Jan 02, 2016
Facts About LendingThe Cost of Credit
Consumer Credit TransactionsConsumer Credit Sales Finance the purchase of goods or services (autos, furniture, dental work, etc.)
Consumer Loans Loan of Money ($$$)
Consumer Credit SalesMaximum Credit Service Charge (interest) the greater of:
24% on unpaid balance up to $1,750, and18% on balance from $1,750 - $5,000, and12% on unpaid balance over $5,000; or
18% on unpaid balance of amount deferred*
Consumer Loans (over $350)Maximum Loan Finance Charges for Consumer Loans (R.S. 9:3519)
36% on loan amounts up to $1,40027% on loan amounts from $1,400 to $4,00024% on loan amounts from $4,000 to $7,00021% on loan amounts over $7,000*
Additional Fees and ChargesConsumer Loans may include fees in addition to the interest (R.S. 9:3530)
$50 Origination Fee$20 Documentation Fee
These fees are included in the amount financed and not considered finance charges when calculating interest. However, these fees are finance charges according to the federal Truth-In-Lending Act (Reg Z) and are included in the APR calculation.
Consumer Credit Sales andConsumer LoansWhat is the common element in both types of loan agreements?
Federal Truth-In-Lending DisclosuresITEMIZATION OF AMOUNT FINANCED
AMOUNT GIVEN TO BORROWER $ _______FEES AND CHARGES (PREPAID) $ _______INSURANCE (Credit Life, Property) $ _______AMOUNTS PAID TO OTHERS $ _______
Number, Amount and Due Dates of Monthly Payments *
ANNUAL PERCENTAGE RATE
TOTAL OF PAYMENTS
What is the Annual Percentage Rate (APR)?The federal Truth-In-Lending Act through Regulation Z requires disclosure of the finance charge in the form of an annualized rate that includes interest and other fees imposed by the creditor as a condition of the extension of credit.*
Interest Rate vs. APR (present value or actuarial method of calculating interest)ITEMIZATION OF AMOUNT FINANCED AMOUNT GIVEN TO BORROWER $1,000 ORIGINATION FEE................$ 50DOCUMENTATION FEE $ 20 TOTAL AMOUNT BORROWED ...$1,070 36% interest on $1,070 for 12 months = $219.93 12 Monthly Payments: 11 at $107.49 and 1 at $107.54 *
ANNUAL PERCENTAGE RATE
49.82 %FINANCE CHARGE
$ 289.93AMOUNT FINANCED
$1,000TOTAL OF PAYMENTS
Other Fees on Consumer Loans NOT Finance ChargesFees must be included in the Itemization
Prepayment Penalties ($25)NSF Check Charges (the greater of 5% or $25)Delinquency Charges (the greater of 5% or $10)Notary Fees ($15 for non-real estate loans)Convenience Fees ($18 for tag agent on auto secured loans)Insurance (credit life, AD&D, property)*
Deferred Presentment and Small Loan Act, R.S. 9:3578.1 et seq. (Payday Loans)Definition of Deferred Presentment A consumer loan made pursuant to a written agreement whereby a licensee:
Accepts a check from the issuer (borrower),Agrees to hold the check for a period of time not to exceed 30 days prior to presentment, andPays the issuer the amount of the check less the permissible fees. The amount paid to the issuer of the check may not exceed $350.
Deferred Presentment and Small Loan Act, R.S. 9:3578.1 et seq. (Payday Loans)Definition of Small Loan A consumer loan of three hundred and fifty dollars or less, made for a term of sixty days or less.*
Finance Charge and Fees on Payday LoansA licensee may charge a fee not to exceed 16.75% of the face amount of the check issued, not to exceed $45 plus a documentation fee up to $10 on each loan transaction.
Other fees allowed:R.S. 9:3529 ($25 NSF check charge); and R.S. 9:3527, a delinquency charge of 5% of the unpaid amount after 10 days of the maturity date, or Interest after default at the rate of 36% per annum for the first year and 18% per annum thereafter.Reasonable attorney fees and costs awarded by a court.*
The Cost of a 14-Day Payday LoanAmount Borrowed $350Interest $45Documentation Fee $10Total Payoff $405*
ANNUAL PERCENTAGE RATE 408.57 %FINANCE CHARGE
$ 55AMOUNT FINANCED
$ 350TOTAL OF PAYMENTS
Payday Loan ProhibitionsA payday lender shall not refuse a partial payment of $50 or more;
A payday lender shall not renew or roll over a deferred presentment transaction or small loan. However, a licensee may accept a partial payment of 25% of the amount advanced plus fees charged and enter into a new deferred presentment transaction or renew the small loan for the remaining balance owed.*
Other IssuesInternet Lenders from out-of-state are not required to apply for a license and are not under the jurisdiction of OFI. However, to enforce a contract in LA, the creditor shall reduce the charges to those permitted in LA pursuant to R.S. 9:3511(B).
Other IssuesDebt Relief Companies offer to help consumers with multiple payday loans or other financial difficulties. Usually these companies collect up-front fees and do little to resolve financial problems. Most of these companies are scams. *
Louisiana Pawnshop ActThe pawnbroker takes possession of the pledged item for 3 months as required by R.S. 37:1781 et seq.
ANNUAL PERCENTAGERATE 240 %FINANCE CHARGE
$ 180AMOUNT FINANCED
$ 300TOTAL OF PAYMENTS
Where to go for AssistanceSee handout for important agencies, names, addresses, phone numbers and web sites.
QUESTIONS?John J. Braud, CPACompliance Examiner Deputy ChiefLouisiana Office of Financial Institutions(225) 925-7762 (Direct)firstname.lastname@example.org(225) 925-4660 (Main Office)(888) 525-9414 (Toll Free)*