House Bill No. 6576
House Bill No. 6576
PUBLIC ACT NO. 97-13
AN ACT CONCERNING SMALL LOAN LENDERS.
Be it enacted by the Senate and House of
Representatives in General Assembly convened:
Section 1. Section 36a-555 of the general
statutes is repealed and the following is
substituted in lieu thereof:
No person shall engage in the business of
making loans of money or credit in the amount or
to the value of [five] FIFTEEN thousand dollars or
less for loans made under section 36a-563, [or ten
thousand dollars or less for loans made under] AS
AMENDED BY SECTION 2 OF THIS ACT, OR section
36a-565, and charge, contract for or receive a
greater rate of interest, charge or consideration
than twelve per cent per annum therefor, except a
bank, an out-of-state bank, a Connecticut credit
union, a federal credit union, an out-of-state
credit union, a savings and loan association
wholly owned subsidiary service corporation, a
person to the extent that such person makes loans
for agricultural, commercial, industrial or
governmental use or extends credit through an
open-end credit plan, as defined in subdivision
(8) of section 36a-676, for the retail purchase of
consumer goods or services, or a licensed
pawnbroker, unless licensed to do so by the
commissioner as provided in sections 36a-555 to
36a-573, inclusive, AS AMENDED BY THIS ACT.
Sec. 2. Section 36a-563 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) Every licensee under sections 36-555 to
36a-573, inclusive, AS AMENDED BY THIS ACT, may
loan any sum of money not exceeding [five] FIFTEEN
thousand dollars, excluding charges, and may
charge, contract for and receive thereon charges
at a rate not to exceed the following: (1) On any
loan which does not exceed one thousand eight
hundred dollars, excluding charges, or on any
unsecured loan or on any loan secured only by
credit life insurance, seventeen dollars per one
hundred dollars on that part of the cash advance,
not exceeding six hundred dollars, and eleven
dollars per one hundred dollars on any remainder
when the loan is made payable over a period of one
year, and proportionately at those rates over a
longer or shorter term of loan; (2) on a loan
which exceeds one thousand eight hundred dollars,
excluding charges, and which is secured by
property other than credit life insurance, eleven
dollars per one hundred dollars on the entire cash
advance when the loan is made payable over a
period of one year, and proportionately at that
rate over a longer or shorter term of loan. Such
charges shall be computed at the time the loan is
made on the full amount of the cash advance for
the full term of the loan contract,
notwithstanding any agreement to repay the loan in
instalments. Such charges shall be added to the
cash advance and the resulting sum may become the
face amount of the note. All payments made on
account of any loan, except those applied to
default and deferment charges, shall be deemed to
be applied to the unpaid instalments in the order
in which they are due.
(b) For the purpose of computations, whether
at the maximum rate or less, a month shall be that
period of time from any date in one month to the
corresponding date in the next month, but if there
is no such corresponding date, then to the last
day of the next month, and a day shall be
considered one-thirtieth of a month when such
computation is made for a fraction of a month. For
loans originally scheduled to be repaid over a
period of forty-eight months and fifteen days or
less, the portion of the charges applicable to any
particular monthly instalment period, as
originally scheduled or following a deferment,
shall bear the same ratio to the total charges,
excluding any adjustment made under subsection (c)
of this section, as the balance scheduled to be
outstanding during that monthly period bears to
the sum of all the monthly balances scheduled
originally by the contract of loan. For loans
originally scheduled to be repaid over a period in
excess of forty-eight months and fifteen days, the
portion of the charges applicable to any
particular monthly instalment period, as
originally scheduled or following a deferment,
shall be the charges which would be incurred for
that monthly instalment period if the annual
percentage rate disclosed to the borrower pursuant
to [the Connecticut Truth-In-Lending Act] SECTIONS
36a-675 TO 36a-685, INCLUSIVE, were charged, by
the actuarial method, on the disclosed amount
financed and all payments were made according to
schedule.
(c) Notwithstanding the requirement in
subsection (a), a borrower and licensee may agree
that the first instalment due date may be not more
than fifteen days more than one month, and the
charge for each day in excess of one month shall
be one-thirtieth of the portion of the charges
applicable to a first instalment period of one
month. The charges for the extra days shall be
added to the first instalment, but shall be
excluded in computing deferment charges and
refunds. When a loan contract provides for extra
days in a first instalment period, for the
purposes of sections 36a-555 to 36a-573,
inclusive, AS AMENDED BY THIS ACT, such extra days
shall be treated as the first days in the first
instalment period and the due dates of the
remaining instalments shall be calculated from the
due date of such first instalment.
