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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