State Codes and Statutes

Statutes > Nebraska > Chapter45 > 45-1024

45-1024. Installment loans; interest rateauthorized; charges permitted; computation; application of payments; violations;restrictions.(1) Except as provided in section 45-1025 andsubsection (6) of this section, every licensee may make loans and may contractfor and receive on such loans charges at a rate not exceeding twenty-fourpercent per annum on that part of the unpaid principal balance on any loannot in excess of one thousand dollars, and twenty-one percent per annum onany remainder of such unpaid principal balance. Except for loans secured bymobile homes, a licensee may not make loans for a period in excess of onehundred forty-five months if the amount of the loan is greater than threethousand dollars but less than twenty-five thousand dollars. Charges on loansmade under the Nebraska Installment Loan Act shall not be paid, deducted,or received in advance. The contracting for, charging of, or receiving ofcharges as provided for in subsection (2) of this section shall not be deemedto be the payment, deduction, or receipt of such charges in advance.(2) When the loan contract requires repayment in substantially equaland consecutive monthly installments of principal and charges combined, thelicensee may, at the time the loan is made, precompute the charges at theagreed rate on scheduled unpaid principal balances according to the termsof the contract and add such charges to the principal of the loan. Every paymentmay be applied to the combined total of principal and precomputed chargesuntil the contract is fully paid. All payments made on account of any loanexcept for default and deferment charges shall be deemed to be applied tothe unpaid installments in the order in which they are due. The portion ofthe precomputed charges applicable to any particular month of the contract,as originally scheduled or following a deferment, shall be that proportionof such precomputed charges, excluding any adjustment made for a first installmentperiod of more than one month and any adjustment made for deferment, whichthe balance of the contract scheduled to be outstanding during such monthbears to the sum of all monthly balances originally scheduled to be outstandingby the contract. This section shall not limit or restrict the manner of calculatingcharges, whether by way of add-on, single annual rate, or otherwise, if therate of charges does not exceed that permitted by this section. Charges maybe contracted for and earned at a single annual rate, except that the totalcharges from such rate shall not be greater than the total charges from theseveral rates otherwise applicable to the different portions of the unpaidbalance according to subsection (1) of this section. All loan contracts madepursuant to this subsection are subject to the following adjustments:(a) Notwithstanding the requirement for substantially equal and consecutivemonthly installments, the first installment period may not exceed one monthby more than twenty-one days and may not fall short of one month by more thaneleven days. The charges for each day exceeding one month shall be one-thirtiethof the charges which would be applicable to a first installment period ofone month. The charge for extra days in the first installment period may beadded to the first installment and such charges for such extra days shallbe excluded in computing any rebate;(b) If prepayment in full by cash, a new loan, or otherwise occurs beforethe first installment due date, the charges shall be recomputed at the rateof charges contracted for in accordance with subsection (1) or (2) of thissection upon the actual unpaid principal balances of the loan for the actualtime outstanding by applying the payment, or payments, first to charges atthe agreed rate and the remainder to the principal. The amount of chargesso computed shall be retained in lieu of all precomputed charges;(c) If a contract is prepaid in full by cash, a new loan, or otherwiseafter the first installment due date, the borrower shall receive a rebateof an amount which is not less than the amount obtained by applying to theunpaid principal balances as originally scheduled or, if deferred, as deferred,for the period following prepayment, according to the actuarial method, therate of charge contracted for in accordance with subsection (1) or (2) ofthis section. The licensee may round the rate of charge to the nearest one-halfof one percent if such procedure is not consistently used to obtain a greateryield than would otherwise be permitted. Any default and deferment chargeswhich are due and unpaid may be deducted from any rebate. No rebate shallbe required for any partial prepayment. No rebate of less than one dollarneed be made. Acceleration of the maturity of the contract shall not in itselfrequire a rebate. If judgment is obtained before the final installment date,the contract balance shall be reduced by the rebate which would be requiredfor prepayment in full as of the date judgment is obtained;(d) If any installment on a precomputed or interest bearing loan isunpaid in full for ten or more consecutive days, Sundays and holidays included,after it is due, the licensee may charge and collect a default charge notexceeding an amount equal to five percent of such installment. If any installmentpayment is made by a check, draft, or similar signed order which is not honoredbecause of insufficient funds, no account, or any other reason except an errorof a third party to the loan contract, the licensee may charge and collecta fifteen-dollar bad check charge. Such default or bad check charges may becollected when due or at any time thereafter;(e) If, as of an installment due date, the payment date of all whollyunpaid installments is deferred one or more full months and the maturity ofthe contract is extended for a corresponding period, the licensee may chargeand collect a deferment charge not exceeding the charge applicable to thefirst of the installments deferred, multiplied by the number of months inthe deferment period. The deferment period is that period during which nopayment is made or required by reason of such deferment. The deferment chargemay be collected at the time of deferment or at any time thereafter. The portionof the precomputed charges applicable to each deferred balance and installmentperiod following the deferment period shall remain the same as that applicableto such balance and periods under the original loan contract. No installmenton which a default charge has been collected, or on account of which any partialpayment has been made, shall be deferred or included in the computation ofthe deferment charge unless such default charge or partial payment is refundedto the borrower or credited to the deferment charge. Any payment receivedat the time of deferment may be applied first to the deferment charge andthe remainder, if any, applied to the unpaid balance of the contract, exceptthat if such payment is sufficient to