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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 any loan where the
original principal amount of the loan is not in excess of three thousand dollars
($3,000) and two percent (2%) per month on any loan where the original principal
amount of the loan exceeds three thousand dollars ($3,000). 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 (1) 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) of
this section 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 (1) 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 (1) 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, 2014
History: Amended 2014 Ky. Acts ch. 13, sec. 1, effective July 15, 2014. -- 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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