2006 Code of Virginia § 38.2-4705 - Maximum interest rate and maximum service charge on premium finance agreement

38.2-4705. Maximum interest rate and maximum service charge on premiumfinance agreement.

A. The Commission shall periodically investigate the economic conditions andother factors relating to and affecting the business of insurance premiumfinance companies. The Commission shall ascertain all pertinent factsnecessary to determine what maximum interest rate and what maximum servicecharge shall be permitted. Upon the basis of those facts and subject to thischapter, the Commission shall determine and fix by regulation or order themaximum interest rate and maximum service charge that may be charged inadvance upon the amount financed by any insurance premium finance company.

B. The Commission shall initially fix the maximum interest rate at onepercent per month charged in advance upon the entire amount financed payablein installments, and shall initially fix the maximum service charge atfifteen dollars. Thereafter, the maximum interest rate and maximum servicecharge shall be determined by the Commission after giving due considerationto such factors as (i) prevailing market interest rates, (ii) other relevantcost indices, and (iii) the industry-wide experience of premium financecompanies operating in this Commonwealth. Before redetermining the maximuminterest rate or maximum service charge, the Commission shall give alllicensees notice and opportunity to be heard and to introduce evidence withrespect to the maximum interest rate or service charge.

C. Interest at the authorized rate may be charged from the effective date ofthe premium finance agreement or the inception date of the insurance contractfor which the premiums are being financed, whichever is earlier, through thedate when the final installment of the premium finance agreement is payable.Interest charged under a premium finance agreement shall not be fully earnedat the inception of the agreement. The insurance premium finance company mayearn interest through the date the principal amount financed under a premiumfinance agreement has been paid in full for any reason. Upon such payment infull, a refund credit of any unearned interest shall be due the insured andshall be computed on a short rate or prorata basis as set forth in theagreement, provided that the interest charged does not exceed the maximuminterest rate established by the Commission pursuant to subsection A. Theservice charge received by an insurance premium finance company shall befully earned upon its receipt and no portion of the service charge need berefunded upon prepayment of the loan for any reason. Only one service chargeshall be made for each premium finance agreement, and no insurance agent orinsurance premium finance company shall induce any person to enter into morethan one premium finance agreement for the purpose of obtaining more than oneservice charge. Notwithstanding the foregoing, one additional charge not toexceed ten dollars may be charged if additional premiums are added to anexisting finance agreement at the insured's request. Such additional chargemay be applied only once during the term of any premium finance agreement. Nopart of any charges shall be paid to any insurance agent by an insurancepremium finance company, nor shall any insurance premium finance company pay,allow or give, or offer to pay, allow or give, directly or indirectly, to anyinsurance agent, any valuable consideration as an inducement to finance thepremium of any insurance policy. No insurance agent shall accept any valuableconsideration as an inducement to finance the premium of any insurancepolicy. No person shall be in violation of this section solely by reason ofownership in an insurance premium finance company.

D. Notwithstanding the foregoing, the Commission by rule or order may exemptany premium finance agreement, any class of premium finance agreements or anymarket segment from any of the provisions of this section, if it finds theirapplication unnecessary to achieve the purposes of this chapter.

(1981, c. 107, 38.1-740.1; 1986, c. 562; 1994, cc. 8, 123.)