pay, in addition to the appropriatedeferment charge, any installment which is in default and the applicable defaultcharge, it shall be first so applied and any such installment shall not bedeferred or subject to the deferment charge. If a loan is prepaid in fullduring the deferment period, the borrower shall receive, in addition to therequired rebate, a rebate of that portion of the deferment charge applicableto any unexpired full month or months of such deferment period; and(f) If two or more full installments are in default for one full monthor more at any installment date and if the contract so provides, the licenseemay reduce the contract balance by the rebate which would be required forprepayment in full as of such installment date and the amount remaining unpaidshall be deemed to be the unpaid principal balance and thereafter in lieuof charging, collecting, receiving, and applying charges as provided in thissubsection, charges may be charged, collected, received, and applied at theagreed rate as otherwise provided by this section until the loan is fullypaid.(3) The charges, as referred to in subsection (1) of this section, shallnot be compounded. The charging, collecting, and receiving of charges as providedin subsection (2) of this section shall not be deemed compounding. If partor all of the consideration for a loan contract is the unpaid principal balanceof a prior loan, then the principal amount payable under such loan contractmay include any unpaid charges on the prior loan which have accrued withinsixty days before the making of such loan contract and may include the balanceremaining after giving the rebate required by subsection (2) of this section.Except as provided in subsection (2) of this section, charges shall (a) becomputed and paid only as a percentage per month of the unpaid principal balanceor portions thereof and (b) be computed on the basis of the number of daysactually elapsed. For purposes of computing charges, whether at the maximumrate or less, a month shall be that period of time from any date in a monthto the corresponding date in the next month but if there is no such correspondingdate then to the last day of the next month, and a day shall be consideredone-thirtieth of a month when computation is made for a fraction of a month.(4) Except as provided in subsections (5) and (6) of this section, inaddition to that provided for under the Nebraska Installment Loan Act, nofurther or other amount whatsoever shall be directly or indirectly charged,contracted for, or received. If any amount, in excess of the charges permitted,is charged, contracted for, or received, the loan contract shall not on thataccount be void, but the licensee shall have no right to collect or receiveany interest or other charges whatsoever. If such interest or other chargeshave been collected or contracted for, the licensee shall refund to the borrowerall interest and other charges collected and shall not collect any interestor other charges contracted for and thereafter due on the loan involved, asliquidated damages, and the licensee or its assignee, if found liable, shallpay the costs of any action relating thereto, including reasonable attorney'sfees. No licensee shall be found liable under this subsection if the licenseeshows by a preponderance of the evidence that the violation was not intentionaland resulted from a bona fide error notwithstanding the maintenance of proceduresreasonably adopted to avoid any such error.(5) A borrower may be required to pay all reasonable expenses incurredin connection with the making, closing, disbursing, extending, readjusting,or renewing of loans. Such expenses may include abstracting, recording, releasing,and registration fees; premiums paid for nonfiling insurance; premiums paidon insurance policies covering tangible personal property securing the loan;amounts charged for a debt cancellation contract or a debt suspension contract,as agreed upon by the parties, if the debt cancellation contract or debt suspensioncontract is a contract of a financial institution and such contract is solddirectly by such financial institution or by an unaffiliated, nonexclusiveagent of such financial institution in accordance with 12 C.F.R. part 37,as such part existed on January 1, 2006, and the financial institution isresponsible for the unaffiliated, nonexclusive agent's compliance with suchpart; title examinations; credit reports; survey; taxes or charges imposed upon or in connectionwith the making and recording or releasing of any mortgage; and amounts charged for a guaranteed asset protectionwaiver. Except as provided in subsection (6) of this section,a borrower may also be required to pay a nonrefundable loan origination feenot to exceed the lesser of five hundred dollars or an amount equal to sevenpercent of that part of the original principal balance of any loan not inexcess of two thousand dollars and five percent on that part of the originalprincipal balance in excess of two thousand dollars, if the licensee has notmade another loan to the borrower within the previous twelve months. If thelicensee has made another loan to the borrower within the previous twelvemonths, a nonrefundable loan origination fee may only be charged on new fundsadvanced on each successive loan. Such reasonable initial charges may be collectedfrom the borrower or included in the principal balance of the loan at thetime the loan is made and shall not be considered interest or a charge forthe use of the money loaned.(6)(a) Loans secured solely by real property that are not made pursuantto subdivision (11) of section 45-101.04 on real property shall not be subjectto the limitations on the rate of interest provided in subsection (1) of thissection or the limitations on the nonrefundable loan origination fee undersubsection (5) of this section if (i) the principal amount of the loan isseven thousand five hundred dollars or more and (ii) the sum of the principalamount of the loan and the balances of all other liens against the propertydo not exceed one hundred percent of the appraised value of the property.Acceptable methods of determining appraised value shall be made by the departmentpursuant to rule, regulation, or order.(b) An origination fee on such loan shall be computed only on the principalamount of the loan reduced by any portion of the principal that consists ofthe amount required to pay off another loan made under this subsection bythe same licensee.(c) A prepayment penalty on such loan shall be permitted only if (i)the maximum amount of the penalty to be assessed is stated in writing at thetime the loan is made, (ii) the loan is prepaid in full within two years fromthe date of the loan, and (iii) the loan is prepaid with money other thanthe proceeds of another loan made by the same licensee. Such prepayment penaltyshall not exceed six months interest on eighty percent of the original principalbalance computed at the agreed rate of interest on the loan.