(1) Except as otherwise
provided in this section, upon prepayment in full of the unpaid balance of a
precomputed consumer credit transaction, an amount not less than the unearned
portion of the finance charge calculated according to this section shall be rebated
to the consumer. If the rebate otherwise required is less than one dollar, no rebate
need be made.
(2) Upon prepayment in full of a consumer credit transaction, other than one
pursuant to a revolving account, a refinancing, or a consolidation, whether or not
precomputed, the creditor may collect or retain a minimum charge within the limits
stated in this subsection (2) if the finance charge earned at the time of prepayment
is less than any minimum charge contracted for. The minimum charge may not
exceed the lesser of the amount of finance charge contracted for or twenty-five
dollars.
(3) (a) Except as otherwise provided in this section, the unearned portion of
the finance charge is a fraction of the finance charge of which the numerator is the
sum of the periodic balances scheduled to follow the computational period in which
prepayment occurs, and the denominator is the sum of all periodic balances under
either the consumer credit agreement or, if the balance owing resulted from a
refinancing described in section 5-2-205 or a consolidation described in section 5-2-206, under the refinancing agreement or consolidation agreement.
(b) With respect to a precomputed transaction entered into on or after
October 28, 1975, and payable according to its original terms in more than sixty-one installments or on any precomputed transaction entered into on or after
January 1, 1982, the unearned portion of the finance charge is, at the option of the
lender, either:
(I) That portion that is applicable to all fully unexpired computational periods
as originally scheduled, or if deferred, as deferred, that follow the date of
prepayment. For this purpose, the applicable charge is the total of that which would
have been made for each such period, had the consumer credit transaction not been
precomputed, by applying to unpaid balances of the amount financed, according to
the actuarial method, the annual percentage rate of charge previously stated to the
consumer pursuant to the provisions on disclosure contained in section 5-3-101
based upon the assumption that all payments were made as originally scheduled, or
if deferred, as deferred. The creditor, at the creditor's option, may round the annual
percentage rate to the nearest one-half of one percent so long as such procedure is
not consistently used to obtain a greater yield than would otherwise be permitted;
or
(II) The total finance charge minus the earned finance charge. The earned
finance charge shall be determined by applying the annual percentage rate
previously stated to the consumer pursuant to the provisions on disclosure
contained in section 5-3-101 according to the actuarial method to the actual unpaid
balances for the actual time the balances were unpaid up to the date of
prepayment. If a delinquency or deferral charge was collected, it shall be treated as
a payment.
(c) In the case of a consumer credit transaction primarily secured by an
interest in land, reasonable sums actually paid or payable to persons not related to
the creditor for customary closing costs included in the finance charge shall be
deducted from the finance charge before the calculation prescribed by this
subsection (3) is made.
(4) As used in this section, unless the context otherwise requires:
(a) Computational period means one month if one-half or more of the
intervals between scheduled payments under the agreement is one month or more
and otherwise means one week.
(b) The interval to the due date of the first scheduled installment or the
final scheduled payment date is measured from the date of a consumer credit
transaction and includes either the first or last day of the interval. If the interval to
the due date of the first scheduled installment does not exceed one month by more
than fifteen days when the computational period is one month or eleven days when
the computational period is one week, the interval shall be considered as one
computational period.
(c) Periodic balance means the amount scheduled to be outstanding on the
last day of a computational period before deducting the payment, if any, scheduled
to be made on that day.
(5) (a) This subsection (5) applies only if the schedule of payments is not
regular.
(b) If the computational period is one month and:
(I) If the number of days in the interval to the due date of the first scheduled
installment is less than one month by more than five days or more than one month
by more than five but not more than fifteen days, the unearned finance charge shall
be increased by an adjustment for each day by which the interval is less than one
month and, at the option of the creditor, may be reduced by an adjustment for each
day by which the interval is more than one month; the adjustment for each day shall
be one-thirtieth of that part of the finance charge earned in the computational
period prior to the due date of the first scheduled installment assuming that period
to be one month; and
(II) If the interval to the final scheduled payment date is a number of
computational periods plus an additional number of days less than a full month, the
additional number of days shall be considered a computational period only if
sixteen days or more. This subparagraph (II) applies whether or not subparagraph (I)
of this paragraph (b) applies.
(c) Notwithstanding paragraph (b) of this subsection (5), if the computational
period is one month, the number of days in the interval to the due date of the first
installment exceeds one month by not more than fifteen days and the schedule of
payments is otherwise regular, the creditor at the creditor's option may exclude the
extra days and the charge for the extra days in computing the unearned finance
charge; but if the creditor does so and a rebate is required before the due date of
the first scheduled installment, the creditor shall compute the earned charge for
each elapsed day as one-thirtieth of the amount the earned charge would have
been if the first interval had been one month.
(d) If the computational period is one week and:
(I) If the number of days in the interval to the due date of the first scheduled
installment is less than five days or more than nine days but not more than eleven
days, the unearned finance charge shall be increased by an adjustment for each
day by which the interval is less than seven days and, at the option of the creditor,
may be reduced by an adjustment for each day by which the interval is more than
seven days; the adjustment for each day shall be one-seventh of that part of the
finance charge earned in the computational period prior to the due date of the first
scheduled installment assuming that period to be one week; and
(II) If the interval to the final scheduled payment date is a number of
computational periods plus an additional number of days less than a full week, the
additional number of days shall be considered a computational period only if four
days or more. This subparagraph (II) applies whether or not subparagraph (I) of this
paragraph (d) applies.
(6) Except as otherwise provided in paragraph (b) of subsection (3) of this
section, if a deferral described in section 5-2-204 has been agreed to, the unearned
portion of the finance charge is the portion thereof attributable according to the
sum of the balances method to the period from the first day of the computational
period following that in which prepayment occurs; except that the numerator of the
fraction is the sum of the periodic balances, after rescheduling to give effect to any
deferral, scheduled to follow the computational period in which prepayment occurs.
A separate rebate of the deferral charge is not required unless the unpaid balance
of the transaction is paid in full during the deferral period, in which event the
creditor shall also rebate the unearned portion of the deferral charge.
(7) Except as otherwise provided in paragraph (b) of subsection (3) of this
section, this section does not preclude the collection or retention by the creditor of
delinquency charges described in section 5-2-203.
(8) If the maturity is accelerated for any reason and judgment is obtained,
the consumer is entitled to the same rebate as if payment had been made on the
date judgment is entered.
(9) Upon prepayment in full of a consumer credit transaction by the
proceeds of consumer credit insurance described in section 5-4-103, the consumer
or the consumer's estate is entitled to the same rebate as though the consumer had
prepaid the agreement on the date the proceeds of the insurance are paid to the
creditor but no later than ten business days after satisfactory proof of loss is
furnished to the creditor.