Indiana Modifies Provisions Regarding Supervised Loans
by: Zachary Pearlstein
Indiana has recently updated regulations regarding supervised loans, effective on July 1, 2013. These updates are as follows:
Consumer Credit Sales:
There is a new method for determining the maximum credit service charge for a consumer credit sale. The charge may not exceed the greater of:
- The total of:
- 36% per year on the part of the unpaid balances of the amount financed which is $2,000 or less;
- 21% per year on that part of the unpaid balances of the amount financed which is more than $2,000 but less than $4,000; and
- 15% per year on that part of the unpaid balances of the amount financed which is more than $4,000; or
Non-Supervised Loans:
For a consumer loan other than a supervised loan, a lender may contract a finance charge of not more than 25% annually, on the unpaid principal balance.
In addition, a lender may contract for the following:
- For a consumer loan secured by an interest in land that:
- Is not made under a revolving loan account, 2% of the loan amount, or
- Is made under a revolving loan account, 2% of the line of credit
In the case of a consumer loan that is not secured by an interest in land, if a lender retains part of a loan origination fee charged on a loan that is paid in full by a new loan from the same lender:
-
If the loan is paid in full by the new loan within 3 months after the date of the prior loan, the lender may not charge a loan origination fee on the new loan, or in the case of a revolving loan, on the increased credit line.
-
The lender may not assess more than two loan origination fees in any 12 month period.
-
In the case of a consumer loan that is secured by an interest in land, a lender is not prohibited from receiving a fee for preparing deeds, mortgages, and reconveyances, in addition to the loan origination fee.
Supervised Loans:
A supervised loan is defined as a consumer loan in which the rate of the finance charge exceeds 25% (previously 21%).
The loan finance charge may not exceed the greater of:
-
The total of:
-
36% per year on the part of the unpaid balances of the amount financed which is $2,000 or less;
-
21% per year on that part of the unpaid balances of the amount financed which is more than $2,000 but less than $4,000; and
-
15% per year on that part of the unpaid balances of the amount financed which is more than $4,000; or
-
25% per year on the unpaid balances of the amount financed.
In addition to the loan finance charge, the lender may receive a loan origination fee of not more than $50, which is not subject to refund or rebate.
In the case of a supervised loan that is not secured by an interest in land, if a lender retains any part of an origination fee that is paid in full by a new loan from the same lender:
-
If the loan is paid in full by the new loan within 3 months after the date of the prior loan, the lender may not charge a loan origination fee on the new loan, or in the case of a revolving loan, on the increased credit line.
-
The lender may not assess more than two loan origination fees in any 12 month period.
In the case of a consumer loan that is secured by an interest in land, a lender is not prohibited from receiving a fee for preparing deeds, mortgages, and reconveyances, in addition to the loan origination fee.
About the Author:
Zachary Pearlstein is Associate Counsel and Compliance Specialist at Bankers Advisory. He is a graduate of Brandeis University and earned his Juris Doctor at Suffolk Law School. He is admitted to the Massachusetts Bar. Zachary can be reached at zachary@bankersadvisory.com
Zachary Pearlstein, JD, is a Regulatory Compliance Director with CLA's Mortgage Advisory Division. He joined CLA on January 1, 2014, as part of its acquisition of Bankers Advisory, Inc. Zachary oversees Mortgage Advisory's regulatory compliance team, which focuses on federal and state compliance, fair lending, and the Home Mortgage Disclosure Act (HMDA). He is a graduate of Brandeis University and earned his juris doctor at Suffolk University Law School. He is admitted to the Massachusetts Bar.
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