(d) A licensee making a loan pursuant to this subsection may obtainan interest in any fixtures attached to such real property and any insuranceproceeds payable in connection with such real property or the loan.(e) For purposes of this subsection, principal amount of the loan meansthe total sum owed by the borrower including, but not limited to, insurancepremiums, loan origination fees, or any other amount that is financed, exceptthat for purposes of subdivision (6)(b) of this section, loan originationfees shall not be included in calculating the principal amount of the loan. SourceLaws 1941, c. 90, § 15, p. 350; C.S.Supp.,1941, § 45-143; Laws 1943, c. 107, § 3, p. 370; R.S.1943, § 45-137; Laws 1957, c. 193, § 1, p. 684; Laws 1963, c. 273, § 2, p. 821; Laws 1963, Spec. Sess., c. 7, § 9, p. 93; Laws 1963, Spec. Sess., c. 9, § 1, p. 103; Laws 1979, LB 87, § 3; Laws 1980, LB 276, § 8; Laws 1982, LB 702, § 1; Laws 1984, LB 681, § 1; Laws 1994, LB 979, § 8; Laws 1995, LB 614, § 1; Laws 1997, LB 555, § 17; Laws 1999, LB 170, § 1; Laws 2000, LB 932, § 30; R.S.Supp.,2000, § 45-137; Laws 2001, LB 53, § 52; Laws 2003, LB 218, § 14; Laws 2004, LB 999, § 40; Laws 2005, LB 533, § 61; Laws 2006, LB 876, § 50; Laws 2009, LB328, § 47; Laws 2010, LB571, § 11.Annotations1. Constitutionality2. Retroactive amendment3. Violations4. Miscellaneous1. ConstitutionalityLegislative Bill 17 of the 1963 Special Session of the Legislature was sustained as constitutional. Kometscher v. Wade, 177 Neb. 299, 128 N.W.2d 781 (1964).Amendment to this section in 1963 Special Session by Legislative Bill 11 was unconstitutional as special legislation. State Securities Co. v. Ley, 177 Neb. 251, 128 N.W.2d 766 (1964).2. Retroactive amendmentRetroactive amendment of this section did not apply to transactions already reduced to judgment. Berg v. Midwest Laundry Equipment Corp., 178 Neb. 770, 135 N.W.2d 457 (1965).Retroactive reduction in penalty for violation of this section sustained as constitutional. Davis v. General Motors Acceptance Corp., 176 Neb. 865, 127 N.W.2d 907 (1964).3. ViolationsLegislature at 1963 Special Session changed penalty for violation of this section. Highway Equipment & Supply Co. v. Jones, 182 Neb. 234, 153 N.W.2d 859 (1967).Where maximum rate of interest was exceeded, installment loan violated this section. Robertson v. Burnett, 172 Neb. 385, 109 N.W.2d 716 (1961).Where excessive charges are made on renewal of loan, there is a violation of this act. State ex rel. Beck v. Associates Discount Corp., 168 Neb. 803, 97 N.W.2d 583 (1959).In an action based upon an illegal contract by a licensee under the small loan law, such licensee loses all right to collect any sum whatever on the indebtedness under the contract. Nitzel & Co. v. Nelson, 144 Neb. 662, 14 N.W.2d 197 (1944).The method used here in calculating unearned interest to be rebated did not produce an actuarially accurate rebate but rather produced hidden charges in violation of the Consumer Protection Act, but there was no violation of the Nebraska Small Loan Act, as the Nebraska statutes do authorize calculation of prepayment rebates by this method. Ballew v. Associates Fin. Ser. Co. of Neb. Inc., 450 F.Supp. 253 (D. Neb. 1976).4. MiscellaneousPermissive provisions of Installment Loan Act apply to licensees. State ex rel. Beck v. Associates Discount Corp., 162 Neb. 683, 77 N.W.2d 215 (1956).Amount charged for making loan was not in excess of that permitted by this section. Underwriters Acceptance Corp. v. Dunkin, 152 Neb. 550, 41 N.W.2d 855 (1950).Notwithstanding limitations on interest rates imposed on state banks by Nebraska law, national bank in Nebraska can charge, with respect to credit card transactions, rates allowed by Nebraska law for "small loan companies". Fisher v. First Nat. Bank of Omaha, 548 F.2d 255 (8th Cir. 1977).This section authorizes the calculation of prepayment rebates by the method used in this case, and an otherwise lawful transaction under this section is not rendered usurious because of the use of this method in calculating a prepayment rebate. Ballew v. Associates Fin. Ser. Co. of Neb. Inc., 450 F.Supp. 253 (D. Neb. 1976).In suit to declare lender's interest charge usurious where borrower paid maximum legal loan rate plus one hundred dollars, court found the latter charge only "incidental" to the extension of credit where borrower received other monetary consideration in addition to a loan. Campbell v. Liberty Financial Planning, Inc., 422 F.Supp. 1386 (D. Neb. 1976).Defendant's disclosure of method used in computing late charge in language of this section was meaningful. Scott v. Liberty Finance Co., 380 F.Supp. 475 (D. Neb. 1974).

State Codes and Statutes

Statutes > Nebraska > Chapter45 > 45-1024

45-1024. Installment loans; interest rateauthorized; charges permitted; computation; application of payments; violations;restrictions.(1) Except as provided in section 45-1025 andsubsection (6) of this section, every licensee may make loans and may contractfor and receive on such loans charges at a rate not exceeding twenty-fourpercent per annum on that part of the unpaid principal balance on any loannot in excess of one thousand dollars, and twenty-one percent per annum onany remainder of such unpaid principal balance. Except for loans secured bymobile homes, a licensee may not make loans for a period in excess of onehundred forty-five months if the amount of the loan is greater than threethousand dollars but less than twenty-five thousand dollars. Charges on loansmade under the Nebraska Installment Loan Act shall not be paid, deducted,or received in advance. The contracting for, charging of, or receiving ofcharges as provided for in subsection (2) of this section shall not be deemedto be the payment, deduction, or receipt of such charges in advance.(2) When the loan contract requires repayment in substantially equaland consecutive monthly installments of principal and charges combined, thelicensee may, at the time the loan is made, precompute the charges at theagreed rate on scheduled unpaid principal balances according to the termsof the contract and add such charges to the principal of the loan. Every paymentmay be applied to the combined total of principal and precomputed chargesuntil the contract is fully paid. All payments made on account of any loanexcept for default and deferment charges shall be deemed to be applied tothe unpaid installments in the order in which they are due. The portion ofthe precomputed charges applicable to any particular month of the contract,as originally scheduled or following a deferment, shall be that proportionof such precomputed charges, excluding any adjustment made for a first installmentperiod of more than one month and any adjustment made for deferment, whichthe balance of the contract scheduled to be outstanding during such monthbears to the sum of all monthly balances originally scheduled to be outstandingby the contract. This section shall not limit or restrict the manner of calculatingcharges, whether