five miles from the originally licensed
location, but in no case may a licensee move any place of business
located outside a municipality to a location within a municipality.
A licensee may not move the location of any place of business
located within a municipality to any other location outside of that
municipality.
(6) A licensee may conduct the business of making regulated
consumer loans only at or from a place of business for which he
holds a license and not under any other name than that stated in
the license.
(7) A license issued under the provisions of this section
shall not be transferable or assignable.
(8) A licensee must be incorporated under the laws of this
state. The licensee may, however, be a subsidiary of an out-of-
state company or financial institution.
§46A-4-103. Revocation, suspension or forfeiture of license.
(1) The commissioner may issue to a person licensed to make
regulated consumer loans an order to show cause why his license
should not be revoked or should not be suspended for a period not in excess of six months. The order shall state the place for a
hearing and set a time for the hearing that is no less than ten
days from the date of the order. After the hearing the
commissioner shall revoke or suspend the license if he finds that:
(a) The licensee has repeatedly and willfully violated this
chapter or any rule or order lawfully made or issued pursuant to
this article;
(b) The licensee has failed to remit their required annual
assessment, or to maintain their status as a business in good
standing with the office of the secretary of state, notwithstanding
notification in writing by the commissioner sent by certified mail
to the licensee's last known address providing for thirty days to
rectify such failure;
(c) The licensee has forfeited their license by failing to
remain open for regulated consumer lending business in conformity
with the rules or order of the commissioner; or
(d) Facts or conditions exist which would clearly have
justified the commissioner in refusing to grant a license had these
facts or conditions been known to exist at the time the application
for the license was made.
(2) No revocation or suspension of a license under this
article is lawful unless prior to institution of proceedings by the commissioner notice is given to the licensee of the facts or
conduct which warrant the intended action, and the licensee is
given an opportunity to show compliance with all lawful
requirements for retention of the license.
(3) If the commissioner finds that probable cause for
revocation of a license exists and that enforcement of this article
requires immediate suspension of the license pending investigation,
he may, after a hearing upon five days' written notice, enter an
order suspending the license for not more than thirty days.
(4) Nothing in this section limits the authority of the
commissioner to take action against a regulated consumer lender
pursuant to chapter thirty-one-a of this code.
(5) Whenever the commissioner revokes or suspends a license,
he shall enter an order to that effect and forthwith notify the
licensee of the revocation or suspension. Within five days after
the entry of the order he shall mail by registered or certified
mail or deliver to the licensee a copy of the order and the
findings supporting the order.
(6) Any person holding a license to make regulated consumer
loans may relinquish the license by notifying the commissioner in
writing of its relinquishment, but this relinquishment shall not
affect his liability for acts previously committed.
(7) No revocation, suspension, forfeiture or relinquishment of
a license shall impair or affect the obligation of any preexisting
lawful contract between the licensee and any consumer.
(8) The commissioner may reinstate a license, terminate a
suspension or grant a new license to a person whose license has
been revoked or suspended if no fact or condition then exists which
clearly would have justified the commissioner in refusing to grant
a license.
§46A-4-104. Records; annual reports.
(1) Every licensee shall maintain records in conformity with
generally accepted accounting principles and practices in a manner
which will enable the commissioner to determine whether the
licensee is complying with the provisions of this article. The
record-keeping system of a licensee shall be sufficient if he makes
the required information reasonably available. The records need
not be kept in the place of business where regulated consumer loans
are made, if the commissioner is given free access to the records
wherever located. The records pertaining to any loan need not be
preserved for more than two years after making the final entry
relating to the loan, but in the case of a revolving loan account
such two-year period is measured from the date of each entry.
(2) On or before the fifteenth day of February each year, every licensee shall file with the commissioner a composite annual
report in the form prescribed by the commissioner relating to all
regulated consumer loans made by him. The commissioner shall
consult with comparable officials in other states for the purpose
of making the kinds of information required in annual reports
uniform among the states. Information contained in annual reports
shall be confidential and may be published only in composite form.
§46A-4-105. Examinations; assessments and investigations.
(1) The commissioner shall examine at least every eighteen
months the loans, business and records of every licensee. In
addition, for the purpose of discovering violations of this article
or securing information lawfully required, the attorney general or
the commissioner may at any time investigate the loans, business
and records of any regulated consumer lender. For these purposes
he shall have free and reasonable access to the offices, places of
business and records of the lender.
