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286.3-215 Authority to charge interest in advance -- Installment loans with interest
in advance -- Exceptions -- Restrictions on installment loans.
(1)
(2)
(3)
(4)
(a)
In addition to the powers heretofore granted, any bank or trust company or
combined bank and trust company shall have the power to lend money
repayable in installments; to charge or to receive in advance interest therefor
in the case of a loan having a maximum maturity of not more than five (5)
years and thirty-two (32) days; to contract for a charge for a secured or
unsecured installment loan, and which under its terms shall be repayable in
installments over a period of not exceeding ten (10) years and thirty-two (32)
days, which charge shall be at a rate not exceeding eight dollars ($8) per one
hundred dollars ($100) per annum upon the principal amount of the loan
which charge or charges shall be for the entire period of the loan and may be
collected in advance only if the maximum maturity of the loans does not
exceed five (5) years and thirty-two (32) days.
(b) If the maturity of the loan exceeds five (5) years and thirty-two (32) days but
does not exceed ten (10) years and thirty-two (32) days the charge of interest
may not be discounted or received in advance but may be added on to the
principal amount of the loan and shall not be discounted.
(c) If any scheduled payment or deferred payments are more than twice as large as
the average of the earlier scheduled payments, the debtor and creditor shall
agree that the debtor has the right to finance the amount of such payment or
deferred payments at the time they are due without penalty. The terms of the
refinancing which are agreed to by the debtor and the creditor shall be no less
favorable to the debtor than the terms of the original loan.
In addition to the charge permitted by this section, no further amount shall be
directly or indirectly charged, contracted for, or received on any such installment
loan, except lawful fees actually paid to a public officer for filing, recording, or
releasing any instrument securing the loan and delinquent charges as hereinafter set
out, and except an investigation fee not exceeding one dollar ($1) for each fifty
dollars ($50) or fraction thereof upon the first eight hundred dollars ($800) of the
principal amount of such loans.
Delinquency charges may be made not to exceed five cents ($0.05) for each dollar
of each installment more than ten (10) days in arrears, and only one (1) delinquency
charge shall be made on any one (1) installment. No delinquency charge shall
exceed five dollars ($5) on any one (1) installment. In addition to such delinquency
charges, attorney's fees not exceeding fifteen percent (15%) of the unpaid balance
and court costs may be collected, provided that the note is referred to an attorney
not a salaried employee of the holder for collection.
The lending institution shall permit the borrower to repay his loan in whole or in
part at any time. If a loan is paid in full prior to maturity, the lending institution
shall make a rebate at a rate not less than in accordance with the Rule of 78s if the
maximum financing charge permitted hereunder has been taken. If a lesser charge
has been taken, the rebate shall be at not less than a proportional rate. Provided,
however, the lending institution shall be permitted in computing rebates to retain a
minimum charge of ten dollars ($10) to cover its acquisition costs and where the
amount of credit for anticipation of repayment is less than one dollar ($1), no rebate
need be made.
(5) In the case of loans made under this section the corporation shall not take any
assignment, pledge or transfer of wages to be earned or paid in the future, nor any
first lien or first mortgage on real estate as security, except such lien as is created by
virtue of a judgment or decree or first mortgage liens on loans on unimproved real
estate not exceeding ten (10) acres in size or on real estate on which there is located
or to be located a residential mobile home. Nothing in this section is intended to
prevent lending institutions from making loans under the provisions of the National
Housing Act or any other federal legislation, which loans are hereby authorized.
(6) No lending institution under this section shall split up or divide a loan or permit any
person to become obligated to it under more than one (1) contract of loan at the
same time for the purpose of obtaining a greater charge than would otherwise be
permitted by this section.
(7) Every note evidencing a loan made under this section shall contain the following
information and provisions: The original principal amount of the loan excluding any
charge made under this section; a statement of the total charge for the loan; the
amount and the date of each installment; the date of final maturity; an agreement
that the borrower may repay the loan in whole or in part at any time, and that if the
loan is paid in full before final maturity, the borrower will receive a refund of the
unearned portion of the charge as required by this section. At the time the loan is
made, the lending institution shall give the borrower either a copy of the note, or a
statement of the transaction containing the provisions and information required to
be contained in the note. The lending institution shall deliver a receipt for each
payment.
(8) In advertising for loans subject to this section, every advertisement shall conform to
the following requirement: Any statement of the amount of the loan shall be the
original principal amount showing in detail any charge made under this section.
(9) KRS 286.4-420, 286.4-620 and 360.010 shall not apply to loans made under
authority of this section, but said sections shall remain in full force and effect for all
other purposes. Nothing in this section shall be construed to impair the validity or
effect of said sections with respect to loans other than those made pursuant to this
section nor shall anything in this section be construed to impair the validity or effect
of KRS 360.025.
(10) Any contract of loan in the making or collection of which any act shall have been
done which constitutes a willful violation of any provision of this section shall be
void, and the bank, trust company, or combined bank and trust company shall have
no right to collect or receive any interest or charges whatsoever on such loan, but
the unpaid principal of the loan shall be paid in full to the lending institution.
Effective: July 13, 1984
History: Amended 1984 Ky. Acts ch. 111, sec. 125, effective July 13, 1984. -Amended 1980 Ky. Acts ch. 78, sec. 1, effective April 1, 1980. -- Amended 1974 Ky.
Acts ch. 184, sec. 1. -- Amended 1972 Ky. Acts ch. 267, sec. 1. -- Amended 1962
Ky. Acts ch. 79, sec. 1. -- Created 1946 Ky. Acts ch. 60, sec. 1.
Formerly codified as KRS 287.215.
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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