§412:9-306  Refunds on prepayment of a
precomputed loan.  (a)  A borrower shall be entitled to a refund of the
unearned interest that has been paid in advance when a precomputed loan is paid
in full or refinanced prior to maturity, or on which judgment has been
obtained:



(1)  The amount of the refund on a loan with an
original term of sixty months or less shall be computed under a method no less
favorable to the borrower than the Rule of 78ths method (also known as the Sum
of the Digits method).  The refund shall represent at least as great a
proportion of the total finance charge as the sum of the periodical time
balances, after the day of prepayment, bears to the sum of all the periodical
time balances under the schedule of payments in the loan agreement;



(2)  If the original term of a precomputed loan
exceeds sixty months, the amount of refund of unearned interest shall be equal
to the difference between the total interest originally charged and the
actuarially earned amount;



(3)  Refunds on precomputed loans originated prior to
July 1, 1993, shall be made in accordance with the terms of existing loan
agreements, provided that the refund provision complied with applicable law at
the consumer loan origination.



(b)  No refund less than $1 need be made and the
financial services loan company shall not be required to refund any portion of
the unearned interest that has been paid in advance which results in a minimum
interest retained on the precomputed loan of less than $15. [L 1993, c 350, pt
of §1]



 



Revision Note



 



  "July 1, 1993," substituted for "the effective
date of this Act".