(2) If the lender's records are located outside this state,
the lender at his option shall make them available to the
commissioner at a convenient location within this state, or pay the
reasonable and necessary expenses for the commissioner or his
representatives to examine them at the place where they are
maintained. The commissioner may designate representatives, including comparable officials of the state in which the records
are located, to inspect them on his behalf.
(3) For the purposes of this section, the commissioner may
administer oaths or affirmations, and upon his own motion or upon
request of any party, may subpoena witnesses, compel their
attendance, adduce evidence and require the production of any
matter which is relevant to the investigation, including the
existence, description, nature, custody, condition and location of
any books, documents or other tangible things and the identity and
location of persons having knowledge of relevant facts, or any
other matter reasonably calculated to lead to the discovery of
admissible evidence.
(4) Upon failure without lawful excuse to obey a subpoena or
to give testimony and upon reasonable notice to all persons
affected thereby, the commissioner may apply to any circuit court
of this state for an order compelling compliance.
(5) The commissioner of banking shall charge and collect from
each regulated consumer lender and pay into a special revenue
account in the state treasury for the department of banking an
annual assessment payable on the first day of July, computed upon
the total outstanding gross loan balances and installment sales
contract balances net of unearned interest as is set out in section eight, article two, chapter thirty-one-a of this code.
§46A-4-107. Loan finance charge for regulated consumer lenders.
(1) With respect to a regulated consumer loan, including a
revolving loan account, a regulated consumer lender may contract
for and receive a loan finance charge not exceeding that permitted
by this section.
(2) On a loan of two thousand dollars or less, which is
unsecured by real property, the loan finance charge, calculated
according to the actuarial method, may not exceed thirty-one
percent per year on the unpaid balance of the principal amount.
(3) On a loan of greater than two thousand dollars or which is
secured by real property the loan finance charge, calculated
according to the actuarial method, may not exceed twenty-seven
percent per year on the unpaid balance of the principal amount:
Provided, That the loan finance charge on any loan greater than ten
thousand dollars may not exceed eighteen percent per year on the
unpaid balance of the principal amount. Loans made by regulated
consumer lenders shall be subject to the restrictions and
supervision set forth in this article irrespective of their rate of
finance charges.
(4) Where the loan is nonrevolving and is greater than two
thousand dollars, the permitted finance charge may include a charge of not more than a total of two percent of the amount financed for
any origination fee, points, or investigation fee:
Provided, That
where any loan, revolving or nonrevolving, is secured by real
estate, the permitted finance charge may include a charge of not
more than a total of five percent of the amount financed for any
origination fee, points or investigation fee. In any loan secured
by real estate, such charges may not be imposed again by the same
or affiliated lender in any refinancing of that loan made within
twenty-four months thereof, unless these earlier charges have been
rebated by payment or credit to the consumer under the actuarial
method, or the total of the earlier and proposed charges does not
exceed five percent of the amount financed. Charges permitted
under this subsection shall be included in the calculation of the
loan finance charge. The financing of such charges shall be
permissible and shall not constitute charging interest on interest.
In a revolving home equity loan, the amount of the credit line
extended shall for purposes of this subsection constitute the
amount financed. Other than herein provided, no points,
origination fee, investigation fee or other similar prepaid finance
charges attributable to the lender or its affiliates may be levied.
Except as provided for by section one hundred nine, article three
of this chapter, no additional charges may be made; nor may any charge permitted by this section be assessed unless the loan is
made. To the extent that this section overrides the preemption on
limiting points and other such charges on first lien residential
mortgages contained in Section 501 of the United States Depository
Institutions Deregulation and Monetary Control Act of 1980, the
state law limitations contained in this section shall apply. If
the loan is precomputed:
(a) The loan finance charge may be calculated on the
assumption that all scheduled payments will be made when due; and
(b) The effect of prepayment, refinancing or consolidation is
governed by the provisions on rebate upon prepayment, refinancing
or consolidation contained in section one hundred eleven, article
three of this chapter.
(5) For the purposes of this section, the term of a loan
commences on the date the loan is made. Differences in the lengths
of months are disregarded and a day may be counted as one thirtieth
of a month. Subject to classifications and differentiations the
licensee may reasonably establish, a part of a month in excess of
fifteen days may be treated as a full month if periods of fifteen
days or less are disregarded and if that procedure is not
consistently used to obtain a greater yield than would otherwise be
permitted.
