6-1412

6-1412. Limitation on interest and other
charges

A. It is unlawful for a licensee to charge, contract for, receive or collect an
interest charge other than as permitted by this article.

B. The interest is to be computed on the balance of the premiums due, after
subtracting the down payment made by the insured in accordance with the premium finance
agreement, from the effective date of the earliest insurance contract for which the
premiums are being advanced to and including the date when the final installment of the
premium finance agreement is payable.

C. On any premium finance agreement in any original principal amount not exceeding
one thousand dollars, a licensee may contract for and receive an interest charge at a
rate not exceeding three per cent per month or thirty-six per cent per annum.

D. On any premium finance agreement in which the original principal amount exceeds
one thousand dollars, a licensee may contract for and receive an interest charge at a
rate not exceeding three per cent per month on that part of the original principal amount
not exceeding one thousand dollars, and two per cent per month on that part of the
principal exceeding one thousand dollars.

E. A licensee may contract for and receive an interest charge on the entire amount
of the unpaid principal balance of the premium finance agreement at the single annual
percentage rate which would earn not more than the total amount of interest charges at
the scheduled maturity of the premium finance agreement as would the several different
rates that otherwise would be applicable under subsection D, to different portions of the
unpaid principal balance, if the premium finance agreement is paid according to the
agreed terms.

F. For the purposes of computing an interest charge, it is permissible to calculate
the interest charges on an annual basis of twelve months of thirty days each or on a
daily basis if a day is counted either as 1/360th, 1/365th, or 1/366th of a year, as the
licensee and insured may agree in writing.

G. If the premium finance agreement requires repayment in substantially equal and
consecutive monthly installments of principal and interest charges combined and the first
installment falls due no less than fifteen nor more than forty-five days after the
effective date of the policy, the interest charges may be precomputed at the agreed rate
on scheduled unpaid principal balances and added to the principal amount advanced under
the premium finance agreement, subject to the following requirements:

1. Any insured may prepay the obligation in full at any time. If prepayment in
full occurs by a new premium finance agreement, renewal or refinancing, or by cash, the
insured shall be refunded or credited with the precomputed charges which are applicable
to all fully unexpired months of the premium finance agreement as originally
scheduled. For this purpose the applicable interest charge is the total of those charges
which would have been made for each such unexpired month by applying scheduled payments
to unpaid balances of principal according to the actuarial method at that single annual
interest rate which would earn the original amount of precomputed interest charges on the
premium finance agreement, assuming interest charges had not been precomputed at the
contract rate but had been computed by actuarial method at that single annual interest
rate from the inception of the premium finance agreement. All computations shall be
based on the assumption that all payments are made as scheduled. The licensee may round
the annual interest rate to the nearest one-quarter of one per cent. In this paragraph,
"actuarial method" means the method of allocating each payment between interest charges
and principal pursuant to which the payment is applied first to interest charges computed
on the unpaid balance of principal for the time the balance is outstanding, and the
remainder of the payment is subtracted from the unpaid principal amount.

2. If the maturity of the premium finance agreement is accelerated, the contract
balance shall be reduced by the refund or credits of precomputed interest charges which
would be required for prepayment in full on the date of acceleration, and thereafter the
licensee may receive the interest charges authorized in this section computed on unpaid
balances of the premium finance agreement for the time actually outstanding from the
installment date nearest the date of acceleration until paid. The premium finance
agreement may provide that the premium finance company, with or without accelerating
maturity, may recompute the entire amount due under the premium finance agreement on a
per cent per month basis or reduce the premium finance agreement balance as of any
installment date by the refund or credit of precomputed interest charges which would be
required for prepayment in full on such installment date and receive the interest charges
authorized by this section computed on unpaid balances of the premium finance agreement
for the time actually outstanding from such installment date until the premium finance
agreement is fully paid.