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S.B. 157






Sponsor: Peter C. Knudson

             7      LONG TITLE
             8      General Description:
             9          This bill modifies the Utah Consumer Credit Code Amendments.
             10      Highlighted Provisions:
             11          This bill:
             12          .    addresses prepayment fee and rebate of prepaid finance charges;
             13          .    addresses delinquency charges;
             14          .    deletes language related to minimum charges; and
             15          .    makes technical changes.
             16      Monies Appropriated in this Bill:
             17          None
             18      Other Special Clauses:
             19          This bill provides an immediate effective date.
             20      Utah Code Sections Affected:
             21      AMENDS:
             22          70C-3-101, as last amended by Chapter 20, Laws of Utah 1995
             23          70C-3-103, as enacted by Chapter 133, Laws of Utah 1991
             24          70C-4-101, as enacted by Chapter 159, Laws of Utah 1985
             26      Be it enacted by the Legislature of the state of Utah:
             27          Section 1. Section 70C-3-101 is amended to read:

             28           70C-3-101. Prepayment of debt.
             29          (1) (a) Subject to the other provisions of this section, a debtor may prepay the unpaid
             30      balance of a closed-end consumer credit debt at any time without penalty.
             31          (b) Notwithstanding Subsection (1)(a), a debtor may be required to pay a prepayment
             32      fee for prepaying a closed-end extension of credit secured by a subordinate lien on a dwelling
             33      that is not subject to Section 32 of Regulation Z, 12 C.F.R. Sec. 226.32 if:
             34          (i) the creditor offers the debtor the option of entering into either:
             35          (A) a contract that does not contain a prepayment fee; or
             36          (B) a contract containing:
             37          (I) a prepayment fee; and
             38          (II) a rate of finance charge or fee that is lower than the rate of finance charge or fee
             39      under the contract described in Subsection (1)(b)(i)(A); and
             40          (ii) the debtor enters into the contract described in Subsection (1)(b)(i)(B).
             41          (2) For purposes of this section:
             42          (a) The unpaid balance of a closed-end consumer credit debt at any point in time shall
             43      consist only of:
             44          (i) any unpaid earned finance charge[,];
             45          (ii) the unpaid principal of the debt[,]; and
             46          (iii) any delinquency or deferral and other allowable charges that may have been
             47      assessed prior to prepayment.
             48          (b) Except as provided in Subsection (2)(c), the earned finance charge and unpaid
             49      principal shall be calculated only by the actuarial or United States Rule method from the date
             50      the credit is first extended to the debtor, but the creditor may accrue finance charges during any
             51      delay period pertaining to a right of rescission.
             52          (c) (i) Any prepaid finance charge not exceeding 5% of the original principal amount of
             53      the debt which the parties expressly agree is nonrefundable in the event of prepayment shall be
             54      fully earned on the date the credit is extended.
             55          (ii) Any [additional] prepaid finance charges in addition to the prepaid finance charges
             56      described in Subsection (2)(c)(i) are [deemed] considered to be earned proportionally over the
             57      entire term of the agreement, and in that event of prepayment, any unearned portion of such
             58      charge, calculated on a pro rata basis according to the remaining term of the agreement, shall

             59      be rebated.
             60          (iii) Notwithstanding Subsections (2)(c)(i) and (ii), on a closed-end extension of credit
             61      secured by a subordinate lien on a dwelling that is not subject to Section 32 of Regulation Z, 12
             62      C.F.R. Sec. 226.32 any prepaid finance charge shall be fully earned on the date the credit is
             63      extended.
             64          (d) Any costs, charges, or fees paid to third parties in connection with setting up the
             65      credit are not subject to rebate unless the creditor becomes entitled to a rebate of any part of the
             66      cost, charge, or fee as a result of the prepayment.
             67          (3) If the maturity of a closed-end consumer credit debt is accelerated for any reason
             68      and judgment is obtained, the debtor is entitled to have the unpaid balance of the debt
             69      calculated, less any legal offset, as if payment in full had been made on the date judgment was
             70      entered. Interest on the judgment shall be the rate agreed on by the parties with respect to the
             71      debt.
             72          (4) The provisions of this section for calculating the unpaid balance of a debt apply to
             73      all prepayments of closed-end consumer credit debts after September 1, 1985, unless a different
             74      method for calculating the unpaid balance on prepayment is expressly provided for in a
             75      consumer credit contract which was entered into prior to July 1, 1985, and was lawful when
             76      made.
             77          Section 2. Section 70C-3-103 is amended to read:
             78           70C-3-103. Delinquency charges -- Conversion of account.
             79          (1) With respect to a closed-end loan, [no] a delinquency charge may not be [collected
             80      on an installment which is paid in full within ten days after its scheduled due date even though
             81      an earlier installment or a delinquency charge on an earlier installment has not been paid in
             82      full. For purposes of this subsection, payments shall be applied first to current payments due
             83      and then to delinquent installments and charges] assessed on a payment that is a payment in
             84      full for the scheduled installment period solely because of an unpaid delinquency charge
             85      relating to an earlier installment.
             86          (2) (a) With respect to a closed-end loan other than one in which the finance charge is
             87      based on unpaid daily balances, if two payments or parts [thereof] of two payments are past due
             88      for more than ten days, the lender may convert the loan to one in which the finance charge is
             89      based on unpaid daily balances.

             90          (b) In the event of conversion[,] under Subsection (2)(a):
             91          (i) the creditor shall calculate the unpaid balance of the debt in accordance with the
             92      provisions governing rebate on prepayment under Section 70C-3-101 as of the due date of the
             93      first delinquent installment[,]; and [thereafter]
             94          (ii) after the conversion the creditor may collect a finance charge not exceeding the
             95      annual rate agreed upon by the parties.
             96          Section 3. Section 70C-4-101 is amended to read:
             97           70C-4-101. Minimum billing cycle charge.
             98          If there is an unpaid balance in an open-end account on the date the finance charge is
             99      applied [and that charge does not exceed $1 for billing cycles which are monthly or longer], the
             100      creditor may assess a minimum charge [of not more than $1 for those periods].
             101          Section 4. Effective date.
             102          If approved by two-thirds of all the members elected to each house, this bill takes effect
             103      upon approval by the governor, or the day following the constitutional time limit of Utah
             104      Constitution Article VII, Section 8, without the governor's signature, or in the case of a veto,
             105      the date of veto override.

Legislative Review Note
    as of 1-27-05 12:24 PM

Based on a limited legal review, this legislation has not been determined to have a high
probability of being held unconstitutional.

Office of Legislative Research and General Counsel

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