December 1995 -- Volume 12, Issue 6
State Law Changes
- CALIFORNIA - Effective: January 1, 1996 *** Law Type: Credit Insurance
- ILLINOIS - Effective January 1, 1996 *** Law Type: Credit Insurance
- MICHIGAN - Effective April 1, 1996 *** Law Type: Consumer Finance
- NORTH CARLOLINA - Effective January 1, 1996 *** Law Type: Credit Insurance
- OREGON - Effective January 1, 1996 *** Law Type: Credit Insurance
- SOUTH CAROLINA - Effective January 1, 1996 *** Law Type: Consumer Finance
- WISCONSIN - Effective January 1, 1996 *** Law Type: Credit Insurance
Other Items of Interest
State Law Changes..................
* CALIFORNIA *
Effective: January 1, 1996 *** Law Type: Credit Insurance
Senate Bill 740 has effectively removed the $.50/$100/yr rate limitation previously imposed under the Consumer Finance Lenders Law. All classes of business are now subject to the rates set by the Department of Insurance.
* ILLINOIS *
Effective: January 1, 1996 *** Law Type: Credit Insurance
A revision to the Insurance Regulation will lower prima facie credit life rates on January 1, 1996. The reduction is an approximate 6% decrease from the current rates. The rates as of January 1 will be:
Single Decreasing Life $ .47/$100/yr
Single Level Life $ .94/$100/yr
Joint Decreasing Life $ .78/$100/yr
Joint Level Life $1.57/$100/yr
* MICHIGAN *
Effective: April 1, 1996 *** Law Type: Consumer Finance
The Credit Reform Act has set new limits for maximum loan amount, interest, and time price differential charges, and delinquency charges.
Regulatory Loan Act
Maximum Loan Amount - Raised to $15,000 from current $8,000.
Maximum Charge - Increased to 25% simple interest from 22%.
Delinquency Charge - Increased to $15 or 5% of the unpaid installment payment from $5 or 5% of the installment
Retail Installment Sales
The maximum time price differential will be 25% per year. The present maximum is a split add-on rate structure of 12% of the amount financed up to $500 plus 10% on the amount exceeding $500.
Motor Vehicle Financing
The maximum charge on the installment sale of a motor vehicle will be 25% per year simple interest. Currently maximum rates are set by class of vehicle.
The Act is effective 90 days after the adjournment of the State Legislature. We are advised that adjournment regularly takes place during the last week in December. The date of April 1st is an approximate date depending upon the actual day that the Legislature adjourns.
NOTE: Due to space limitations in the printed version of this newsletter, From Our Research Dept... will return with the second part of "The Elusive Final Payment" in the February Issue.
* NORTH CAROLINA *
Effective: January 1, 1996 *** Law Type: Credit Insurance
Credit life insurance published prima facie rates will reduce on January 1, 1996. This is the third in a series of gradual reductions of prima facie rates. The new rates will be:
Single Decreasing Life $ .55/$100/yr
Single Level Life $1.15/$100/yr
Joint Decreasing Life* $ .9166/$100/yr
Joint Level Life* $1.9166/$100/yr
*Joint life rates may not exceed 1 2/3 of the corresponding single life rate. This particular set of rates poses a rounding question for the appropriate joint life rates. We have published joint life rates here at the maximum 5/3 of the corresponding single rates that is allowed. For the sake of practicality, we would expect $.91 and $1.91 to be used as joint decreasing and joint level life rates, respectively.
