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286.4-530 Basic, default and deferment charges -- Prohibition against division
of loan and excessive charges.
(1)
(2)
(3)
(4)
(5)
Every licensee may lend any sum of money not exceeding fifteen thousand
dollars ($15,000), excluding charges, and may charge, contract for and receive
thereon charges not in excess of three percent (3%) per month on that part of
the unpaid principal balance not in excess of one thousand dollars ($1,000)
and two percent (2%) per month on that part of the unpaid principal balance
exceeding one thousand dollars ($1,000) but not exceeding three thousand
dollars ($3,000); provided, however, that in any loan wherein the original
principal amount of the loan (face amount less precomputed charges) exceeds
three thousand dollars ($3,000), the licensee may not charge at a rate per
month in excess of two percent (2%) per month on the unpaid balances of the
principal. Such charges shall be computed in advance at the agreed rate on
scheduled unpaid principal balances of the cash advance on the assumption
that all scheduled payments will be made when due. The total amount of such
precomputed charges shall be added to the original cash advance and the
resulting sum shall become the face amount of the note. Every payment may
be applied to the combined total of the cash advance and precomputed
charges until the contract is paid in full.
For the purposes of computation, whether at the maximum rate or less, a
month shall be that period of time from any date in a month to the
corresponding date in the next month and if there is no such corresponding
date then to the last day of such month, and a day shall be considered
one-thirtieth (1/30) of a month when such computation is made for a fraction of
a month. The portion of the charges applicable to any particular monthly
installment period, as originally scheduled or following a deferment, shall bear
the same ratio to the total charges, excluding any adjustments made pursuant
to subsection (3) of this section, as the balance scheduled to be outstanding
during that monthly period bears to the sum of all monthly balances scheduled
originally by the contract of loan.
A licensee and borrower may agree that the first installment date may be not
more than fifteen (15) days more than one (1) month and the amount of such
installment may be increased by one-thirtieth (1/30) of the portion of the
charges applicable to a first installment period of one (1) month for each extra
day.
If one-half (1/2) or more of any installment remains unpaid more than seven (7)
days after it is due, the licensee may charge and collect a default charge not
exceeding two cents (2 ) for each dollar of the scheduled installment, and such
charge may be collected for each full month the installment remains unpaid.
If the payment of all wholly unpaid installments on which no default charge has
been collected is deferred one or more full months, the licensee may charge
and collect a deferment charge not exceeding two cents (2 ) for each one
dollar ($1) of the sum of the installments so deferred, multiplied by the number
of months the maturity of the contract is extended; provided, however, that
such number of months shall not exceed the number of installments which are
due and wholly unpaid or due within fifteen (15) days from the date of
deferment. The deferment charge may be collected at the time of deferment or
at any time thereafter. Any payment received at the time of deferment may be
applied first to the deferment charge and the remainder, if any, applied to the
unpaid balance of the contract, provided, however, that if such payment is
sufficient to pay, in addition to the appropriate deferment charge, any
installment which is in default and the applicable default charge, it shall be first
so applied and any such installment shall not be deferred or subject to the
deferment charge. At the time a deferment is made the borrower shall be given
a statement or receipt showing the amount of the deferment charge, the date
and amount of the next scheduled payment and the number of remaining
scheduled payments.
(6) If the contract of loan is prepaid in full by cash, a new loan or otherwise before
the final installment date, the portion of the charges applicable to the full
installment periods following the installment date nearest the date of
prepayment shall be refunded. Any default or deferment charges which are due
and unpaid may be deducted from such refund. The tender by the borrower or
at his request of an amount equal to the unpaid balance less the required
refund must be accepted by the licensee in full payment of the contract. If
judgment is obtained before the final installment date the contract balance shall
be reduced by the refund which would be required for prepayment in full as of
the date judgment is obtained. No refund of less than one dollar ($1) need be
made; no refund for partial prepayments need be made.
(7) If two (2) or more full installments are in default for one (1) full month or more
at any installment date and if the contract so provides, the licensee may reduce
the contract balance by the refund or credit which would be required for
prepayment in full on such installment date. Thereafter, in lieu of charging,
collecting or receiving charges as provided in subsections (1) to (6) inclusive of
this section, charges may be charged, collected and received as provided by
subsection (8) of this section until the contract is fully paid.
(8) In lieu of computing and collecting charges as provided in subsections (1) to
(6) inclusive of this section a licensee may contract for, collect and receive on
loans of fifteen thousand dollars ($15,000) or less charges as permitted in
subsection (1) computed on the unpaid principal balance of the loan from time
to time outstanding. Such charges shall not be paid, deducted, received in
advance or compounded but shall be computed, collected and received only on
unpaid principal balances for the time actually outstanding. The definition of a
month and of a day in subsection (2) of this section shall apply for the purposes
of such computations.
(9) If part or all of the consideration for a contract of loan is the unpaid principal
balance of a prior loan with the same licensee then the principal amount
payable under such contract of loan shall not include any unpaid charges on
the prior loan except such charges which have accrued within sixty (60) days
before the making of such new contract of loan and may include the balance
remaining after giving the refund required by subsection (6) of this section.
(10) In addition to the charges provided for in this subtitle no further charge or
amount whatsoever for any examination, service, brokerage, commission,
expense, fee, or bonus or other thing shall be directly or indirectly charged,
contracted for, or received, except the lawful fees actually and necessarily paid
out by the licensee to any public official for filing, recording or releasing in any
public office any instrument securing the loan; the identifiable charge of
premium for insurance provided for in KRS 286.4-560; or fees for noting or
releasing a lien on or transferring a certificate of title to any motor vehicle
offered as security for a loan made under this subtitle. If any amount in excess
of the amounts authorized by this subtitle is charged, contracted for or
received, except as the result of an accidental or bona fide error, the lender
shall have no right to collect or receive any charges whatsoever.
(11) No licensee shall induce or permit any borrower to split up or divide any loan
nor permit any one borrower to become indebted to him under more than one
(1) contract of loan at the same time if the actual amount of the indebtedness
on any one of such contracts is in the amount or of the value of fifteen
thousand dollars ($15,000) or less and there is charged, contracted for, or
received thereon, directly or indirectly, by any device, subterfuge, or pretense
whatsoever, any interest, or consideration therefor greater than would
otherwise be permitted by this subtitle.
(12) No licensee shall directly or indirectly charge, contract for or receive any
interest or consideration greater than the lender would be permitted by law to
charge if he were not a licensee hereunder upon any loan in the amount or of
the value of more than fifteen thousand dollars ($15,000) excluding charges, or
in any case in which the licensee permits any individual as borrower, indorser,
guarantor, or surety for any borrower, or otherwise, to owe on any loan or loans
directly or contingently, or both, to the licensee at any time the sum of more
than fifteen thousand dollars ($15,000) for principal, excluding charges.
Effective:July 15, 1982
History: Amended 1982 Ky. Acts ch. 53, sec. 3, effective July 15, 1982. -Amended 1980 Ky. Acts ch. 107, sec. 2, effective July 15, 1980. -- Amended
1976 Ky. Acts ch. 382, sec. 1. -- Amended 1970 Ky. Acts ch. 48, sec. 2. -Created 1960 Ky. Acts ch. 204, sec. 13, effective June 16, 1960.
Formerly codified as KRS 288.530.
Legislative Research Commission Note (7/12/2006). In accordance with 2006
Ky. Acts ch. 247, secs. 38 and 39, this statute has been renumbered as a
section of the Kentucky Financial Services Code, KRS Chapter 286, and KRS
references within this statute have been adjusted to conform with the 2006
renumbering of that code.
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