Louisiana Revised Statutes 9:3532.1 – Prepayment penalties in connection with simple interest real estate secured loans
Terms Used In Louisiana Revised Statutes 9:3532.1
- Consumer: means a natural person who purchases goods, services, or movable or immovable property or rights therein, for a personal, family, or household purpose and includes a purchaser or buyer in a consumer credit sale or transaction made with the use of a seller credit card or otherwise, or a borrower or debtor in a consumer loan, revolving loan account, or a lender credit card. See Louisiana Revised Statutes 9:3516
- Consumer loan: means a loan of money or its equivalent made by a supervised financial organization, a licensed lender, or lender in which the debtor is a consumer, and the loan is entered into primarily for personal, family, or household purposes and includes debts created by the use of a lender credit card, revolving loan account, or similar arrangement, as well as insurance premium financing. See Louisiana Revised Statutes 9:3516
- Contract: A legal written agreement that becomes binding when signed.
- Escrow: Money given to a third party to be held for payment until certain conditions are met.
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Principal: means the amount financed or amount deferred under a consumer credit transaction. See Louisiana Revised Statutes 9:3516
A. As a condition of the consumer‘s being permitted to prepay a consumer loan secured by a mortgage on immovable property in full prior to the loan’s maturity, an extender of credit may contract for and receive a prepayment penalty in an amount not to exceed:
(1) Five percent of the unpaid principal balance if the loan is prepaid in full during the first year of its term.
(2) Four percent of the unpaid principal balance if the loan is prepaid in full during the second year of its term.
(3) Three percent of the unpaid principal balance if the loan is prepaid in full during the third year of its term.
(4) Two percent of the unpaid principal balance if the loan is prepaid in full during the fourth year of its term.
(5) One percent of the unpaid principal balance if the loan is prepaid in full during the fifth year of its term.
B. No prepayment penalties shall be assessed if the loan is prepaid in full after the fifth year of its term. Prepayment penalties may be assessed under this Section only with respect to consumer real estate secured loans that bear simple interest, and that have an original principal balance of twenty-five thousand dollars or more, and that are payable over a term of seven years or longer.
C. Notwithstanding any other provision of law to the contrary, no prepayment penalty or similar fee or charge shall be due, assessed, charged, collected, paid, held in escrow, or contracted to be paid if all or part of a prepayment of all or part of an outstanding loan balance is made from proceeds paid in full or partial satisfaction of a claim or claims made under a policy or policies of insurance insuring against casualty, flood, or other loss or damage to property securing the loan being prepaid in connection with a gubernatorially declared disaster.
Acts 1995, No. 1184, §2; Acts 2006, No. 188, §2.