Chapter 082
2003 -- H 6021 SUBSTITUTE A
Enacted 07/01/03
A N A C T
RELATING
TO INSURANCE - INSURANCE PREMIUM FINANCE AGREEMENTS
Introduced
By: Representative Robert A. Watson
Date
Introduced: February 12, 2003
It
is enacted by the General Assembly as follows:
SECTION
1. Chapter 27-40 of the General Laws entitled "Insurance Premium Finance
Agreements"
is hereby repealed in its entirety.
CHAPTER
27-40
Insurance
Premium Finance Agreements
27-40-1.
Short title. -- This chapter may be cited as the "Insurance
Premium Finance
Act".
27-40-2.
Definitions. -- As used in this chapter:
(1) "Director" means the director of business regulation.
(2) "Insurance premium finance agreement"; referred to in this
chapter as "agreement",
means
an agreement by which an insured, or prospective insured, promises to pay to an
insurance
premium
finance company the amount advanced or to be advanced, under the agreement to
an
insurer
or to an insurance producer, in payment of a premium or premiums on an
insurance
contract
or contracts, together with interest and a service charge, as authorized and
limited by this
chapter;
(3) "Insurance premium finance company", referred to in this chapter
as "company",
means
a person engaged in the business of entering into insurance premium finance
agreements,
as
defined in subdivision (2) of this section, or acquiring insurance premium
finance agreements
from
other insurance premium finance companies;
(4) "Licensee" means an insurance premium finance company holding a
license issued
and
existing by virtue of and pursuant to chapter 14.1 of title 19; and
(5) "Person" means an individual, partnership, association, business
corporation,
nonprofit
corporation, common law trust, joint stock company; or any other group of
individuals
howsoever
lawfully organized.
27-40-3.
Licensee's maintenance and preservation of records -- Examination by
director.
--
(a) Every licensee shall maintain records of its insurance premium finance
transactions,
and the records shall be available for examination and investigation by the
director.
The
director may, at any time during regular business hours of the licensee,
examine the records
of
the licensee at any location at which the records are maintained.
(b) Every licensee shall preserve records of the insurance premium finance
transactions,
including
cards used in a card system, if any, for at least two (2) years after the final
entry is made
with
respect to an agreement. Preservation of the records on photographics,
microfilm,
microfiche,
or similar media shall constitute compliance with this section.
27-40-4.
Form of agreement. -- (a) Every agreement shall:
(1) Be dated and signed by, or on behalf of, the insured, and the printed
portion of it shall
be
in at least eight (8) point type;
(2) Contain the names and place of business of the insurance producer
negotiating the
insurance
contract or contracts to which the agreement relates, the name and residence,
or place
of
business, of the insured, as specified by the insured, the name and place of
business of the
company
to which payments under the agreement are to be made, a brief description of
the
insurance
contract, or contracts, and the amount of the premium or premiums for the
contract; and
(3) Set forth the following items where they are applicable:
(i) The total amount of the premium or premiums;
(ii) The amount of the down payment;
(iii) The principal balance, the difference between paragraphs (i) and (ii) of
this
subdivision;
(iv) The amount of interest to be charged;
(v) The balance payable by the insured, sum of paragraphs (iii) and (iv) of
this
subdivision;
and
(vi) The number of installments required, the amount of each installment
expressed in
dollars,
and the due date or period of the installments.
(b) The items set forth in subdivision (a)(3) of this section do not need to be
stated in the
sequence
in which they appear in subdivision (a)(3) of this section, and additional
items may be
included
to explain computations made in determining the amount to be paid by the
insured.
27-40-5.
Limitation on interest and other charges. -- (a) A company shall
not charge,
contract
for, receive, or collect an interest or discount charge other than as provided
by this
chapter.
(b) Interest is to be computed on the balance of the premium or premiums due,
after
subtracting
the down payment made by the insured in accordance with the agreement, from the
effective
date of the insurance contract, for which the premium or premiums is or are
being
advanced,
to and including the date when the final installment provided for in the
agreement is
due
and payable.
(c) Interest shall not exceed that specified in section 6-26-2. A service
charge of fifteen
dollars
($15.00) per agreement, which need not be refunded upon cancellation or
prepayment,
may
be imposed. The interest provided for by this chapter anticipates timely
repayment, in
consecutive
equal monthly installments, for a period of one year. With respect to
contractual
arrangements
for repayment in greater or lesser periods, or in unequal, irregular, or other
than
monthly
installments, interest may be computed at an equivalent effective rate, having
due regard
for
timely payments of installments.
(d) Notwithstanding the provisions of any agreement, an insured may prepay the
obligation
in full at any time. In that event, the insured shall receive a refund credit.
The refund
credit
shall represent at least as great a proportion of the interest as the sum of
the periodic
balances
following the month in which prepayment is made bears to the sum of all
periodic
balances
under the schedule of installments in the agreement. If the amount of a refund
credit is
less
than one dollar ($1.00), no actual refund need be made.
27-40-6.
Delinquency and cancellation charges. -- (a) An agreement may
provide for
payment
by the insured of a delinquency charge ranging from one dollar ($1.00) to a maximum
of
five
percent (5%) of an installment that is in default for a period of five (5) days
or more.