(d) If any instalment remains unpaid for ten
or more consecutive days, including Sundays and
holidays, after it is due, the licensee may charge
and collect a default charge not exceeding the
lesser of seven dollars and fifty cents or five
cents per dollar, or fraction thereof, of such
scheduled instalment, except a minimum default
charge of three dollars may be charged and
collected. Default charges may be collected when
due or at any time thereafter, but may not be
accumulated until the last payment date.
(e) If, as of an instalment due date, the
payment date of all wholly unpaid instalments is
deferred one or more full months and the maturity
of the contract is extended for a corresponding
period, the licensee may charge and collect a
deferment charge not exceeding the charge
applicable to the first of the instalments
deferred, multiplied by the number of months in
the deferment period. The deferment period is that
period during which no payment is made or required
by reason of such deferment, except that no
deferment made pursuant to this subsection shall
extend the maturity of any contract made under
sections 36a-555 to 36a-573, inclusive, AS AMENDED
BY THIS ACT, for more than (1) three months, for
loans originally repayable in twenty-four months
or less, (2) five months, for loans originally
repayable in more than twenty-four months but not
more than forty-eight months, and (3) eight
months, for loans originally repayable in more
than forty-eight months. The deferment charge may
be collected at the time of deferment or at any
time thereafter. The portion of the charges
contracted for under subsection (a) applicable to
each deferred balance and instalment period
following the deferment period shall remain the
same as that applicable to such balance and period
under the original contract of loan. No instalment
on which a default charge has been collected, or
on account of which any partial payment has been
made, shall be deferred or included in the
computation of the deferment charge unless such
default charge or partial payment is refunded to
the borrower or credited to the deferment charge.
Any payment received at the time of deferment may
be applied first to the deferment charge and the
remainder, if any, applied to the unpaid balance
of the contract, but if such payment is sufficient
to pay, in addition to the appropriate deferment
charge, any instalment which is in default and the
applicable default charge, it shall be first so
applied and any such instalment shall not be
deferred or subject to the deferment charge. If a
loan is prepaid in full during the deferment
period, the borrower shall receive, in addition to
the refund required under subsection (f) of this
section, a refund of that portion of the deferment
charge applicable to any unexpired full month or
months of such deferment period.
(f) If the contract of loan is prepaid in
full by cash, a new loan or otherwise, before the
final instalment date, the portion of the charges
applicable to the full instalment periods, as
scheduled originally in the loan contract or as
rescheduled by reason of any deferment made
pursuant to sections 36a-555 to 36a-573,
inclusive, AS AMENDED BY THIS ACT, following the
date of prepayment shall be refunded or credited
to the borrower. Where prepayment occurs on other
than a monthly instalment due date, it shall be
deemed to have occurred on the preceding or
succeeding instalment due date nearest to the date
of prepayment. Where prepayment occurs on a date
midpoint between the preceding and succeeding
monthly instalment due dates, it shall be deemed
to have occurred on the preceding monthly due
date. In all cases where prepayment occurs before
the first monthly instalment due date, it shall be
deemed to have occurred on the first monthly
instalment due date. If judgment is obtained
before the final instalment date, the judgment
shall reflect the refund which would be required
for prepayment in full as of the date judgment is
obtained. No refund of less than one dollar [need
be made; no refund] OR for partial prepayments
need be made.
(g) If part or all of the consideration for a
loan contract is the unpaid balance, excluding
default charges, of a prior loan with the same
licensee, the cash advance under such new loan
contract may include the balance of the prior
contract which remains after giving the required
refund.
