45-5-402 - Changes in payment schedules Prepayments Deferrals. - Tennessee Statutes

45-5-402. Changes in payment schedules Prepayments Deferrals.

(a)  With respect to loans where the total amount of the loan is less than one hundred dollars ($100):

     (1)  If the loan is precomputed and is prepaid in full, by refinancing or otherwise, more than thirty (30) days prior to its original maturity date, the borrower shall be entitled to receive a refund, or a refund credit, of any precomputed interest charge in an amount at least equal to the following:

          (A)  If the loan is payable in periodic installments, an amount on each installment for the time each installment is so paid in advance of its due date at the maximum authorized nominal rate; or

          (B)  If the loan is not payable in installments, an amount equal to that required in subdivision (a)(1)(A) and computed as if the loan was paid in consecutive equal monthly installments; and

     (2)  No prepayment refund of less than one dollar ($1.00) need be made.

(b)  With respect to loans where the total amount of the loan is one hundred dollars ($100) or more:

     (1)  Unless the parties to the transaction otherwise agree in writing, the installment loans shall be paid in accordance with the schedule of payments provided in the loan contract. The parties may, however, agree that the loan may be prepaid or that the payment of all or part of one (1) or more unpaid installments may be deferred, subject, however, to the limitations provided in this section;

     (2)  In the event of prepayment in full, by refinancing or otherwise, of the installment loan:

          (A)  (i)  With respect to a precomputed transaction that has an original term of sixty-one (61) months or less and that is scheduled to be repaid in substantially equal successive installments at approximately equal intervals, the amount required to prepay shall be the outstanding balance as of the applicable scheduled installment date; provided, that the borrower shall be entitled to a refund or credit of interest, the amount of which shall be no less than the amount computed in accordance with the Rule of 78, as follows: the amount of the refund or credit shall be as great a proportion of the total interest originally contracted for as the sum of the periodic time balances of the loan scheduled to follow the applicable scheduled installment date bears to the sum of all the periodic time balances of the loan, both sums to be determined according to the schedule of payments originally contracted for. The applicable scheduled installment date shall be the scheduled installment date next following the actual date of payment, unless payment is made on a scheduled installment date, in which case the date of payment shall be the applicable scheduled installment date;

                (ii)  With respect to a precomputed transaction that has an original term of more than sixty-one (61) months and that is scheduled to be repaid in substantially equal successive installments at approximately equal intervals, the amount required to prepay shall be the outstanding balance as of the date of prepayment; provided, that the borrower shall be entitled to a refund or credit of interest, the amount of which shall be no less than the amount computed in accordance with the actuarial method;

          (B)  In a transaction not covered by subdivision (b)(2)(A), the amount required to prepay shall be the outstanding balance as of the date of payment, including any earned interest unpaid as of that date;

          (C)  Where the amount of the refund credit is less than one dollar ($1.00), no refund credit shall be made. Any refund credit in the amount of one dollar ($1.00) or more may be made in cash or credit to the outstanding indebtedness of the borrower;

          (D)  If the indebtedness created by the installment loan is fully satisfied prior to maturity through surrender of any collateral securing the loan, repossession of collateral, or any judgment, the outstanding obligation of the borrower shall be determined as provided in either subdivision (b)(2)(A) or (B), as may be appropriate, computed as of the date the registrant recovers the value of the collateral through disposition of the collateral, or the date judgment is entered in favor of the registrant, or, if the registrant elects to keep the collateral in satisfaction of the indebtedness, as of the date the registrant takes possession of the collateral. In the case of a precomputed transaction, if the date is other than a scheduled payment date, the next following scheduled payment date shall be used in the computation; and

     (3)  The parties may, at any time, agree to a deferral of all or part of one (1) or more unpaid installments, and the registrant on the agreement may make and collect a charge for the deferral, subject to the following provisions:

          (A)  A deferral postpones the scheduled due date of an installment or installments as originally scheduled, or as previously deferred, for the deferment period;

          (B)  The deferment period is that period of time for which the payment is or the payments are deferred;

          (C)  The deferral charge shall not exceed an amount equal to the result of applying the effective rate of interest provided in the original agreement between the parties, to the amount deferred for the deferment period, calculated without regard to differences in the lengths of months, but proportionately for a part of a month, counting each day as one thirtieth (1/30) of a month. A deferral charge is earned pro rata during the deferment period and is fully earned on the last day of the deferment period;

          (D)  If a loan is prepaid in full during a deferment period, then the registrant shall make or credit to the borrower a refund of the unearned deferral charge in addition to any other refund or credit made for prepayment in full;

          (E)  A deferral charge may be collected at the time it is assessed or at any time thereafter;

          (F)  Any payment received at the time of the deferment may be applied first to the deferral charge and the remainder, if any, to the unpaid balance of the loan, but if the payment is sufficient to pay, in addition to the appropriate delinquency charge, any installment that is in default, it shall be first so applied, and the installment shall not then be deferred or be subject to the deferral charge;

          (G)  No installment on which a delinquency charge has been collected shall be deferred or included in the computation of the deferral unless the delinquency charge is refunded to the borrower or credited to the deferral charge;

          (H)  In addition to the deferral charge, the registrant may make appropriate additional charges as provided in this chapter. The amount of the charges that are not paid in cash may be added to the amount deferred for the purpose of calculating the deferral;

          (I)  The deferral agreement shall be evidenced in writing, which shall include:

                (i)  The amount of the deferral charge;

                (ii)  The amount or amounts deferred;

                (iii)  The date to which, or the time period for which, payment is deferred; and

                (iv)  The nature and amount of any other charges made at the time;

          (J)  No deferral charge may be made for a period after the date that the registrant elects to accelerate the maturity of the loan; and

          (K)  An agreement to a deferral shall not affect the determination of the length of the term of the loan under § 45-5-302(2).

[Acts 1979, ch. 204, § 10; T.C.A., § 45-2010; Acts 1983, ch. 164, § 3; 1988, ch. 705, § 1.]