40-2610. Service charges; computation; maximum; refund on prepayment.
40-2610
40-2610. Service charges; computation; maximum; refund on prepayment.A premium finance company shall not charge, contract for, receive, orcollect a service charge other than as permitted by this act.
The service charge shall be computed on the balance of the premiumsdue (after subtracting the down payment made by the insured inaccordance with the premium finance agreement) from the effective dateof the insurance coverage, for which the premiums are being advanced, toand including the date when the final installment of the premium financeagreement is payable.
The total service charges shall be a maximum of $12per $100 per year, plus an additional chargeof $10 per premium finance agreement, which need notbe refunded on prepayment. No insurance premiumfinance company shall induce an insured to become obligated under morethan one premium finance agreement for the purpose of obtaining morethan one additional charge of $10. The insured mayprepay the premium finance agreement at anytime and if the premium finance agreement is prepaid in full (by cash,renewal or refinancing) one month or more before the final payment isdue, any unearned service charge shall be refunded onthe basis ofthe rule commonly known as the rule of seventy-eighths (78ths), which iscomputed as follows:
The amount refunded shall be the proportion of the service chargewhich the sum of the monthly balances scheduled to follow the date ofprepayment in full bears to the sum of the scheduled monthly balances ofthe premium finance agreement.
History: L. 1968, ch. 287, § 10; L. 1975, ch. 246, § 1; L. 1980,ch. 139, § 1;L. 1991, ch. 136, § 3; July 1.