16a-2-401.   Finance charge for consumer loan;loan secured by mortgage or interest in manufactured home; prepaid financecharges.(1) For any consumer loan incurred pursuant to open end credit,including, without limitation, a loan pursuant to a lender credit card, alendermay charge a finance charge at any rate agreed to by the parties, subject,however, to the limitations on prepaid finance charges set forth in subsection(6). This subsection does not apply to a consumer loan secured by a firstmortgage or a second mortgage.

      (2)   For any consumer loan incurred pursuant to closed end credit, a lendermay charge a periodic finance charge, calculated accordingly to the actuarialmethod, not to exceed: (a) 36% per annum onthe portion of the unpaid balance which is $860or less, and (b) 21% per annum on theportion of the unpaid balance which exceeds$860,subject, however to the limitations onprepaid finance charges set forth in subsection (6). This subsection does notapply to a consumer loan secured by a first mortgage or a second mortgage.

      (3)   For any consumer loan secured by a second mortgage or a consumer loansecured by an interest in a manufactured home as defined by 42 U.S.C.5402(6), a lender may charge aperiodic finance charge, calculated according to the actuarial method, not toexceed 18% per annum, subject, however to the limitations on prepaid financecharges set forth in subsection (6). This subsection does not apply if thelender and the consumer agree in writing that the finance charge for the loanisgoverned by K.S.A. 16-207(b), and amendments thereto.

      (4)   If the parties to a consumer loan secured by a first mortgage or aconsumer loan secured by an interest in a manufactured home as defined by 42U.S.C. 5402(6) agree inwriting to make the transaction subject to the uniform consumer credit code,then the periodic finance charge for the loan, calculated according to theactuarial method, may not exceed 18% per annum, subject, however to thelimitations on prepaid finance charges set forth in subsection (6).

      (5)   This section does not limit or restrict the manner of calculating thefinance charge, whether by way of add-on, discount or otherwise, so long as therate and the amount of the finance charge does not exceed that permitted bythis section.

      (6)   Prepaid finance charges on consumer loans are limited as follows:

      (a)   For a consumer loan secured by a first mortgage or a second mortgage,or a consumer loan secured by an interest in a manufactured home as definedby 42 U.S.C. 5402(6), prepaid finance charges in an amount not to exceed 8%of the amount financedmay be charged, provided that the aggregate amount of prepaid finance chargespayable to the lender or any person related to the lender do not exceed 5% ofthe amount financed; and

      (b)   for any other consumer loan, prepaid finance charges in an amount not toexceed the lesser of 2% of the amount financed or $100 may be charged.

      Prepaid finance charges permitted under this subsection are in addition tofinance charges permitted under subsection (1), (2), (3) and (4), asapplicable. Prepaid finance charges permitted under this subsection are fullyearned when paid and are non-refundable, unless the parties agree otherwise inwriting.

      (7)   The finance charge limitations in subsections (3) and (4) do notapply to a consumer loan the finance charge for which is governed by subsection(h) of K.S.A.16-207, and amendments thereto.

      (8)   If a loan secured by a first mortgage constitutes a "consumer loan" undersubsection (17) of K.S.A. 16a-1-301, and amendments thereto, by virtue of theloan-to-value ratio exceeding 100% at the time the loan is made, then theperiodic finance charge for the loan shall not exceed that authorized bysubsection (b) of K.S.A. 16-207, and amendments thereto, but the loan issubject tothe limitationson prepaid finance charges set forth in paragraph (a) of subsection (6), whichprepaid finance charges may be charged in addition to the finance chargespermitted under subsection (b) of K.S.A. 16-207, and amendments thereto.

      (9)   If, within 12 months after the date of the original loan, a lender or aperson related to the lender refinances a loan with respect to which a prepaidfinance charge was payable to the same lender pursuant to subsection (6), thenthe following apply:

      (a)   If a prepaid finance charge with respect to the original loan was payableto the lender pursuant to paragraph (a) of subsection (6), then theaggregate amount of prepaid finance charges payable to the lender or any personrelated to the lender with respect to the new loan may not exceed 5% of theadditional amount financed.

      (b)   If a prepaid finance charge with respect to the original loan was payableto the lender pursuant to paragraph (b) of subsection (6), then theaggregate amount of prepaid finance charges payable to the lender or any personrelated to the lender with respect to the new loan may not exceed the lesser of2% of the additional amount financed or $100.

      (c)   For purposes of this subsection, "additional amount financed" means thedifference between: (i) The amount financed for the new loan, less the amountof all closing costs incurred in connection with the new loan which are notincluded in the prepaid finance charges for the new loan; and (ii) the unpaidprincipal balance of the original loan.

      (10)   For any period in which a finance charge is due on a consumer loanpursuant to open end credit, the parties may agree on a minimum amount.

      (11)   If the parties to a contract for deed to real estate agree in writing tomake the transaction subject to the uniform consumer credit code, then thetransaction is subject to the same limitations as set forth in subsections (4)and (6) for a consumer loan secured by a first mortgage.

      (12)   This section does not apply to a payday loan governed by K.S.A.16a-2-404, and amendments thereto.

      History:   L. 1973, ch. 85, § 27;L. 1974, ch. 91, § 1;L. 1975, ch. 126, § 1;L. 1980, ch. 76, § 9;L. 1980, ch. 77, § 3;L. 1981, ch. 94, § 3;L. 1982, ch. 94, § 1;L. 1983, ch. 79, § 3;L. 1985, ch. 82, § 3;L. 1986, ch. 90, § 1;L. 1988, ch. 85, § 6;L. 1988, ch. 86, § 3;L. 1988, ch. 87, § 2;L. 1993, ch. 200, § 7;L. 1995, ch. 54, § 2;L. 1999, ch. 107, § 15;L. 2000, ch. 27, § 3;L. 2000, ch. 159, § 1; July 1.