(6) With respect to a revolving loan account:
(a) A charge may be made by a regulated consumer lender in
each monthly billing cycle which is one twelfth of the maximum
annual rates permitted by this section computed on an amount not
exceeding the greatest of:
(i) The average daily balance of the debt; or
(ii) The balance of the debt at the beginning of the first day
of the billing cycle, less all payments on and credits to such debt
during such billing cycle and excluding all additional borrowings
during such billing cycle. For the purpose of this subdivision a
billing cycle is monthly if the billing statement dates are on the
same day each month or do not vary by more than four days
therefrom.
(b) If the billing cycle is not monthly, the maximum loan
finance charge which may be made by a regulated consumer lender is
that percentage which bears the same relation to an applicable
monthly percentage as the number of days in the billing cycle bears
to thirty.
(c) Notwithstanding subdivisions (a) and (b) of this
subsection, if there is an unpaid balance on the date as of which
the loan finance charge is applied, the licensee may contract for
and receive a charge not exceeding fifty cents if the billing cycle is monthly or longer, or the pro rata part of fifty cents which
bears the same relation to fifty cents as the number of days in the
billing cycle bears to thirty if the billing cycle is shorter than
monthly, but no charge may be made pursuant to this subdivision if
the lender has made an annual charge for the same period as
permitted by the provisions on additional charges.
(7) As an alternative to the loan finance charges allowed by
subsections (2) and (4) of this section, a regulated consumer
lender may on a loan of one thousand two hundred dollars or less
contract for and receive interest at a rate of up to thirty-one
percent per year on the unpaid balance of the principal amount,
together with a nonrefundable loan processing fee of not more than
two percent of the amount financed:
Provided, That no other
finance charges are imposed on the loan.
(8) Notwithstanding any contrary provision in this section, a
licensed regulated consumer lender who is the assignee of a
nonrevolving consumer loan unsecured by real property located in
this state, which loan contract was applied for by the consumer
when he or she was in another state, and which was executed and had
its proceeds distributed in that other state, may collect, receive
and enforce the loan finance charge and other charges, including
late fees, provided in said contract under the laws of the state where executed:
Provided, That the consumer was not induced by the
assignee or its in-state affiliates to apply and obtain the loan
from an out-of-state source affiliated with the assignee in an
effort to evade the consumer protections afforded by this chapter.
Such charges shall not be deemed to be usurious or in violation of
the provisions of this chapter or any other provisions of this
code.
§46A-4-108. Use of multiple loan agreements.
A regulated consumer lender may not use multiple loan
agreements with intent to obtain a higher loan finance charge than
would otherwise be permitted by the provisions of this article. A
regulated consumer lender uses multiple loan agreements if, with
intent to obtain a higher loan finance charge than would otherwise
be permitted, he allows any person, or husband and wife, to become
obligated in any way under more than one loan agreement with the
regulated consumer lender for a regulated consumer loan under this
article.
The excess amount of the loan finance charge provided for in
agreements in violation of this section is an excess charge for the
purposes of the provisions on effect of violations on rights of
parties.
§46A-4-109. Restrictions on interest in land as security; assignment of earnings to regulated consumer lender
prohibited; when security interest on household furniture
goods not valid; prohibitions as to renegotiation of loan
discharged in bankruptcy.
(1) No consumer loan of two thousand dollars or less may be
secured by an interest in land, other than a purchase money loan
for that land, unless the lender is licensed in this state as a
regulated consumer lender or as a secondary mortgage lender, or is
a federally insured depository institution permitted to conduct
lending in West Virginia. A security interest taken in violation of
this subsection is void.
(2) Notwithstanding the provisions of section one hundred
sixteen, article two of this chapter, no regulated consumer lender
shall take any assignment of or order for payment of any earnings
to secure any loan made by any regulated consumer lender under this
article. An assignment or order taken in violation of this
subsection is void. This subsection does not prohibit a court from
ordering a garnishment to affect recovery of moneys owed by a
borrower to a lender as part of a judgment in favor of said lender.
(3) Other than for a purchase money lien, no regulated
consumer lender may take a security interest in household goods in
the possession and use of the borrower. Where federal law permits a security interest in certain nonpurchase items deemed not to be
household goods, the security agreement creating such security
interest must be in writing, signed in person by the borrower, and
if the borrower is married, signed in person by both husband and
wife:
Provided, That the signature of both husband and wife shall
not be required when they have been living separate and apart for
a period of at least five months prior to the making of such
security agreement. A security interest taken in violation of this
subsection is void.
