TCA § 45-2-1106 — Installment loans — Interest and insurance

In addition to all other powers granted them elsewhere in this chapter and chapter 1 of this title, banks have the power to make installment loans, either secured or unsecured, with repayment in equal, or substantially equal, monthly or other periodic installments over the term of the loans. Interest computed on the principal amount of the loan for the entire term of the loan at a rate not to exceed six percent (6%) per annum may be either deducted in advance or added to the principal; provided, that if the unpaid balance of the loan is either paid or renewed prior to its maturity date, the borrower or other person paying or renewing the loan shall be refunded or credited with unearned interest in an amount that represents at least as great a proportion of the original charge as the sum of the periodical time balances after the date of prepayment bears to the sum of all the periodical time balances under the schedule of payments in the original installment loan; provided, that the bank shall not be required to make a refund or credit where the amount thereof would be less than one dollar ($1.00) for each loan. In no event, however, shall the effective rate of interest on any loan made pursuant hereto, when computed from its inception to its originally contracted maturity, exceed the annual rates as follows: Ten and fifty-three one hundredths percent (10.53%) on loans of less than six (6) months; Eleven and fifty-eight one hundredths percent (11.58%) on loans as long as six (6) months but less than twelve (12) months; Twelve and fifty-nine one hundredths percent (12.59%) on loans as long as twelve (12) months but less than twenty-four (24) months; Thirteen and thirty-eight one hundredths percent (13.38%) on loans as long as twenty-four (24) months but less than thirty-six (36) months; Fourteen and seventeen one hundredths percent (14.17%) on loans as long as thirty-six (36) months but less than forty-eight (48) months; Fifteen and four one hundredths percent (15.04%) on loans as long as forty-eight (48) months but less than sixty (60) months; Sixteen and two one hundredths percent (16.02%) on loans as long as sixty (60) months but less than seventy-two (72) months; Seventeen and fifteen one hundredths percent (17.15%) on loans as long as seventy-two (72) months but less than eighty-four (84) months; and Eighteen and zero one hundredths percent (18.00%) on all loans for a period of eighty-four (84) months or longer. Notwithstanding any other provision herein to the contrary, the nominal rate of interest on any loan permitted by this section shall not exceed six percent (6%) per annum. In addition to such interest, a bank may require a borrower to pay loan charges in accordance with the following: A bank may require a borrower to make, or require a borrower to reimburse the bank for having made, to third parties payments necessary or incidental to the loan, including insurance premiums, official fees, taxes, appraisal fees, fees for title examination, attorney fees for documenting or closing the loan, fees for inspection or control of collateral, and, upon default, all costs of collection, including reasonable attorney's fees; A bank may require a borrower to pay to the bank a reasonable sum to reimburse the bank for its direct cost in originating, making, securing, processing, servicing and collecting the loan, and the reasonable sum may be an approximation of the direct costs; provided, that the approximation may be based on the bank's actual average cost; and provided further, that the approximation shall never exceed an amount equal to four percent (4%) of the principal amount of the loan; and provided further, that a bank may make a flat charge of not more than twenty-five dollars ($25.00) on any loan in lieu of the direct cost and without regard to the four percent (4%) limitation; A bank may require a borrower to pay delinquency charges on installments past due by more than fifteen (15) days; provided, that no charge shall exceed five percent (5%) of any such installment, nor shall any bank impose a delinquency charge on a loan more than once on account of the same past due installment; and Notwithstanding any other provision herein or elsewhere to the contrary, no bank shall be permitted to charge a commitment fee or brokerage commission in connection with any installment loan made pursuant to this section. (2) (A) A bank, in making an installment loan in excess of three hundred dollars ($300) pursuant to this section, may require a borrower to insure tangible personal property offered as security for the loan against any substantial risk of loss, damage or destruction for any amount not to exceed the actual value of the property or the approximate amount of the loan, whichever is lesser, and for a term and upon conditions that are reasonable and appropriate considering the nature of the property and maturity and other circumstances of the loan; provided, that the insurance is sold by a licensed agent, broker or solicitor and the borrower may furnish the borrower's own insurance policy. The bank may also request as security for any loan obligation in excess of three hundred dollars ($300) insurance on the life of the borrower or one (1) of them, if there are two (2) or more. The initial amount of credit life insurance shall not exceed the total amount repayable under the total amount of the indebtedness. Not more than one (1) policy of life insurance may be written in connection with any installment loan transaction unless requested by the borrower, comaker or endorser. In accepting any insurance provided for in this subdivision (b)(2) as security for a loan, the bank may deduct the premiums for the insurance from the proceeds of the loan, and remit the premiums to the insurance company writing the insurance and any gain or advantage to the bank or any employee, officer, director, agent, affiliate, or associate from the insurance or its sale shall not be considered as additional or further charge or interest in connection with any loan made under this section. Every insurance policy or certificate written in connection with a loan transaction pursuant to this section shall provide for cancellation of coverage and a refund of the premium unearned upon the discharge of the loan obligation for which the insurance is security, without prejudice to any claim existing at the time of discharge. Whenever insurance is written in connection with a loan transaction, the bank shall deliver or cause to be delivered to the borrower a policy, certificate or other memorandum that shows the coverages and the costs of the insurance, if any, to the borrower within thirty (30) days from the date of the loan.