(h) In addition to the charges provided for
by sections 36a-555 to 36a-573, inclusive, AS
AMENDED BY THIS ACT, no further or other charge or
amount for any examination, service, brokerage,
commission or other thing, or otherwise, shall be
directly or indirectly charged, contracted for or
received. If interest or any other charges in
excess of those permitted by said sections are
charged, contracted for or received, except as the
result of a bona fide error, the contract of loan
shall be void and the licensee shall have no right
to collect or receive any principal, interest or
charges. No person shall owe any licensee, as
such, at any time more than [five] FIFTEEN
thousand dollars for principal as a borrower,
comaker or guarantor for loans made under said
sections. No licensee shall induce or permit any
borrower or borrowers to split or divide any loan
or loans made under said sections, or permit any
borrower to become obligated, directly or
indirectly, under more than one contract of loan
under said sections at the same time primarily for
the purpose of obtaining a higher rate of charge
than would otherwise be permitted by said
sections. No contract made under said sections,
except as deferred in accordance with subsection
(e) of this section, shall provide for a greater
rate of interest than twelve per cent per annum on
the balance remaining unpaid twenty-four months
and fifteen days after the date of making such
contract if the original cash advance was one
thousand dollars or less or thirty-six months and
fifteen days if the original cash advance was in
excess of one thousand dollars but not in excess
of one thousand eight hundred dollars. No contract
made under said sections with an original cash
advance in excess of one thousand eight hundred
dollars, except as deferred in accordance with
subsection (e) of this section, shall provide for
a greater rate of interest than twelve per cent
per annum on the balance remaining unpaid on the
scheduled maturity date of said contract. No part
of the principal balance remaining unpaid by a
borrower twenty-four months and fifteen days after
making such contract where the original cash
advance was one thousand dollars or less or
thirty-six months and fifteen days where the
original cash advance was in excess of one
thousand dollars but not in excess of one thousand
eight hundred dollars, shall directly or
indirectly be renewed or refinanced by the lender
who made such loan. If the maturity date of a loan
made under said sections has been extended by
deferred payments, the maximum renewal period that
such loan may be extended shall be the number of
months such loan is deferred. When a contract is
renewed or refinanced prior to twenty-four months
and fifteen days where the original cash advance
was one thousand dollars or less or thirty-six
months and fifteen days where the original cash
advance exceeded one thousand dollars but did not
exceed one thousand eight hundred dollars, from
the date of making such contract, such renewal or
refinancing shall, for the purposes of this
section, be deemed a separate loan transaction.
(i) Notwithstanding the provisions of
subsection (a) of this section, on any loan
secured by real property a licensee may include in
the amount of the loan the following closing
costs, provided such costs are bona fide,
reasonable in amount and not assessed for the
purpose of circumventing or otherwise limiting any
applicable provision of sections 36a-555 to
36a-573, inclusive, AS AMENDED BY THIS ACT: (1)
Fees or premiums for title examination, abstract
of title, title insurance, surveys, or similar
purposes; (2) appraisals, if made by a person who
is not an employee or affiliated with the
licensee, and (3) fees and taxes paid to public
officials for the recording and release of any
document related to the real estate security. A
licensee may collect costs incurred in the event
of foreclosure which shall not include any
attorney's fee.
(j) No agreement with respect to a loan under
sections 36a-555 to 36a-573, inclusive, AS AMENDED
BY THIS ACT, may provide for charges resulting
from default by the borrower, other than those
authorized by said sections.
Sec. 3. Section 36a-573 of the general
statutes is repealed and the following is
substituted in lieu thereof:
No person, except as authorized by the
provisions of sections 36a-555 to 36a-573,
inclusive, AS AMENDED BY THIS ACT, shall, directly
or indirectly, charge, contract for or receive any
interest, charge or consideration greater than
twelve per cent per annum upon the loan, use or
forbearance of money or credit of the amount or
value of (1) five thousand dollars or less FOR ANY
SUCH TRANSACTION ENTERED INTO BEFORE THE EFFECTIVE
DATE OF THIS ACT, AND (2) FIFTEEN THOUSAND DOLLARS
OR LESS FOR ANY SUCH TRANSACTION ENTERED INTO ON
AND AFTER THE EFFECTIVE DATE OF THIS ACT. The
provisions of this section shall apply to any
person who, as security for any such loan, use or
forbearance of money or credit, makes a pretended
purchase of property from any person and permits
the owner or pledgor to retain the possession
thereof, or who, by any device or pretense of
charging for the person's services or otherwise,
seeks to obtain a greater compensation than twelve
per cent per annum. No loan for which a greater
rate of interest or charge than is allowed by the
provisions of sections 36a-555 to 36a-573,
inclusive, AS AMENDED BY THIS ACT, has been
contracted for or received, wherever made, shall
be enforced in this state, and any person in any
way participating therein in this state shall be
subject to the provisions of said sections,
provided, a loan lawfully made after June 5, 1986,
in compliance with a validly enacted licensed loan
law of another state to a borrower who was not, at
the time of the making of such loan, a resident of
Connecticut but who has become a resident of
Connecticut, may be acquired by a licensee and its
interest provision shall be enforced in accordance
with its terms.
Approved April 18, 1997