by way of add-on, single annual rate, or otherwise, if therate of charges does not exceed that permitted by this section. Charges maybe contracted for and earned at a single annual rate, except that the totalcharges from such rate shall not be greater than the total charges from theseveral rates otherwise applicable to the different portions of the unpaidbalance according to subsection (1) of this section. All loan contracts madepursuant to this subsection are subject to the following adjustments:(a) Notwithstanding the requirement for substantially equal and consecutivemonthly installments, the first installment period may not exceed one monthby more than twenty-one days and may not fall short of one month by more thaneleven days. The charges for each day exceeding one month shall be one-thirtiethof the charges which would be applicable to a first installment period ofone month. The charge for extra days in the first installment period may beadded to the first installment and such charges for such extra days shallbe excluded in computing any rebate;(b) If prepayment in full by cash, a new loan, or otherwise occurs beforethe first installment due date, the charges shall be recomputed at the rateof charges contracted for in accordance with subsection (1) or (2) of thissection upon the actual unpaid principal balances of the loan for the actualtime outstanding by applying the payment, or payments, first to charges atthe agreed rate and the remainder to the principal. The amount of chargesso computed shall be retained in lieu of all precomputed charges;(c) If a contract is prepaid in full by cash, a new loan, or otherwiseafter the first installment due date, the borrower shall receive a rebateof an amount which is not less than the amount obtained by applying to theunpaid principal balances as originally scheduled or, if deferred, as deferred,for the period following prepayment, according to the actuarial method, therate of charge contracted for in accordance with subsection (1) or (2) ofthis section. The licensee may round the rate of charge to the nearest one-halfof one percent if such procedure is not consistently used to obtain a greateryield than would otherwise be permitted. Any default and deferment chargeswhich are due and unpaid may be deducted from any rebate. No rebate shallbe required for any partial prepayment. No rebate of less than one dollarneed be made. Acceleration of the maturity of the contract shall not in itselfrequire a rebate. If judgment is obtained before the final installment date,the contract balance shall be reduced by the rebate which would be requiredfor prepayment in full as of the date judgment is obtained;(d) If any installment on a precomputed or interest bearing loan isunpaid in full for ten or more consecutive days, Sundays and holidays included,after it is due, the licensee may charge and collect a default charge notexceeding an amount equal to five percent of such installment. If any installmentpayment is made by a check, draft, or similar signed order which is not honoredbecause of insufficient funds, no account, or any other reason except an errorof a third party to the loan contract, the licensee may charge and collecta fifteen-dollar bad check charge. Such default or bad check charges may becollected when due or at any time thereafter;(e) If, as of an installment due date, the payment date of all whollyunpaid installments is deferred one or more full months and the maturity ofthe contract is extended for a corresponding period, the licensee may chargeand collect a deferment charge not exceeding the charge applicable to thefirst of the installments deferred, multiplied by the number of months inthe deferment period. The deferment period is that period during which nopayment is made or required by reason of such deferment. The deferment chargemay be collected at the time of deferment or at any time thereafter. The portionof the precomputed charges applicable to each deferred balance and installmentperiod following the deferment period shall remain the same as that applicableto such balance and periods under the original loan contract. No installmenton which a default charge has been collected, or on account of which any partialpayment has been made, shall be deferred or included in the computation ofthe deferment charge unless such default charge or partial payment is refundedto the borrower or credited to the deferment charge. Any payment receivedat the time of deferment may be applied first to the deferment charge andthe remainder, if any, applied to the unpaid balance of the contract, exceptthat if such payment is sufficient to pay, in addition to the appropriatedeferment charge, any installment which is in default and the applicable defaultcharge, it shall be first so applied and any such installment shall not bedeferred or subject to the deferment charge. If a loan is prepaid in fullduring the deferment period, the borrower shall receive, in addition to therequired rebate, a rebate of that portion of the deferment charge applicableto any unexpired full month or months of such deferment period; and(f) If two or more full installments are in default for one full monthor more at any installment date and if the contract so provides, the licenseemay reduce the contract balance by the rebate which would be required forprepayment in full as of such installment date and the amount remaining unpaidshall be deemed to be the unpaid principal balance and thereafter in lieuof charging, collecting, receiving, and applying charges as provided in thissubsection, charges may be charged, collected, received, and applied at theagreed rate as otherwise provided by this section until the loan is fullypaid.(3) The charges, as referred to in subsection (1) of this section, shallnot be compounded. The charging, collecting, and receiving of charges as providedin subsection (2) of this section shall not be deemed compounding. If partor all of the consideration for a loan contract is the unpaid principal balanceof a prior loan, then the principal amount payable under such loan contractmay include any unpaid charges on the prior loan which have accrued withinsixty days before the making of such loan contract and may include the balanceremaining after giving the rebate required by subsection (2) of this section.Except as provided in subsection (2) of this section, charges shall (a) becomputed and paid only as a percentage per month of the unpaid principal balanceor portions thereof and (b) be computed on the basis of the number of daysactually elapsed. For purposes of computing charges, whether at the maximumrate or less, a month shall be that period of time from any date in a monthto the corresponding date in the next month but if there is no such correspondingdate then to the last day of the next month, and a day shall be consideredone-thirtieth of a month when computation is made for a fraction of a month.