* 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 | $2.10 | $1.94 | $1.73 | $1.27 |
| 24 | $2.97 | $2.72 | $2.58 | $2.07 |
| 36 | $3.71 | $3.41 | $3.29 | $2.77 |
| 48 | $4.37 | $4.00 | $3.90 | $3.38 |
| 60 | $4.93 | $4.53 | $4.41 | $3.88 |
| 72 | $5.41 | $4.99 | $4.86 | $4.36 |
| 84 | $5.83 | $5.40 | $5.23 | $4.76 |
| 96 | $6.20 | $5.75 | $5.56 | $5.11 |
| 108 | $6.51 | $6.07 | $5.84 | $5.41 |
| 120 | $6.79 | $6.37 | $6.10 | $5.70 |
| Retroactive | Non-Retroactive | |||
|---|---|---|---|---|
| Term | 14 Day | 30 Day | 14 Day | 30 Day |
| 12 | $1.95 | $1.79 | $1.61 | $1.17 |
| 24 | $2.75 | $2.52 | $2.39 | $1.93 |
| 36 | $3.45 | $3.16 | $3.05 | $2.58 |
| 48 | $4.05 | $3.71 | $3.62 | $3.14 |
| 60 | $4.57 | $4.21 | $4.10 | $3.60 |
| 72 | $5.02 | $4.62 | $4.51 | $4.05 |
| 84 | $5.41 | $5.01 | $4.85 | $4.41 |
| 96 | $5.75 | $5.33 | $5.15 | $4.73 |
| 108 | $6.04 | $5.64 | $5.42 | $5.02 |
| 120 | $6.30 | $5.91 | $5.66 | $5.29 |
* SOUTH CAROLINA *
Effective: January 1, 1996 *** Law Type: Consumer Finance
The maximum finance charges allowed on loans under the South Carolina Consumer Finance Act will change effective January 1, 1996. The changes are a result of Senate Bill 602.
The maximum finance charge on loans with a cash advance of more than $150 but not more than $2,000 will be:
|
$25 per $100 of the advance not exceeding $600 plus $18 per $100 of the excess to $1,000 plus $12 per $100 of the remainder to $2,000 |
For loans with a cash advance exceeding $2,000 but not more than $7,500, the finance charge may not exceed $9 per $100 of the cash advance.
Effective: January 1, 1996 *** Law Type: Credit Insurance
There will be a decrease in the Joint Decreasing and Single Level published prima facie life rates. Single Decreasing and Joint Level life rates changed on January 1 of 1995. The rates on January 1, 1996, with the decreases shown in boldface, will be as follows:
|
Single Decreasing Life Single Level Life Joint Decreasing Life Joint Level Life |
$ .65/$100/yr $1.30/$100/yr $1.08/$100/yr $2.16/$100/yr |
These changes were contained in Senate Bill 602 which amended Sections 34-29-160 and 37-4-203 of the South Carolina Code.
* WISCONSIN *
Effective: January 1, 1996 *** Law Type: Credit Insurance
The Insurance Department Regulation implementing the adjustment of published prima facie credit life insurance rates, outlined in AB 960 that was passed in 1994, is apparently being sent to the legislature as an emergency rule as we go to press. The Regulation will increase current prima facie rates. The rates will become:
|
Single Decreasing Life Single Level Life Joint Decreasing Life Joint Level Life |
$ .39/$100/yr $ .72/$100/yr $ .65/$100/yr $1.20/$100/yr |
It is our understanding that if the emergency rule does not pass in time for a January 1, 1996 implementation, the new rates will go into effect sometime around March 1, 1996.
1995 REVIEW
A review of changes reported previously in "Of Interest!" during 1995.
- California -
- Department of Corporations
position on $.50/$100/yr credit life rate.
This position led to SB 740 which puts all insurers
under regulation of Department of Insurance.
- Colorado -
- Maximum delinquency charge
increased to $15 for UCCC loans.
- Georgia -
- Maximum delinquency charge
increased to $10 for retail installment contracts.
- Minnesota -
- $25 administrative fee allowed on
closed-end credit. Regulation of "payday" loans.
- N. Carolina -
- "Reasonable" credit investigation
fee allowed to licensed lenders. HB 758.
- Oklahoma -
- Adjustment of dollar amounts in UCCC.
Additional 10% increase.
- Texas -
- Adjustment of dollar amounts in
Regulated Loan and Sales Finance under Texas Code.
- Virginia -
- "Deregulation" Bill passed.
Precomputed loans prohibited, maximum rate 36% for loans
under $2500 and no limit over $2500.
Distribution of this newsletter is made with the understanding that the information contained herein has not been certified as legally acceptable for any particular statute, law, or regulation.
Seasons Greetings from the Folks at Carleton
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Thank you for your friendship, Good Will and Loyalty. May the Happiness and Good Cheer of the Holiday Season Be Yours throughout the New Year. |
Distribution of this newsletter is made with the understanding that the information contained herein has not been certified as legally acceptable for any particular statute, law, or regulation. For more timely and detailed information, subscribe to our Consumer Finance Newsletter and/or The Cost of Personal Borrowing in the United States compliance guide which are both published and updated ten times a year.
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