(4) A regulated consumer lender may not renegotiate the
original loan, or any part thereof, or make a new contract covering
the original loan, or any part thereof, with any borrower, who has
received a discharge in bankruptcy of the original loan or any
balance due thereon at the time of said discharge from any court of
the United States of America exercising jurisdiction in insolvency
and bankruptcy matters, unless said regulated consumer lender shall
pay to and deliver to the borrower the full amount of the loan
shown on said note, promise to pay, or security, less any
deductions for charges herein specifically authorized.
§46A-4-110. Conduct of business other than making loans.
(1) No licensee shall conduct the business of making loans
under the provisions of this article within any office, room or place of business in which any other business is solicited or
engaged in, or in association or conjunction therewith, except as
may be authorized in writing by the commissioner upon his finding
that the character of such other business is sufficiently related
to that of a financial institution and is such that the granting of
such authority would not facilitate evasions of this article or of
the rules lawfully made hereunder, except nothing herein shall
prohibit the licensee from purchasing installment sales contracts
or the sale or provision of insurance authorized by section one
hundred nine, article three of this chapter, or from making loans
authorized under the provisions of the West Virginia secondary
mortgage loan act as set forth in article seventeen, chapter
thirty-one of this code, or from engaging in any business
previously approved by the commissioner prior to first day of
September, one thousand nine hundred ninety-six.
(2) A licensee may purchase, hold and convey real property as
follows:
(a) As shall be necessary for the convenient transaction of
its business;
(b) As is mortgaged to it in good faith by way of security for
loans made by or money due to such regulated consumer lender;
(c) As is conveyed to it in satisfaction of debts previously contracted in the course of its dealings;
(d) As is acquired by the sale on execution or judgment or
decree of any court in its favor.
(3) A licensee shall not purchase, hold or convey any real
property in any other case or for any other purpose whatsoever.
Real property shall be conveyed only by authority of the board of
directors of any such regulated consumer lender. No real property
acquired upon foreclosure in the cases contemplated in subdivision
(b), or acquired under subdivisions (c) and (d) of this section
shall be held for a longer time than ten years, unless such period
shall be extended by the commissioner of banking.
§46A-4-110a. Prohibited conduct.
(1) A regulated consumer lender shall not:
(a) Accept or receive deposits or sell or offer for sale its
secured or unsecured evidences or certificates of indebtedness; or
(b) Pay any fees, bonuses, commissions, rewards or other
consideration to any person, firm or corporation for the privilege
of using any plan of operation, scheme or device for the
organization or carrying on of business under this article, or the
use of any name, trademark or copyright to be so used:
Provided,
That nothing herein prevents a regulated consumer lender from
agreeing in connection with a loan to pay a broker fee, finders fee or dealer participation fee, or to split the origination fee or
points paid:
Provided, however, That the fee or fee split is
disclosed to the borrower and where proper is included in the
finance charge.
(2) Unless preempted by federal law, no consumer loan by a
regulated consumer lender may contain any scheduled balloon payment
as set forth in this chapter. Nor may any regulated consumer lender
loan contain terms of repayment which result in negative
amortization:
Provided, That nothing herein prevents unequal
payment schedules resulting from a variable rate loan or a
revolving line of credit.
(3) A regulated consumer lender may not make revolving loans
for the retail purchase of consumer goods and services by use of a
lender credit card.
§46A-4-111. Substantial benefit upon refinancing of a loan at
higher rate.
(1) Any nonrevolving consumer loan or credit that is
refinanced and consolidated with a new loan under this article
after the first day of September, one thousand nine hundred ninety-
six, at a higher finance rate than allowed merchants by section one
hundred one, article three of this chapter, must either provide the
consumer with a substantial benefit or provide the disclosures set forth in this section. A substantial benefit accrues to the
consumer if the transaction:
(a) Provides the consumer at least five hundred dollars in new
funds for the consumer's own use, excluding any charges connected
with the loan; or
(b) Provides the consumer with new funds in an amount equal to
the original amount of the loan or credit.
(2) If no substantial benefit is provided, the lender must
comply with the following requirements, except where such an
agreement would violate section one hundred eight of this article:
(a) The lender must in a fixed rate transaction give the
following disclosures in writing to the borrower prior to the
execution of the new agreement:
"If you do agree to consolidate your existing obligation, you
will be paying an annual percentage rate of _____% on the existing
balance of $_____, instead of the rate of ______% which you are now
paying.