(4) Except as provided in subsections (5) and (6) of this section, inaddition to that provided for under the Nebraska Installment Loan Act, nofurther or other amount whatsoever shall be directly or indirectly charged,contracted for, or received. If any amount, in excess of the charges permitted,is charged, contracted for, or received, the loan contract shall not on thataccount be void, but the licensee shall have no right to collect or receiveany interest or other charges whatsoever. If such interest or other chargeshave been collected or contracted for, the licensee shall refund to the borrowerall interest and other charges collected and shall not collect any interestor other charges contracted for and thereafter due on the loan involved, asliquidated damages, and the licensee or its assignee, if found liable, shallpay the costs of any action relating thereto, including reasonable attorney'sfees. No licensee shall be found liable under this subsection if the licenseeshows by a preponderance of the evidence that the violation was not intentionaland resulted from a bona fide error notwithstanding the maintenance of proceduresreasonably adopted to avoid any such error.(5) A borrower may be required to pay all reasonable expenses incurredin connection with the making, closing, disbursing, extending, readjusting,or renewing of loans. Such expenses may include abstracting, recording, releasing,and registration fees; premiums paid for nonfiling insurance; premiums paidon insurance policies covering tangible personal property securing the loan;amounts charged for a debt cancellation contract or a debt suspension contract,as agreed upon by the parties, if the debt cancellation contract or debt suspensioncontract is a contract of a financial institution and such contract is solddirectly by such financial institution or by an unaffiliated, nonexclusiveagent of such financial institution in accordance with 12 C.F.R. part 37,as such part existed on January 1, 2006, and the financial institution isresponsible for the unaffiliated, nonexclusive agent's compliance with suchpart; title examinations; credit reports; survey; taxes or charges imposed upon or in connectionwith the making and recording or releasing of any mortgage; and amounts charged for a guaranteed asset protectionwaiver. Except as provided in subsection (6) of this section,a borrower may also be required to pay a nonrefundable loan origination feenot to exceed the lesser of five hundred dollars or an amount equal to sevenpercent of that part of the original principal balance of any loan not inexcess of two thousand dollars and five percent on that part of the originalprincipal balance in excess of two thousand dollars, if the licensee has notmade another loan to the borrower within the previous twelve months. If thelicensee has made another loan to the borrower within the previous twelvemonths, a nonrefundable loan origination fee may only be charged on new fundsadvanced on each successive loan. Such reasonable initial charges may be collectedfrom the borrower or included in the principal balance of the loan at thetime the loan is made and shall not be considered interest or a charge forthe use of the money loaned.(6)(a) Loans secured solely by real property that are not made pursuantto subdivision (11) of section 45-101.04 on real property shall not be subjectto the limitations on the rate of interest provided in subsection (1) of thissection or the limitations on the nonrefundable loan origination fee undersubsection (5) of this section if (i) the principal amount of the loan isseven thousand five hundred dollars or more and (ii) the sum of the principalamount of the loan and the balances of all other liens against the propertydo not exceed one hundred percent of the appraised value of the property.Acceptable methods of determining appraised value shall be made by the departmentpursuant to rule, regulation, or order.(b) An origination fee on such loan shall be computed only on the principalamount of the loan reduced by any portion of the principal that consists ofthe amount required to pay off another loan made under this subsection bythe same licensee.(c) A prepayment penalty on such loan shall be permitted only if (i)the maximum amount of the penalty to be assessed is stated in writing at thetime the loan is made, (ii) the loan is prepaid in full within two years fromthe date of the loan, and (iii) the loan is prepaid with money other thanthe proceeds of another loan made by the same licensee. Such prepayment penaltyshall not exceed six months interest on eighty percent of the original principalbalance computed at the agreed rate of interest on the loan.(d) A licensee making a loan pursuant to this subsection may obtainan interest in any fixtures attached to such real property and any insuranceproceeds payable in connection with such real property or the loan.(e) For purposes of this subsection, principal amount of the loan meansthe total sum owed by the borrower including, but not limited to, insurancepremiums, loan origination fees, or any other amount that is financed, exceptthat for purposes of subdivision (6)(b) of this section, loan originationfees shall not be included in calculating the principal amount of the loan. SourceLaws 1941, c. 90, § 15, p. 350; C.S.Supp.,1941, § 45-143; Laws 1943, c. 107, § 3, p. 370; R.S.1943, § 45-137; Laws 1957, c. 193, § 1, p. 684; Laws 1963, c. 273, § 2, p. 821; Laws 1963, Spec. Sess., c. 7, § 9, p. 93; Laws 1963, Spec. Sess., c. 9, § 1, p. 103; Laws 1979, LB 87, § 3; Laws 1980, LB 276, § 8; Laws 1982, LB 702, § 1; Laws 1984, LB 681, § 1; Laws 1994, LB 979, § 8; Laws 1995, LB 614, § 1; Laws 1997, LB 555, § 17; Laws 1999, LB 170, § 1; Laws 2000, LB 932, § 30; R.S.Supp.,2000, § 45-137; Laws 2001, LB 53, § 52; Laws 2003, LB 218, § 14; Laws 2004, LB 999, § 40; Laws 2005, LB 533, § 61; Laws 2006, LB 876, § 50; Laws 2009, LB328, § 47; Laws 2010, LB571, § 11.Annotations1. Constitutionality2. Retroactive amendment3. Violations4. Miscellaneous1. ConstitutionalityLegislative Bill 17 of the 1963 Special Session of the Legislature was sustained as constitutional. Kometscher v. Wade, 177 Neb. 299, 128 N.W.2d 781 (1964).Amendment to this section in 1963 Special Session by Legislative Bill 11 was unconstitutional as special legislation. State Securities Co. v. Ley, 177 Neb. 251, 128 N.W.2d 766 (1964).2. Retroactive amendmentRetroactive amendment of this section did not apply to transactions already reduced to judgment. Berg v. Midwest Laundry Equipment Corp., 178 Neb. 770, 135 N.W.2d 457 (1965).Retroactive reduction in penalty for violation of this section sustained as constitutional. Davis v. General Motors Acceptance Corp., 176 Neb. 865, 127 N.W.2d 907 (1964).3. ViolationsLegislature at 1963 Special Session changed penalty for violation of this section. Highway Equipment & Supply Co. v. Jones, 182 Neb. 234, 153 N.W.2d 859 (1967).Where maximum rate of interest was exceeded, installment loan violated this section. Robertson v. Burnett, 172 Neb. 