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

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

(2)  If the original term of a precomputed loanexceeds sixty months, the amount of refund of unearned interest shall be equalto the difference between the total interest originally charged and theactuarially earned amount;

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

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

 

Revision Note

 

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