408.170. Contracts paid in full before due date--recomputations of interest--refund defined.
Contracts paid in full before due date--recomputations ofinterest--refund defined.
408.170. 1. If a note or loan contract providing for amount ofinterest, added to the principal of the loan, is prepaid in full (by cash,renewal, or refinancing) one month or more before the final installmentdate, the lender shall either:
(1) Recompute the amount of interest earned to the date of prepaymentin full on the basis of the rate of interest originally contracted forcomputed on the actual unpaid principal balances for the time actuallyoutstanding; or
(2) If the initial term of the contract is sixty-one months or lessand it is a contract for five thousand dollars or less, give a refund of aportion of the amount of interest originally contracted for which shall becomputed as follows: The amount of the refund shall be at least as great aproportion of such amount of interest as the sum of the full monthlybalances of the contract scheduled to follow the installment date after thedate of prepayment in full bears to the sum of all the monthly balances ofthe contract, both sums to be determined according to the payment scheduleprovided by the contract; except that, if prepayment in full occurs duringthe first installment period, interest shall be recomputed and charged onlyfor the actual number of days elapsed. When the period before the firstinstallment is more or less than one month, the portion of the interestearned for such period shall be determined by counting each day in suchperiod as one-thirtieth of a month and one three hundred and sixtieth of ayear.
2. No refund shall be required for any partial prepayment.
3. For a contract for more than five thousand dollars, the word"refund" as used herein shall mean a credit or deduction from the amount ofinterest originally contracted for at any time by cash, renewal orrefinancing, the buyer shall receive a refund which shall be calculated bythe actuarial method. The lender shall retain no more interest than isactually earned whenever a note or loan contract is prepaid.
(L. 1951 p. 875 § 408.032(f), A.L. 1986 H.B. 1207, A.L. 2002 S.B. 895)Effective 7-01-03