385, 109 N.W.2d 716 (1961).Where excessive charges are made on renewal of loan, there is a violation of this act. State ex rel. Beck v. Associates Discount Corp., 168 Neb. 803, 97 N.W.2d 583 (1959).In an action based upon an illegal contract by a licensee under the small loan law, such licensee loses all right to collect any sum whatever on the indebtedness under the contract. Nitzel & Co. v. Nelson, 144 Neb. 662, 14 N.W.2d 197 (1944).The method used here in calculating unearned interest to be rebated did not produce an actuarially accurate rebate but rather produced hidden charges in violation of the Consumer Protection Act, but there was no violation of the Nebraska Small Loan Act, as the Nebraska statutes do authorize calculation of prepayment rebates by this method. Ballew v. Associates Fin. Ser. Co. of Neb. Inc., 450 F.Supp. 253 (D. Neb. 1976).4. MiscellaneousPermissive provisions of Installment Loan Act apply to licensees. State ex rel. Beck v. Associates Discount Corp., 162 Neb. 683, 77 N.W.2d 215 (1956).Amount charged for making loan was not in excess of that permitted by this section. Underwriters Acceptance Corp. v. Dunkin, 152 Neb. 550, 41 N.W.2d 855 (1950).Notwithstanding limitations on interest rates imposed on state banks by Nebraska law, national bank in Nebraska can charge, with respect to credit card transactions, rates allowed by Nebraska law for "small loan companies". Fisher v. First Nat. Bank of Omaha, 548 F.2d 255 (8th Cir. 1977).This section authorizes the calculation of prepayment rebates by the method used in this case, and an otherwise lawful transaction under this section is not rendered usurious because of the use of this method in calculating a prepayment rebate. Ballew v. Associates Fin. Ser. Co. of Neb. Inc., 450 F.Supp. 253 (D. Neb. 1976).In suit to declare lender's interest charge usurious where borrower paid maximum legal loan rate plus one hundred dollars, court found the latter charge only "incidental" to the extension of credit where borrower received other monetary consideration in addition to a loan. Campbell v. Liberty Financial Planning, Inc., 422 F.Supp. 1386 (D. Neb. 1976).Defendant's disclosure of method used in computing late charge in language of this section was meaningful. Scott v. Liberty Finance Co., 380 F.Supp. 475 (D. Neb. 1974).

State Codes and Statutes

State Codes and Statutes

Statutes > Nebraska > Chapter45 > 45-1024

45-1024. Installment loans; interest rateauthorized; charges permitted; computation; application of payments; violations;restrictions.(1) Except as provided in section 45-1025 andsubsection (6) of this section, every licensee may make loans and may contractfor and receive on such loans charges at a rate not exceeding twenty-fourpercent per annum on that part of the unpaid principal balance on any loannot in excess of one thousand dollars, and twenty-one percent per annum onany remainder of such unpaid principal balance. Except for loans secured bymobile homes, a licensee may not make loans for a period in excess of onehundred forty-five months if the amount of the loan is greater than threethousand dollars but less than twenty-five thousand dollars. Charges on loansmade under the Nebraska Installment Loan Act shall not be paid, deducted,or received in advance. The contracting for, charging of, or receiving ofcharges as provided for in subsection (2) of this section shall not be deemedto be the payment, deduction, or receipt of such charges in advance.(2) When the loan contract requires repayment in substantially equaland consecutive monthly installments of principal and charges combined, thelicensee may, at the time the loan is made, precompute the charges at theagreed rate on scheduled unpaid principal balances according to the termsof the contract and add such charges to the principal of the loan. Every paymentmay be applied to the combined total of principal and precomputed chargesuntil the contract is fully paid. All payments made on account of any loanexcept for default and deferment charges shall be deemed to be applied tothe unpaid installments in the order in which they are due. The portion ofthe precomputed charges applicable to any particular month of the contract,as originally scheduled or following a deferment, shall be that proportionof such precomputed charges, excluding any adjustment made for a first installmentperiod of more than one month and any adjustment made for deferment, whichthe balance of the contract scheduled to be outstanding during such monthbears to the sum of all monthly balances originally scheduled to be outstandingby the contract. This section shall not limit or restrict the manner of calculatingcharges, whether by way of add-on, single annual rate, or otherwise, if therate of charges does not exceed that permitted by this section. Charges maybe contracted for and earned at a single annual rate, except that the totalcharges from such rate shall not be greater than the total charges from theseveral rates otherwise applicable to the different portions of the unpaidbalance according to subsection (1) of this section. All loan contracts madepursuant to this subsection are subject to the following adjustments:(a) Notwithstanding the requirement for substantially equal and consecutivemonthly installments, the first installment period may not exceed one monthby more than twenty-one days and may not fall short of one month by more thaneleven days. The charges for each day exceeding one month shall be one-thirtiethof the charges which would be applicable to a first installment period ofone month. The charge for extra days in the first installment period may beadded to the first installment and such charges for such extra days shallbe excluded in computing any rebate;(b) If prepayment in full by cash, a new loan, or otherwise occurs beforethe first installment due date, the charges shall be recomputed at the rateof charges contracted for in accordance with subsection (1) or (2) of thissection upon the actual unpaid principal balances of the loan for the actualtime outstanding by applying the payment, or payments, first to charges atthe agreed rate and the remainder to the principal. The amount of chargesso computed shall be retained in lieu of all precomputed charges;(c) If a contract is prepaid in full by cash, a new loan, or otherwiseafter the first installment due date, the borrower shall receive a rebateof an amount which is not less than the amount obtained by applying to theunpaid principal balances as originally scheduled or, if deferred, as deferred,for the period following prepayment, according to the actuarial method, therate of charge contracted for in accordance with subsection (1) or (2) ofthis section. The licensee may round the rate of charge to the nearest one-halfof one percent if such procedure is not consistently used to obtain a greateryield than would otherwise be permitted. Any default and deferment chargeswhich are due and unpaid may be deducted from any rebate. No