I acknowledge receipt of this information __________ (initials
of borrower).";
(b) The lender must allow the borrower the choice of repaying
his or her existing loan/credit balance at the originally agreed
upon rate and obtaining any additional extension of credit as a separate agreement, notwithstanding any law other than section one
hundred eight of this article which may limit the borrower's
ability to have multiple loan agreements with the same lender;
(c) The lender, where it holds the prior agreement, must
refund or credit to the borrower's account any unearned finance
charge and any returned insurance premiums upon cancellation of the
insurance sold in connection with the prior agreement;
(d) The lender shall, where applicable, provide the borrower
prior to the loan's execution, conspicuous written notice of the
provisions of subdivisions (a), (b) and (c) of this subsection;
(e) The commissioner may provide and require a modified
disclosure form for similar transactions involving adjustable or
variable rates, and where applicable, prior to the loan's
execution, the borrower must be given conspicuous written notice of
the provisions of subdivisions (b) and (c) of this subsection,
together with the disclosure form as may be required by this
section; and
(f) Nothing in this section shall prohibit the receipt of
goods or services by the borrower at the time the consolidated loan
agreement is made, nor shall this section prohibit or pertain to
any loan where the refinancing results in the consumer paying a
lower finance charge rate.
§46A-4-112. Code reference to supervised lenders and industrial
loan companies; authority of the commissioner.
All references in other chapters of this code to supervised
loans, supervised lenders, industrial loans, industrial loan
companies and licensees thereof, as well as to article seven,
chapter thirty-one of this code, shall, after the operative date of
this chapter, and despite the repeal of said statute, be read,
construed and understood to mean and to have reference,
respectively, to regulated consumer loans, regulated consumer
lenders, regulated consumer lender licensees, and to this article.
All authority vested by this chapter in the commissioner shall
be deemed to be in addition to, and not in limitation of, the
authority vested in the commissioner of banking by provisions
contained in other chapters of this code.
§46A-4-113. Continuation of licensing.
All persons licensed under the provisions of article seven,
chapter thirty-one of this code, or as supervised lenders under the
prior provisions of this article on the operative date of this
chapter, are licensed to make regulated consumer loans under the
provisions of this article, and all provisions of this article
shall after the operative date of this chapter apply to the persons
so previously licensed, including, without limitation, the provisions governing notification contained in article seven of
this chapter.
The commissioner may, but is not required to, deliver evidence
of licensing to the persons so previously licensed. Persons
holding both supervised lender and industrial loan company
licenses, or operating such a licensed business
in the same office
will be combined and provided a single regulated lender license.
ARTICLE 5. CIVIL LIABILITY AND CRIMINAL PENALTIES.
§46A-5-101. Effect of violations on rights of parties; limitation
of actions.
(1) If a creditor has violated the provisions of this chapter
applying to collection of excess charges, security in sales and
leases, disclosure with respect to consumer leases, receipts,
statements of account and evidences of payment, limitations on
default charges, assignment of earnings, authorizations to confess
judgment, illegal, fraudulent or unconscionable conduct, any
prohibited debt collection practice, or restrictions on interest in
land as security, assignment of earnings to regulated consumer
lender, security agreement on household goods for benefit of
regulated consumer lender, and renegotiation by regulated consumer
lender of loan discharged in bankruptcy, the consumer has a cause
of action to recover actual damages and in addition a right in an action to recover from the person violating this chapter a penalty
in an amount determined by the court not less than one hundred
dollars nor more than one thousand dollars. With respect to
violations arising from consumer credit sales or consumer loans
made pursuant to revolving charge accounts or revolving loan
accounts, or from sales as defined in article six of this chapter,
no action pursuant to this subsection may be brought more than four
years after the violations occurred. With respect to violations
arising from other consumer credit sales or consumer loans, no
action pursuant to this subsection may be brought more than one
year after the due date of the last scheduled payment of the
agreement.
(2) If a creditor has violated the provisions of this chapter
respecting authority to make regulated consumer loans, the loan is
void and the consumer is not obligated to pay either the principal
or the loan finance charge. If he has paid any part of the
principal or of the finance charge, he has a right to recover in an
action the payment from the person violating this chapter or from
an assignee of that person's rights who undertakes direct
collection of payments or enforcement of rights arising from the
debt. With respect to violations arising from regulated consumer
loans made pursuant to revolving loan accounts, no action pursuant to this subsection may be brought more than four years after the
violation occurred. With respect to violations arising from other
regulated consumer loans, no action pursuant to this subsection may
be brought more than one year after the due date of the last
scheduled payment of the agreement pursuant to which the charge was
paid.
