Arizona Laws 6-1412. Limitation on interest and other charges
A. It is unlawful for a licensee to charge, contract for, receive or collect an interest charge other than as permitted by this article.
Terms Used In Arizona Laws 6-1412
- Annual percentage rate: The cost of credit at a yearly rate. It is calculated in a standard way, taking the average compound interest rate over the term of the loan so borrowers can compare loans. Lenders are required by law to disclose a card account's APR. Source: FDIC
- Contract: A legal written agreement that becomes binding when signed.
- including: means not limited to and is not a term of exclusion. See Arizona Laws 1-215
- Insured: means any person covered under an insurance contract or other evidence of insurance coverage subject to regulation under title 20. See Arizona Laws 6-1401
- Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
- Month: means a calendar month unless otherwise expressed. See Arizona Laws 1-215
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Premium finance agreement: means a written agreement by which an insured or prospective insured agrees to pay to a premium finance company the amount advanced or to be advanced under the written agreement to an insurance producer in payment of premiums of an insurance contract together with interest or discount and a service charge as authorized and limited by this article. See Arizona Laws 6-1401
- Premium finance company: means a person engaged in whole or in part in the business of financing insurance premiums, entering into premium finance agreements with insureds or otherwise acquiring premium finance agreements from insurance producers or other premium finance companies. See Arizona Laws 6-1401
- Remainder: An interest in property that takes effect in the future at a specified time or after the occurrence of some event, such as the death of a life tenant.
- Writing: includes printing. See Arizona Laws 1-215
B. The interest is to be computed on the balance of the premiums due, after subtracting the down payment made by the insured in accordance with the premium finance agreement, from the effective date of the earliest insurance contract for which the premiums are being advanced to and including the date when the final installment of the premium finance agreement is payable.
C. On any premium finance agreement in any original principal amount not exceeding one thousand dollars, a licensee may contract for and receive an interest charge at a rate not exceeding three per cent per month or thirty-six per cent per annum.
D. On any premium finance agreement in which the original principal amount exceeds one thousand dollars, a licensee may contract for and receive an interest charge at a rate not exceeding three per cent per month on that part of the original principal amount not exceeding one thousand dollars, and two per cent per month on that part of the principal exceeding one thousand dollars.
E. A licensee may contract for and receive an interest charge on the entire amount of the unpaid principal balance of the premium finance agreement at the single annual percentage rate which would earn not more than the total amount of interest charges at the scheduled maturity of the premium finance agreement as would the several different rates that otherwise would be applicable under subsection D, to different portions of the unpaid principal balance, if the premium finance agreement is paid according to the agreed terms.
F. For the purposes of computing an interest charge, it is permissible to calculate the interest charges on an annual basis of twelve months of thirty days each or on a daily basis if a day is counted either as 1/360th, 1/365th, or 1/366th of a year, as the licensee and insured may agree in writing.
G. If the premium finance agreement requires repayment in substantially equal and consecutive monthly installments of principal and interest charges combined and the first installment falls due no less than fifteen nor more than forty-five days after the effective date of the policy, the interest charges may be precomputed at the agreed rate on scheduled unpaid principal balances and added to the principal amount advanced under the premium finance agreement, subject to the following requirements:
1. Any insured may prepay the obligation in full at any time. If prepayment in full occurs by a new premium finance agreement, renewal or refinancing, or by cash, the insured shall be refunded or credited with the precomputed charges which are applicable to all fully unexpired months of the premium finance agreement as originally scheduled. For this purpose the applicable interest charge is the total of those charges which would have been made for each such unexpired month by applying scheduled payments to unpaid balances of principal according to the actuarial method at that single annual interest rate which would earn the original amount of precomputed interest charges on the premium finance agreement, assuming interest charges had not been precomputed at the contract rate but had been computed by actuarial method at that single annual interest rate from the inception of the premium finance agreement. All computations shall be based on the assumption that all payments are made as scheduled. The licensee may round the annual interest rate to the nearest one-quarter of one per cent. In this paragraph, "actuarial method" means the method of allocating each payment between interest charges and principal pursuant to which the payment is applied first to interest charges computed on the unpaid balance of principal for the time the balance is outstanding, and the remainder of the payment is subtracted from the unpaid principal amount.
2. If the maturity of the premium finance agreement is accelerated, the contract balance shall be reduced by the refund or credits of precomputed interest charges which would be required for prepayment in full on the date of acceleration, and thereafter the licensee may receive the interest charges authorized in this section computed on unpaid balances of the premium finance agreement for the time actually outstanding from the installment date nearest the date of acceleration until paid. The premium finance agreement may provide that the premium finance company, with or without accelerating maturity, may recompute the entire amount due under the premium finance agreement on a per cent per month basis or reduce the premium finance agreement balance as of any installment date by the refund or credit of precomputed interest charges which would be required for prepayment in full on such installment date and receive the interest charges authorized by this section computed on unpaid balances of the premium finance agreement for the time actually outstanding from such installment date until the premium finance agreement is fully paid.