§412:9-305  Open-end consumer loans. (a)  Open-end consumer loans made under the authority of this article shall besubject to the following special restrictions:

(1)  A financial services loan company shall notcompound interest on any open-end consumer loan by adding any unpaid interestto the unpaid principal balance of the open-end loan.  However, the unpaidprincipal balance may include charges other than interest and late charges;

(2)  Regardless of the interest computation methodused in each billing cycle under an open-end loan agreement, the unpaidprincipal balance of any day shall be determined by adding to any balanceunpaid as of the beginning of that day all advances and other permissibleamounts (other than interest) charged to the borrower, and deducting allpayments and other credits made or received that day;

(3)  If credit life insurance or credit disabilityinsurance is provided, the additional charge for the insurance shall becalculated in each billing cycle by applying the current monthly premium rate(which may be calculated daily), as approved by the insurance commissioner, tothe entire outstanding balances, or to as much of the outstanding balances thatthe insurance covers, using the same method used for the calculation of loan interest. A financial services loan company shall not be obligated to advance to theinsurer any premiums for the insurance on a borrower who is delinquent inmaking the required minimum payments on the loan if one or more of the paymentsis past due for ninety days or more.  However, the financial services loancompany shall advance to the insurer the amounts required to keep the insurancein force during the ninety-day period.  The advanced amounts may be debited tothe borrower's open-end account; and

(4)  A financial services loan company may retain anysecurity interest in real or personal property securing the open-end loan untilthe open-end loan is terminated.

(b)  A financial services loan company mayimpose charges on an open-end consumer loan for:

(1)  Participation in an open-end loan account,whether assessed on an annual, periodic, or other basis; and

(2)  Payment of items that overdraw an open-end loanaccount. [L 1993, c 350, pt of §1; am L 1995, c 45, §1]