October 1995 -- Volume 12 Issue 5
State Law Changes
Other items of interest...
State Law Changes...................
* OREGON *
Effective: January 1, 1996 *** Law Type: Credit Insurance
There will be a reduction in prima facie credit life and disability rates on January 1, 1996. The change is the result of a review of experience data by the Director of Insurance as specified in OAR 836-60-041(5).
CREDIT LIFE INSURANCE
Initial Indebtedness LESS THAN $3,000:
Single Decreasing Life - $ .47/$100/yr
Single Level Life - $ .85/$100/yr
Single M.O.B. Rate - $ .72/$1000/mo
For loan terms exceeding 63 months, the rate is the actuarial equivalent of the M.O.B. rate at the term of the contract.
Initial Indebtedness of $3,000 OR MORE:
Single Decreasing Life - $ .42/$100/yr
Single Level Life - $ .76/$100/yr
Single M.O.B. Rate - $ .65/$1000/mo
For loan terms exceeding 63 months, the rate is the actuarial equivalent of the M.O.B. rate at the term of the contract.
Joint life is 165% of the corresponding rounded single life rate.
CREDIT DISABILITY (A&H) INSURANCE
Rates are per $100 of coverage
| Retroactive | Non-Retroactive | |||
|---|---|---|---|---|
| Term | 14 Day | 30 Day | 14 Day | 30 Day |
| 12 | $2.07 | $1.92 | $1.71 | $1.25 |
| 24 | $2.93 | $2.69 | $2.55 | $2.05 |
| 36 | $3.67 | $3.37 | $3.25 | $2.74 |
| 48 | $4.32 | $3.96 | $3.86 | $3.34 |
| 60 | $4.87 | $4.48 | $4.36 | $3.84 |
| 72 | $5.35 | $4.93 | $4.80 | $4.31 |
| 84 | $5.76 | $5.33 | $5.17 | $4.70 |
| 96 | $6.12 | $5.68 | $5.49 | $5.05 |
| 108 | $6.43 | $6.00 | $5.77 | $5.35 |
| 120 | $6.71 | $6.29 | $6.03 | $5.63 |
| Retroactive | Non-Retroactive | |||
|---|---|---|---|---|
| Term | 14 Day | 30 Day | 14 Day | 30 Day |
| 12 | $1.92 | $1.77 | $1.59 | $1.16 |
| 24 | $2.72 | $2.49 | $2.36 | $1.91 |
| 36 | $3.41 | $3.12 | $2.98 | $2.55 |
| 48 | $4.01 | $3.67 | $3.58 | $3.10 |
| 60 | $4.52 | $4.16 | $4.05 | $3.56 |
| 72 | $4.96 | $4.57 | $4.45 | $4.00 |
| 84 | $5.35 | $4.95 | $4.80 | $4.36 |
| 96 | $5.68 | $5.27 | $5.09 | $4.68 |
| 108 | $5.96 | $5.57 | $5.36 | $4.96 |
| 120 | $6.22 | $5.84 | $5.59 | $5.22 |
From Our Research Dept.........
The "Elusive Final Payment" - Part I
We recently went to work trying to reconcile a credit transaction for a customer that was generated from their "system". The transaction in question seemed simple enough, the basic data were as follows:
36 month transaction term
$5,000.00 Amount Financed
21% Simple Interest Rate
1 month to the 1st payment date
Unfortunately, we initially received a copy of the completed contract form via fax. You know how you have those days when modern technology is more hindrance than help? Well, this was one of "those days". The most legible numbers were in the condition that 3's, 6's, 8's and 9's were pretty much interchangeable. If you have dealt with a facsimile machine much at all, you know what I'm talking about.
However, our intrepid research staff attempted to dig in to the calculations as best they could. The only portion of the contract initially readable was the Truth-in-Lending "Fed Box". We checked off items one by one. The disclosed A.P.R. appeared okay at 20.99% (we wondered why it deviated from the contract rate by even .01, but that was a fine tuning issue to worry about later). The Amount Financed seemed fine at $5,000.00. However, the Finance Charge and Total of Payments were causing some concern.
We derived from the above information that the full precision payment was $188.37533681, which would properly truncate to $188.37. Truncation ensures we are not charging for even an iota greater than the 21% we assumed was contracted for.
Using a payment of $188.37, we calculated a Finance Charge of $1,781.32 and a Total of Payments of $6,781.32. However, the Finance Charge was disclosed as $1,785.45 and the Total of Payments disclosed as $6,785.45.
The $4.13 difference in Finance Charge was a concern. When analyzing transactions made with certain assumptions, it is usually easier to reconcile thousands of dollars than just a few. In fact, a standard rule of thumb is that the smaller the difference, the more difficult to reconcile.
A quick telephone call confirmed that this transaction did include 35 regular payments and an odd final payment. We finally reconciled the transaction to our satisfaction and we will share our conclusions with you in the December issue.
For now, we pose the question: Which of the following values would your system or calculation tool produce from the data supplied at the beginning of the article?
Given 35 "regular" monthly payments of $188.37, what final payment would your system disclose if all payments were made as scheduled?
(We will give you a clue to our conclusion. The final payment we arrived at is among the following.)
| $190.21 | $192.50 | $189.37 | $186.26 | $188.47 |
| $185.34 | $187.51 | $184.38 | $181.21 | $194.00 |
| $190.96 | $193.24 | $188.37 | $188.63 | $200.01 |
Happy Computing!
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