rebate shallbe required for any partial prepayment. No rebate of less than one dollarneed be made. Acceleration of the maturity of the contract shall not in itselfrequire a rebate. If judgment is obtained before the final installment date,the contract balance shall be reduced by the rebate which would be requiredfor prepayment in full as of the date judgment is obtained;(d) If any installment on a precomputed or interest bearing loan isunpaid in full for ten or more consecutive days, Sundays and holidays included,after it is due, the licensee may charge and collect a default charge notexceeding an amount equal to five percent of such installment. If any installmentpayment is made by a check, draft, or similar signed order which is not honoredbecause of insufficient funds, no account, or any other reason except an errorof a third party to the loan contract, the licensee may charge and collecta fifteen-dollar bad check charge. Such default or bad check charges may becollected when due or at any time thereafter;(e) If, as of an installment due date, the payment date of all whollyunpaid installments is deferred one or more full months and the maturity ofthe contract is extended for a corresponding period, the licensee may chargeand collect a deferment charge not exceeding the charge applicable to thefirst of the installments deferred, multiplied by the number of months inthe deferment period. The deferment period is that period during which nopayment is made or required by reason of such deferment. The deferment chargemay be collected at the time of deferment or at any time thereafter. The portionof the precomputed charges applicable to each deferred balance and installmentperiod following the deferment period shall remain the same as that applicableto such balance and periods under the original loan contract. No installmenton which a default charge has been collected, or on account of which any partialpayment has been made, shall be deferred or included in the computation ofthe deferment charge unless such default charge or partial payment is refundedto the borrower or credited to the deferment charge. Any payment receivedat the time of deferment may be applied first to the deferment charge andthe remainder, if any, applied to the unpaid balance of the contract, exceptthat if such payment is sufficient to pay, in addition to the appropriatedeferment charge, any installment which is in default and the applicable defaultcharge, it shall be first so applied and any such installment shall not bedeferred or subject to the deferment charge. If a loan is prepaid in fullduring the deferment period, the borrower shall receive, in addition to therequired rebate, a rebate of that portion of the deferment charge applicableto any unexpired full month or months of such deferment period; and(f) If two or more full installments are in default for one full monthor more at any installment date and if the contract so provides, the licenseemay reduce the contract balance by the rebate which would be required forprepayment in full as of such installment date and the amount remaining unpaidshall be deemed to be the unpaid principal balance and thereafter in lieuof charging, collecting, receiving, and applying charges as provided in thissubsection, charges may be charged, collected, received, and applied at theagreed rate as otherwise provided by this section until the loan is fullypaid.(3) The charges, as referred to in subsection (1) of this section, shallnot be compounded. The charging, collecting, and receiving of charges as providedin subsection (2) of this section shall not be deemed compounding. If partor all of the consideration for a loan contract is the unpaid principal balanceof a prior loan, then the principal amount payable under such loan contractmay include any unpaid charges on the prior loan which have accrued withinsixty days before the making of such loan contract and may include the balanceremaining after giving the rebate required by subsection (2) of this section.Except as provided in subsection (2) of this section, charges shall (a) becomputed and paid only as a percentage per month of the unpaid principal balanceor portions thereof and (b) be computed on the basis of the number of daysactually elapsed. For purposes of computing charges, whether at the maximumrate or less, a month shall be that period of time from any date in a monthto the corresponding date in the next month but if there is no such correspondingdate then to the last day of the next month, and a day shall be consideredone-thirtieth of a month when computation is made for a fraction of a month.(4) Except as provided in subsections (5) and (6) of this section, inaddition to that provided for under the Nebraska Installment Loan Act, nofurther or other amount whatsoever shall be directly or indirectly charged,contracted for, or received. If any amount, in excess of the charges permitted,is charged, contracted for, or received, the loan contract shall not on thataccount be void, but the licensee shall have no right to collect or receiveany interest or other charges whatsoever. If such interest or other chargeshave been collected or contracted for, the licensee shall refund to the borrowerall interest and other charges collected and shall not collect any interestor other charges contracted for and thereafter due on the loan involved, asliquidated damages, and the licensee or its assignee, if found liable, shallpay the costs of any action relating thereto, including reasonable attorney'sfees. No licensee shall be found liable under this subsection if the licenseeshows by a preponderance of the evidence that the violation was not intentionaland resulted from a bona fide error notwithstanding the maintenance of proceduresreasonably adopted to avoid any such error.(5) A borrower may be required to pay all reasonable expenses incurredin connection with the making, closing, disbursing, extending, readjusting,or renewing of loans. Such expenses may include abstracting, recording, releasing,and registration fees; premiums paid for nonfiling insurance; premiums paidon insurance policies covering tangible personal property securing the loan;amounts charged for a debt cancellation contract or a debt suspension contract,as agreed upon by the parties, if the debt cancellation contract or debt suspensioncontract is a contract of a financial institution and such contract is solddirectly by such financial institution or by an unaffiliated, nonexclusiveagent of such financial institution in accordance with 12 C.F.R. part 37,as such part existed on January 1, 2006, and the financial institution isresponsible for the unaffiliated, nonexclusive agent's compliance with suchpart; title examinations; credit reports; survey; taxes or charges imposed upon or in connectionwith the making and recording or releasing of any mortgage; and amounts charged for a guaranteed asset protectionwaiver. Except as provided in subsection (6) of this section,a borrower may also be required to pay a nonrefundable loan origination feenot to exceed the lesser of five hundred dollars or an amount equal to sevenpercent of that part of the original principal balance of any loan not inexcess of two thousand dollars and five percent on that part of the originalprincipal balance in excess of two thousand dollars, if the licensee has notmade another loan to the borrower within the previous twelve months. If thelicensee has made another loan to the borrower within the previous twelvemonths, a nonrefundable loan origination fee may only be charged on new fundsadvanced on each successive loan. Such reasonable initial charges may be collectedfrom the borrower or included in the principal balance of the loan at thetime the loan is made and shall not be considered interest or a charge forthe use of the money loaned.