§ 351 — Restrictions on loans subject to the provisions of this article; interest; other charges

§ 351. Restrictions on loans subject to the provisions of this\narticle; interest; other charges. 1. Every licensee hereunder may loan\nany sum of money not exceeding the maximum principal amounts prescribed\nin section three hundred forty of this article, and may charge, contract\nfor, and receive thereon interest at the rate or rates agreed to by the\nlicensee and the borrower. Such interest may either (a) be calculated on\nthe actual unpaid principal balances of the loan or in the case of a\nloan commitment from the date of each advance thereunder for the actual\ntime outstanding, according to a generally accepted actuarial method at\na fixed or variable rate and in accordance with the provisions of the\nevidence of the indebtedness or (b) precomputed under subdivision five\nof this section.\n 2. On any loan with a variable rate of interest made pursuant to this\nsubdivision, the rate shall be determined at regular intervals as set\nforth in the evidence of indebtedness and in accordance with such\nregulations as the superintendent of financial services shall prescribe\nbut said rate shall not vary more often than once in any three month\nperiod and shall be based on a published index that is (a) readily\navailable, (b) independently verifiable, (c) beyond the control of the\nlicensee, and (d) approved by the superintendent.\n The superintendent of financial services shall adopt regulations,\nincluding but not limited to: (i) providing for disclosure to the\nborrower by the licensee of the circumstances under which the rate may\nincrease, any limitations on the increase, the effect of an increase and\nan example of the payment terms that would result from an increase; (ii)\nproviding for disclosure to the borrower by the licensee of a history of\nthe fluctuations of the index over a reasonable period of time; and\n(iii) providing for notice to the borrower from the licensee prior to\nany rate increase or change in the terms of payment.\n 3. Loans may be granted under an open end or closed end loan agreement\nproviding for a fixed or variable rate.\n 4. Interest, consideration, or charges for the use of money shall not\nbe deducted or received in advance and shall be computed on unpaid\nprincipal balances. Such interest, consideration, or charges shall not\nbe compounded; provided that, if part or all of the principal amount of\nany loan contract is the unpaid principal balance of a prior loan, the\nunpaid interest, consideration or charges for the use of money on such\nprior loan which have accrued within sixty days before the making of\nsuch loan contract may be incorporated as interest bearing principal in\nthe principal amount of such loan contract, and for the purposes of this\nsubdivision any such new loan shall be deemed a separate loan\ntransaction.\n 5. When a closed-end loan agreement requires repayment in\nsubstantially equal and consecutive monthly installments of principal\nand interest combined, the interest may be precomputed at the agreed\nrate on scheduled unpaid principal balances according to the terms of\nthe agreement and added to the principal amount of the loan. Every\npayment may be applied to the combined total of principal and\nprecomputed interest until the loan agreement is fully paid and the\nacceptance or payment of interest on loans made under the provisions of\nthis subdivision shall not be deemed to constitute payment, deduction or\nreceipt thereof in advance nor compounding under subdivision four of\nthis section. Such precomputed interest shall be subject to the\nfollowing adjustments:\n (a) If the loan agreement is prepaid in full by cash, a new loan,\nrefinancing or otherwise before the final installment date, the borrower\nshall receive a refund of (i) the unearned portion of the interest the\namount of which portion shall be determined according to a generally\naccepted actuarial method; provided, however, that if the amount of\nprecomputed interest (A) is less than ten dollars, no refund shall be\nrequired; or (B) exceeds the sum of ten dollars and the earned interest\nis less than that amount, the licensee may retain such an additional\namount as will bring the earned interest to ten dollars and refund the\nremainder, and provided further, that unless the loan is refinanced, no\nrefund shall be required if it amounts to less than one dollar; and (ii)\nif a charge was made to the borrower for credit related insurance for\ninsuring the borrower the excess of the charge to the borrower therefor\nover the insurance charges paid or payable by the licensee, if such\ninsurance charges were paid or payable by the licensee periodically, or\nthe refund for such insurance charges received or receivable by the\nlicensee, if such premium was paid or payable in a lump sum by the\nlicensee, provided that no such refund shall be required if it amounts\nto less than one dollar. In the event (i) the maturity of the loan is\naccelerated due to the default of the borrower or otherwise and judgment\nis obtained, or (ii) repayment is made pursuant to any credit related\ninsurance policy for which a charge was made to the borrower for the\npremium thereon, the borrower or legal representative, as the case may\nbe, shall be entitled to the same refund of interest and insurance\ncharges as if the loan had been prepaid in full on the date of\nacceleration or repayment.