(3) A consumer is not obligated to pay a charge in excess of
that allowed by this chapter, and if he has paid an excess charge
he has a right to a refund. A refund may be made by reducing the
consumer's obligation by the amount of the excess charge. If the
consumer has paid an amount in excess of the lawful obligation
under the agreement, the consumer may recover in an action the
excess amount from the person who made the excess charge or from an
assignee of that person's rights who undertakes direct collection
of payments from or enforcement of rights against the consumer
arising from the debt.
(4) If a creditor has contracted for or received a charge in
excess of that allowed by this chapter, the consumer may, in
addition to recovering such excess charge, also recover from the
creditor or the person liable in an action a penalty in an amount
determined by the court not less than one hundred dollars nor more
than one thousand dollars. With respect to excess charges arising from consumer credit sales or consumer loans made pursuant to
revolving charge accounts or revolving loan accounts, no action
pursuant to this subsection may be brought more than four years
after the time the excess charge was made. With respect to excess
charges arising from other consumer credit sales or consumer loans
no action pursuant to this subsection may be brought more than one
year after the due date of the last scheduled payment of the
agreement pursuant to which the charge was made.
(5) Except as otherwise provided, a violation of this chapter
does not impair rights on a debt.
(6) If an employer discharges an employee in violation of the
provisions prohibiting discharge, the employee may within ninety
days bring a civil action for recovery of wages lost as a result of
the violation and for an order requiring the reinstatement of the
employee. Damages recoverable shall not exceed lost wages for six
weeks.
(7) A creditor has no liability for a penalty under subsection
(1) or subsection (4) of this section if within fifteen days after
discovering an error, and prior to the institution of an action
under this section or the receipt of written notice of the error,
the creditor notifies the person concerned of the error and
corrects the error. If the violation consists of a prohibited agreement, giving the consumer a corrected copy of the writing
containing the error is sufficient notification and correction. If
the violation consists of an excess charge, correction shall be
made by an adjustment or refund.
(8) If the creditor establishes by a preponderance of evidence
that a violation is unintentional or the result of a bona fide
error of fact notwithstanding the maintenance of procedures
reasonably adapted to avoid any such violation or error, no
liability is imposed under subsections (1), (2) and (4) of this
section, and the validity of the transaction is not affected.
§46A-5-103. Willful violations.
(1) A regulated consumer lender who willfully makes charges in
excess of those permitted by the provisions of article four of this
chapter, pertaining to regulated consumer lenders, shall be guilty
of a misdemeanor, and, upon conviction, shall be fined not more
than five thousand dollars, or imprisoned not more than one year,
or both fined and imprisoned.
(2) A person who willfully engages in the business of making
regulated consumer loans without a license in violation of the
provisions of article four of this chapter applying to authority to
make regulated consumer loans shall be guilty of a misdemeanor,
and, upon conviction, shall be fined not more than five thousand dollars, or imprisoned not more than one year, or both fined and
imprisoned.
(3) A person who willfully engages in the business of making
consumer credit sales or consumer loans, or of taking assignments
of rights against consumers arising therefrom and undertakes direct
collection of payments or enforcement of these rights, without
complying with the provisions of section one hundred fifteen,
article seven of this chapter, concerning notification, shall be
guilty of a misdemeanor and, upon conviction, shall be fined not
more than one hundred dollars.
(4) Any person who willfully violates any of the provisions of
sections one hundred twenty-three through one hundred twenty-eight,
inclusive, article two of this chapter, by committing any of the
specifically described and enumerated acts contained therein, shall
be guilty of a misdemeanor and, upon conviction thereof, shall be
fined not more than one thousand dollars, or imprisoned in the
county jail not more than one year, or both fined and imprisoned.
ARTICLE 7. ADMINISTRATION.
§46A-7-103. Division of administrative powers; investigation and
administration.
(1) With respect to regulated consumer lenders and other
supervised financial organizations, the powers of examination and investigation and administrative enforcement shall be exercised by
the official or agency to whose supervision the organization is
subject. All other powers of the attorney general under this
chapter may be exercised by him with respect to any financial
organization whether or not a supervised financial organization.
Notwithstanding the first sentence of this subsection and
notwithstanding subsection (3) of this section, the attorney
general may pursue any investigation, prosecute any suit and take
any other proper action relating to the enforcement of any consumer
protection provision in this chapter.