(6)(a) Loans secured solely by real property that are not made pursuantto subdivision (11) of section 45-101.04 on real property shall not be subjectto the limitations on the rate of interest provided in subsection (1) of thissection or the limitations on the nonrefundable loan origination fee undersubsection (5) of this section if (i) the principal amount of the loan isseven thousand five hundred dollars or more and (ii) the sum of the principalamount of the loan and the balances of all other liens against the propertydo not exceed one hundred percent of the appraised value of the property.Acceptable methods of determining appraised value shall be made by the departmentpursuant to rule, regulation, or order.(b) An origination fee on such loan shall be computed only on the principalamount of the loan reduced by any portion of the principal that consists ofthe amount required to pay off another loan made under this subsection bythe same licensee.(c) A prepayment penalty on such loan shall be permitted only if (i)the maximum amount of the penalty to be assessed is stated in writing at thetime the loan is made, (ii) the loan is prepaid in full within two years fromthe date of the loan, and (iii) the loan is prepaid with money other thanthe proceeds of another loan made by the same licensee. Such prepayment penaltyshall not exceed six months interest on eighty percent of the original principalbalance computed at the agreed rate of interest on the loan.(d) A licensee making a loan pursuant to this subsection may obtainan interest in any fixtures attached to such real property and any insuranceproceeds payable in connection with such real property or the loan.(e) For purposes of this subsection, principal amount of the loan meansthe total sum owed by the borrower including, but not limited to, insurancepremiums, loan origination fees, or any other amount that is financed, exceptthat for purposes of subdivision (6)(b) of this section, loan originationfees shall not be included in calculating the principal amount of the loan. SourceLaws 1941, c. 90, § 15, p. 350; C.S.Supp.,1941, § 45-143; Laws 1943, c. 107, § 3, p. 370; R.S.1943, § 45-137; Laws 1957, c. 193, § 1, p. 684; Laws 1963, c. 273, § 2, p. 821; Laws 1963, Spec. Sess., c. 7, § 9, p. 93; Laws 1963, Spec. Sess., c. 9, § 1, p. 103; Laws 1979, LB 87, § 3; Laws 1980, LB 276, § 8; Laws 1982, LB 702, § 1; Laws 1984, LB 681, § 1; Laws 1994, LB 979, § 8; Laws 1995, LB 614, § 1; Laws 1997, LB 555, § 17; Laws 1999, LB 170, § 1; Laws 2000, LB 932, § 30; R.S.Supp.,2000, § 45-137; Laws 2001, LB 53, § 52; Laws 2003, LB 218, § 14; Laws 2004, LB 999, § 40; Laws 2005, LB 533, § 61; Laws 2006, LB 876, § 50; Laws 2009, LB328, § 47; Laws 2010, LB571, § 11.Annotations1. Constitutionality2. Retroactive amendment3. Violations4. Miscellaneous1. ConstitutionalityLegislative Bill 17 of the 1963 Special Session of the Legislature was sustained as constitutional. Kometscher v. Wade, 177 Neb. 299, 128 N.W.2d 781 (1964).Amendment to this section in 1963 Special Session by Legislative Bill 11 was unconstitutional as special legislation. State Securities Co. v. Ley, 177 Neb. 251, 128 N.W.2d 766 (1964).2. Retroactive amendmentRetroactive amendment of this section did not apply to transactions already reduced to judgment. Berg v. Midwest Laundry Equipment Corp., 178 Neb. 770, 135 N.W.2d 457 (1965).Retroactive reduction in penalty for violation of this section sustained as constitutional. Davis v. General Motors Acceptance Corp., 176 Neb. 865, 127 N.W.2d 907 (1964).3. ViolationsLegislature at 1963 Special Session changed penalty for violation of this section. Highway Equipment & Supply Co. v. Jones, 182 Neb. 234, 153 N.W.2d 859 (1967).Where maximum rate of interest was exceeded, installment loan violated this section. Robertson v. Burnett, 172 Neb. 385, 109 N.W.2d 716 (1961).Where excessive charges are made on renewal of loan, there is a violation of this act. State ex rel. Beck v. Associates Discount Corp., 168 Neb. 803, 97 N.W.2d 583 (1959).In an action based upon an illegal contract by a licensee under the small loan law, such licensee loses all right to collect any sum whatever on the indebtedness under the contract. Nitzel & Co. v. Nelson, 144 Neb. 662, 14 N.W.2d 197 (1944).The method used here in calculating unearned interest to be rebated did not produce an actuarially accurate rebate but rather produced hidden charges in violation of the Consumer Protection Act, but there was no violation of the Nebraska Small Loan Act, as the Nebraska statutes do authorize calculation of prepayment rebates by this method. Ballew v. Associates Fin. Ser. Co. of Neb. Inc., 450 F.Supp. 253 (D. Neb. 1976).4. MiscellaneousPermissive provisions of Installment Loan Act apply to licensees. State ex rel. Beck v. Associates Discount Corp., 162 Neb. 683, 77 N.W.2d 215 (1956).Amount charged for making loan was not in excess of that permitted by this section. Underwriters Acceptance Corp. v. Dunkin, 152 Neb. 550, 41 N.W.2d 855 (1950).Notwithstanding limitations on interest rates imposed on state banks by Nebraska law, national bank in Nebraska can charge, with respect to credit card transactions, rates allowed by Nebraska law for "small loan companies". Fisher v. First Nat. Bank of Omaha, 548 F.2d 255 (8th Cir. 1977).This section authorizes the calculation of prepayment rebates by the method used in this case, and an otherwise lawful transaction under this section is not rendered usurious because of the use of this method in calculating a prepayment rebate. Ballew v. Associates Fin. Ser. Co. of Neb. Inc., 450 F.Supp. 253 (D. Neb. 1976).In suit to declare lender's interest charge usurious where borrower paid maximum legal loan rate plus one hundred dollars, court found the latter charge only "incidental" to the extension of credit where borrower received other monetary consideration in addition to a loan. Campbell v. Liberty Financial Planning, Inc., 422 F.Supp. 1386 (D. Neb. 1976).Defendant's disclosure of method used in computing late charge in language of this section was meaningful. Scott v. Liberty Finance Co., 380 F.Supp. 475 (D. Neb. 1974).