\n (b) (i) In the event of default of more than ten days in the payment\nof any scheduled installment, the licensee may charge and collect a\ndefault charge not exceeding five percent of the installment in default.\nThis charge may not be collected more than once for the same default and\nmay be collected at the time of such default or at any time thereafter.\n (ii) After the final due date or upon acceleration of maturity for\ndefault, the licensee may charge interest at the original agreed rate on\nactual unpaid balances if the loan agreement so provides.\n (c) If payment of all unpaid installments on which no default charge\nhas been charged and collected is deferred one or more full months, and\nif the loan agreement so provides, the licensee may charge and collect\nan amount which shall be equal to the difference between the refund that\nwould be required for prepayment in full as of the scheduled due date of\nthe first deferred installment and the amount which would be required\nfor prepayment in full as of one month prior to said date, multiplied by\nthe number of months in the deferment period. The deferment period is\nthat period in which no scheduled payment has been made and in which no\npayment is required by reason of the deferment. Such charge may be\ncollected at the time of deferment or may be collected at any time\nthereafter. If a refund of precomputed interest is required during a\ndeferment period the borrower shall also receive a refund of the\ndeferment charge for the number of months remaining in said period, for\nwhich purpose a portion of a month exceeding fifteen days shall be\ndeemed a month.\n (d) If two or more installments or parts thereof are in default for\nfive days or more, the licensee may, if the loan agreement so provides,\nelect to convert the loan from a precomputed one to one in which\ninterest is paid on actual unpaid balances. In this event, the licensee\nshall make the same refund of interest as if the loan were prepaid in\nfull on the scheduled payment due date preceding the date of conversion\nand thereafter may charge interest at the agreed rate, by the actuarial\nmethod, on actual unpaid balances for the time actually outstanding.\n 6. * (a) In addition to the interest, consideration, or charges above\nspecified, no further or other charge or amount whatsoever for any\nexamination, service, brokerage, commission, expense, fee, or bonus or\nother thing or otherwise shall be directly or indirectly charged,\ncontracted for, or received, except the premium or identifiable charge\nfor insurance authorized by section three hundred fifty-seven of this\narticle; the lawful fees, if any, actually and necessarily paid out by\nthe licensee to any public officer for filing, recording, or releasing\nin any public office any instrument securing the loan, which fees may be\ncollected when the loan is made or at any time thereafter or non-filing\ninsurance premiums not in excess of seven dollars in lieu of filing,\nrecording or releasing any such instrument; an annual fee on open end\nloans authorized by the superintendent and made pursuant to subdivision\nthree of this section, provided, however, that no such fee shall exceed\nan amount equal to one percent of the amount of the loan or fifty\ndollars, whichever is less; and a fee, not to exceed the amount set\nforth in section 5-328 of the general obligations law, for return by a\ndepository institution of a dishonored check, negotiable order of\nwithdrawal, or share draft.\n * NB Effective until June 30, 2027\n * (a) In addition to the interest, consideration, or charges above\nspecified, no further or other charge or amount whatsoever for any\nexamination, service, brokerage, commission, expense, fee, or bonus or\nother thing or otherwise shall be directly or indirectly charged,\ncontracted for, or received, except the premium or identifiable charge\nfor insurance authorized by section three hundred fifty-seven of this\narticle; the lawful fees, if any, actually and necessarily paid out by\nthe licensee to any public officer for filing, recording, or releasing\nin any public office any instrument securing the loan, which fees may be\ncollected when the loan is made or at any time thereafter or non-filing\ninsurance premiums not in excess of seven dollars in lieu of filing,\nrecording or releasing any such instrument; and a fee, not to exceed the\namount set forth in section 5-328 of the general obligations law, for\nreturn by a depository institution of a dishonored check, negotiable\norder of withdrawal, or share draft.\n * NB Effective June 30, 2027\n (b) Any licensee which knowingly receives, reserves or charges a\ngreater rate of interest than that authorized by this section shall\nforfeit the entire interest which the note, or other evidence of debt\ncarries with it, or which has been agreed to be paid thereon, and if a\ngreater rate of interest has been paid, the person paying the same or\nhis legal representative may recover from the licensee twice the entire\namount of interest thus paid.\n * (c) In addition to other such information as the superintendent may\nrequire, any licensee which charges an annual fee on open end loan\naccounts shall annually report, in a manner and form prescribed by the\nsuperintendent, information to the department on open end loan\nborrowers, which shall include: average annual income of borrowers at\nthe time of the loan, average amount of loans outstanding at the end of\neach calendar year, average interest charged, average amount of annual\nfees, and geographic distribution of loans made by the licensee.\n * NB Repealed June 30, 2027\n