(2) If the attorney general receives a complaint or other
information concerning noncompliance with this chapter by any
supervised financial organization, he shall inform the official or
agency having supervisory authority over the organization
concerned. The attorney general may request information about
financial organizations from the officials or agencies supervising
them.
(3) The attorney general and any official or agency of this
state having supervisory authority over a financial organization
are authorized and directed to consult and assist one another in
maintaining compliance with this chapter. They may jointly pursue
investigations, prosecute actions and take other official actions, as they deem appropriate, if either of them otherwise is empowered
to take the action.
§46A-7-115. Notification.
(1) Every person engaged in this state in making consumer
credit sales or consumer loans, including any person subject to the
provisions of section five-a, article twenty-three, chapter eleven
of this code, as a result of their consumer lending or any person
who regularly purchases retail installment contracts or other
consumer paper from a business with which it is affiliated, and
every person having an office or place of business in this state
who takes assignments of and undertakes direct collection of
payments from or enforcement of rights against debtors arising from
such sales or loans, shall file notification with the state tax
department within thirty days after commencing business in this
state, and, thereafter, on or before the thirty-first day of
January of each year. A notification shall be deemed to be in
compliance with this section if the information hereinafter
required is given in an application for a business registration
certificate provided for in section four, article twelve, chapter
eleven of this code. The state tax commissioner shall make any
information required by this section available to the attorney
general or commissioner upon request. The notification shall state:
(a) Name of the person;
(b) Name in which business is transacted if different from
subdivision (a) of this subsection;
(c) Address of principal office, which may be outside this
state;
(d) Address of all of its offices, if any, in this state at
which consumer loans are made, or in the case of a lender credit
card, a description of its affiliation to any store chain, or
national or regional credit card acceptance system, or in the case
of a person taking assignments of obligations, the offices or
places of business within this state at which business is
transacted;
(e) If consumer credit sales or consumer loans, including
loans secured by real property, are made otherwise than at its
retail store or office in this state, a brief description of the
manner in which they are made;
(f) Address of designated agent upon whom service of process
may be made in this state; and
(g) Whether regulated consumer loans are made.
(2) If information in a notification becomes inaccurate after
filing, accurate information must be filed within thirty days.
(3) The provisions of this section are not applicable to a seller whose credit sales consist entirely of sales made pursuant
to a seller's credit card so long as the issuer of the card has
fully complied with the provisions of this section, nor are the
provisions of this section applicable to a person whose consumer
lending in West Virginia is incidental and confined to access
through a nonproprietary automatic teller machine or similar
electronic communication terminal.
ARTICLE 8. OPERATIVE DATE AND PROVISIONS FOR TRANSITION.
§46A-8-101. Time of becoming operative; provisions for transition;
enforceability of prior transactions.
(1) Except as otherwise provided in this section, this chapter
shall become operative at 12:01 a.m. on the first day of September,
one thousand nine hundred seventy-four.
(2) Notwithstanding the provisions of subsection (1) of this
section, in order to allow sufficient time to prepare for the
implementation and operation of this chapter and to act on
applications for licenses to make regulated consumer loans under
this chapter as amended, the provisions of article four of this
chapter, relating to regulated consumer lenders, and the provisions
of article seven of this chapter, relating to their administration,
shall, to the extent necessary, become operative for such purposes
at 12:01 a.m. on the first day of September, one thousand nine hundred ninety-six.
(3) Transactions entered into before this chapter becomes
operative and the rights, duties and interests flowing from them
thereafter may be terminated, completed, consummated or enforced as
required or permitted by any statute, rule of law or other law
amended, repealed or modified by this chapter as though the repeal,
amendment or modification had not occurred, but this chapter
applies to:
(a) Refinancings and consolidations made after this chapter
becomes operative of consumer credit sales, consumer leases and
consumer loans whenever made;
(b) Consumer credit sales or consumer loans made after this
chapter becomes operative pursuant to revolving charge accounts or
revolving loan accounts entered into, arranged or contracted for
before this chapter becomes operative; and
(c) All consumer credit transactions made before this chapter
becomes operative insofar as this chapter limits the remedies of
creditors.
CHAPTER 47. REGULATION OF TRADE.
ARTICLE 6. MONEY AND INTEREST.
§47-6-5d. Rebate upon prepayment, refinancing, consolidation or
otherwise; liability and penalties for excess charges.
(a) Upon prepayment in full of a precomputed loan, credit sale
or transaction, forbearance or similar transaction repayable
according to its original terms over a period of thirty-six months
or less, the creditor shall rebate that portion of the finance
charge attributable to the prepaid periodic installment periods.
