Transcript Facts About Lending - Jump$tart Coalition

Facts About Lending
The Cost of Credit
Consumer Credit Transactions

Consumer Credit Sales – Finance the
purchase of goods or services (autos,
furniture, dental work, etc.)

Consumer Loans – Loan of Money ($$$)
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Consumer Credit Sales

Maximum Credit Service Charge
(interest) the greater of:
• 24% on unpaid balance up to $1,750, and
• 18% on balance from $1,750 - $5,000, and
• 12% on unpaid balance over $5,000; or
• 18% on unpaid balance of amount deferred
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Consumer Loans (over $350)

Maximum Loan Finance Charges for
Consumer Loans (R.S. 9:3519)
• 36% on loan amounts up to $1,400
• 27% on loan amounts from $1,400 to $4,000
• 24% on loan amounts from $4,000 to $7,000
• 21% on loan amounts over $7,000
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Additional Fees and Charges

Consumer Loans may include fees in addition to the interest
(R.S. 9:3530)
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•
$50 Origination Fee
$20 Documentation Fee
These fees are included in the amount financed and not
considered finance charges when calculating interest.
However, these fees are finance charges according to the
federal Truth-In-Lending Act (Reg Z) and are included in the
APR calculation.
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Consumer Credit Sales and
Consumer Loans

What is the common element in both
types of loan agreements?
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Federal Truth-In-Lending Disclosures
ITEMIZATION OF AMOUNT FINANCED




AMOUNT GIVEN TO BORROWER
FEES AND CHARGES (PREPAID)
INSURANCE (Credit Life, Property)
AMOUNTS PAID TO OTHERS
$ _______
$ _______
$ _______
$ _______
Number, Amount and Due Dates of Monthly Payments
ANNUAL
PERCENTAGE RATE
FINANCE
CHARGE
AMOUNT
FINANCED
TOTAL OF
PAYMENTS
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What is the Annual Percentage
Rate (APR)?

The federal Truth-In-Lending Act through
Regulation Z requires disclosure of the
finance charge in the form of an
annualized rate that includes interest
and other fees imposed by the creditor
as a condition of the extension of credit.
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Interest Rate vs. APR
(present value or actuarial method of calculating interest)

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
ITEMIZATION OF AMOUNT FINANCED
AMOUNT GIVEN TO BORROWER ……………$1,000
ORIGINATION FEE……………………................$ 50
DOCUMENTATION FEE………………………… $ 20
TOTAL AMOUNT BORROWED ………………...$1,070
•
•
36% interest on $1,070 for 12 months = $219.93
12 Monthly Payments: 11 at $107.49 and 1 at $107.54
ANNUAL
PERCENTAGE RATE
49.82 %
FINANCE
CHARGE
$ 289.93
AMOUNT
FINANCED
$1,000
TOTAL OF
PAYMENTS
$1, 289.93
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Other Fees on Consumer Loans
NOT Finance Charges
Fees must be included in the Itemization

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Prepayment Penalties ($25)
NSF Check Charges (the greater of 5% or $25)
Delinquency Charges (the greater of 5% or $10)
Notary Fees ($15 for non-real estate loans)
Convenience Fees ($18 for tag agent on auto
secured loans)
Insurance (credit life, AD&D, property)
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Deferred Presentment and Small
Loan Act, R.S. 9:3578.1 et seq.
(Payday Loans)
Definition of Deferred Presentment – A consumer loan
made pursuant to a written agreement whereby a
licensee:



Accepts a check from the issuer (borrower),
Agrees to hold the check for a period of time not to
exceed 30 days prior to presentment, and
Pays the issuer the amount of the check less the
permissible fees. The amount paid to the issuer of
the check may not exceed $350.
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Deferred Presentment and Small
Loan Act, R.S. 9:3578.1 et seq.
(Payday Loans)

Definition of Small Loan – A consumer
loan of three hundred and fifty dollars or
less, made for a term of sixty days or
less.
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Finance Charge and Fees on
Payday Loans

A licensee may charge a fee not to exceed 16.75% of the face
amount of the check issued, not to exceed $45 plus a
documentation fee up to $10 on each loan transaction.

Other fees allowed:
•
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R.S. 9:3529 ($25 NSF check charge); and
R.S. 9:3527, a delinquency charge of 5% of the unpaid amount
after 10 days of the maturity date, or
Interest after default at the rate of 36% per annum for the first year
and 18% per annum thereafter.
Reasonable attorney fees and costs awarded by a court.
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The Cost of a 14-Day Payday Loan
Amount Borrowed
$350
 Interest
$ 45
 Documentation Fee
$ 10
 Total Payoff
$405
ANNUAL
PERCENTAGE
RATE
408.57 %
FINANCE
CHARGE
AMOUNT
FINANCED
$ 55
$ 350
TOTAL OF
PAYMENTS
$ 405
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Payday Loan Prohibitions
A payday lender shall not refuse a partial
payment of $50 or more;
A payday lender shall not renew or roll over a
deferred presentment transaction or small
loan. However, a licensee may accept a
partial payment of 25% of the amount
advanced plus fees charged and enter into a
new deferred presentment transaction or
renew the small loan for the remaining balance
owed.
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Other Issues

Internet Lenders from out-of-state are
not required to apply for a license and
are not under the jurisdiction of OFI.
However, to enforce a contract in LA, the
creditor shall reduce the charges to
those permitted in LA pursuant to R.S.
9:3511(B).
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Other Issues
Debt Relief Companies offer to help
consumers with multiple payday loans or
other financial difficulties. Usually these
companies collect up-front fees and do
little to resolve financial problems. Most
of these companies are scams.
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Louisiana Pawnshop Act

The pawnbroker takes possession of the
pledged item for 3 months as required by
R.S. 37:1781 et seq.
ANNUAL
PERCENTAGE
RATE
240 %
FINANCE
CHARGE
AMOUNT
FINANCED
TOTAL OF
PAYMENTS
$ 180
$ 300
$ 480
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Where to go for Assistance

See handout for important agencies,
names, addresses, phone numbers and
web sites.
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QUESTIONS?
John J. Braud, CPA
Compliance Examiner Deputy Chief
Louisiana Office of Financial Institutions
•(225) 925-7762 (Direct)
•[email protected]
•(225) 925-4660 (Main Office)
•(888) 525-9414 (Toll Free)
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