When the total is payable in substantially equal consecutive
monthly installments, the portion of such finance charge
attributable to any particular monthly installment period shall be
that proportion of charge originally contracted for, as the balance
scheduled to be outstanding on the last day of the monthly
installment period before deducting the payment, if any, scheduled
to be made on that day bears to the sum of all the monthly
installment balances under the original schedule of payments.
(This method of allocation is the sum of the digits method,
commonly referred to as the "Rule of 78"). For prepayment in full
of a precomputed loan, credit sale or transaction, forbearance or
similar transaction: (i) Repayable according to its original terms
over a period of thirty-six months or less; (ii) in which unequal
or irregular or other than substantially equal consecutive monthly
installments are payable, the commissioner of banking shall
prescribe by rule the method or procedure for the allocation of
charges and the calculation or rebates consistent with the Rule of 78.
(b) Upon prepayment in full of a precomputed loan, credit sale
or transaction, forbearance or similar transaction, repayable by
its original terms over a period of greater than thirty-six months,
an amount shall be rebated of not less than the unearned portion of
the finance charge calculated by applying the rate of finance
charge which was required by applicable law to be disclosed in the
transaction according to the actuarial method to the unpaid balance
for the time remaining as originally scheduled or as extended by
deferral or otherwise for the period following prepayment. In
instances where no rate of finance charge was required by law or
otherwise to be disclosed, the unearned portion of the finance
charge shall be calculated by applying the finance charge which was
charged in the transaction according to the actuarial method to the
unpaid balance for the time remaining as originally scheduled or as
extended by deferral or otherwise for the period following
prepayment.
(c) Unearned prepaid finance charges upon prepayment includes
all prepaid finance charges for points, loan or credit origination
fees, or loan or credit investigation fees retained by the lender
or creditor or its affiliates:
Provided, That: (i) In calculating
the rebate for a consumer loan or credit sale unsecured by real property where such prepaid finance charges have been imposed, the
lender or creditor may deduct such charges up to a maximum of two
percent of the amount financed; and (ii) in calculating the rebate
for a consumer loan or credit sale secured by real property where
such prepaid finance charges have been imposed, the lender or
creditor may deduct such charges up to a maximum of five percent of
the amount financed:
Provided, however, That no such deduction
totaling more than five percent of the amount financed may be made
by the same lender within a twenty-four month period as a result of
a refinancing. Upon prepayment in full of a consumer loan or
credit sale, any unearned prepaid finance charges may be rebated by
using the Rule of 78 where the original loan term is thirty-six
months or less. Where the original loan term is greater than
thirty-six months, any such charges shall be rebated by using the
actuarial method. To the extent that this section overrides the
preemption on limiting points and other such charges on first lien
residential mortgages for nonpurchase money loans contained in
Section 501 of the United States Depository Institutions
Deregulation and Monetary Control Act of 1980, the state law
limitations contained in this section shall apply:
Provided
further, That this subsection does not apply to loans made by
federally-insured depository institutions.
(d) For purposes of the rebate of unearned finance charges as
required by this section, a prepayment in full shall include
repayment by a new loan, extension of credit, refinancing,
consolidation, forbearance or otherwise. The term "loan or credit
investigation fees" does not include the reasonable costs of credit
reports paid to third parties as part of the bona fide closing
costs in real estate transactions, where such costs are not
included as part of the finance charge.
(e) As an alternative to the Rule of 78 method of rebate of
determining the unearned finance charge required by this section,
a creditor may rebate unearned finance charges under any other
method which gives a greater rebate to the debtor than the rebate
determined by the Rule of 78.
(f) The provisions governing rebates as set forth in this
section shall apply to all transactions entered into on or after
the first day of September, one thousand nine hundred ninety-six.
For transactions entered into prior to the first day of September,
one thousand nine hundred ninety-six, the provisions in effect
prior to the effective date of this section of the respective
chapters of this code shall be utilized to determine the rebate of
unearned finance charges.
(g) For consumer credit sales or consumer loans subject to the provisions of chapter forty-six-a of this code, the provisions of
article five of said chapter, govern the imposition of liability
and penalties for charging interest or a finance charge in excess
of the maximum rate allowed under the provisions of this section.
In all other instances, the provisions of this article govern the
imposition of liability and penalties for charging interest or a
finance charge in excess of the maximum allowed under this section.
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