(b) The agreement may provide for payment by the insured of a cancellation
charge of
fifteen
dollars ($15.00), if the default results in cancellation of any insurance
contract or contracts
listed
in the agreement.
(c) An agreement may also provide for payment, upon default, of reasonable
costs of
collection,
including reasonable attorneys' fees.
(d) None of the charges referred to in this section shall be considered
directly or
indirectly
in determining whether a violation of the usury laws has occurred under an
agreement.
27-40-7.
Cancellation of insurance contract upon default. -- (a) When an
agreement
contains
a power of attorney enabling the company to cancel an insurance contract or
contracts
listed
in the agreement, the insurance contract or contracts shall not be cancelled by
the company
unless
the cancellation is effectuated in accordance with this section.
(b) Not less than ten (10) days written notice shall be mailed to the insured,
at his or her
last
known address, as shown on the records of the company, of the intention of the
company to
cancel
the insurance contract or contracts unless the default is removed within the
ten (10) day
period.
(c) After expiration of the ten (10) day period, the company may cancel the
insurance
contract
or contracts by mailing a notice of cancellation to the insurer. The insurance
contract or
contracts
shall be cancelled as if notice of cancellation had personally been submitted
by the
insured,
but without requiring return of the insurance contract or contracts. The
company shall
also
mail a notice of cancellation to the insured at his or her last known address
as shown on the
records
of the company. The insurance contract or contracts shall be cancelled by the
insurer on a
pro
rata basis.
(d) All statutory, regulatory, and contractual restrictions providing that an
insurance
contract
may not be cancelled unless notice is given to a particular governmental
agency,
mortgagee,
or other third party shall be applicable to any cancellation effected under the
provisions
of this section. The insurer shall give the prescribed notice on behalf of
itself or the
insured
to any governmental agency, mortgagee, or other third party on or before the
second
business
day after the day it receives notice of cancellation from the company, and
shall
determine
the effective date of cancellation, taking into consideration the number of
days' notice
required
to complete the cancellation.
27-40-8.
Return premiums. -- Whenever a financed insurance contract or
contracts is
cancelled,
the insurer shall return the gross unearned premium or premiums, if any, that
may be
due
under the insurance contract or contracts, directly to the company for the
account of the
insured,
as soon as reasonably possible, but, in no event, shall the period for the
return exceed
sixty
(60) days after the effective date of cancellation. In the event that crediting
of a return
premium
or premiums to the account of an insured results in a surplus over the amount
due from
the
insured, the company shall refund the excess to the insured, provided that no
refund shall be
required
if the refund amounts to less than one dollar ($1.00).
27-40-9.
Exemption from filing requirements. -- Filing of the agreement
shall not be
necessary
to perfect its validity, as a secured transaction against creditors, subsequent
purchasers,
pledgees,
encumbrancers, trustees in bankruptcy, or other insolvency proceeding under any
law,
or
any person having the status, power, or authority of these, or their successors
or assigns.
SECTION
2. Section 19-14-1 of the General Laws in Chapter 19-14 entitled "Licensed
Activities"
is hereby amended to read as follows:
19-14-1.
Definitions. -- For purposes of this chapter and chapters 14.1, 14.2,
14.3, 14.4
and
14.4 and
14.6 of this title:
(1) "Check" means any check, draft, money order, personal money
order, or other
instrument
for the transmission or payment of money. For the purposes of check cashing,
travelers
checks or foreign denomination instruments shall not be considered checks.
"Check
cashing"
means providing currency for checks;
(2) "Deliver" means to deliver a check to the first person who in
payment for the check
makes
or purports to make a remittance of or against the face amount of the check,
whether or not
the
deliverer also charges a fee in addition to the face amount, and whether or not
the deliverer
signs
the check;
(3) "Electronic money transfer" means receiving money for
transmission within the
United
States or to locations abroad by any means including, but not limited to, wire,
facsimile or
other
electronic transfer system;
(4) (i) "Lender" means any person who makes or funds a loan within
this state with the
person's
own funds, regardless of whether the person is the nominal mortgagee or
creditor on the
instrument
evidencing the loan;
(ii) A loan is made or funded within this state if any of the following
conditions exist:
(A) The loan is secured by real property located in this state;
(B) An application for a loan is taken by an employee, agent, or representative
of the
lender
within this state;
(C) The loan closes within this state; or
(D) The loan solicitation is done by an individual with a physical presence in
this state.
acting
in the capacity of an employee, agent, or representative of the lender.
(iii) The term "lender" shall also include any person engaged in a
transaction whereby
the
person makes or funds a loan within this state using the proceeds of an advance
under a line
of
credit over which proceeds the person has dominion and control and for the
repayment of
which
the person is unconditionally liable. This transaction is not a table funding
transaction. A
person
is deemed to have dominion and control over the proceeds of an advance under a
line of
credit
used to fund a loan regardless of whether:
(A) The person may, contemporaneously with or shortly following the funding of the
loan,
assign or deliver to the line of credit lender one or more loans funded by the
proceeds of an
advance
to the person under the line of credit;
(B) The proceeds of an advance are delivered directly to the settlement agent
by the line
of
credit lender, unless the settlement agent is the agent of the line of credit
lender;
(C) One or more loans funded by the proceeds of an advance under the line of
credit is
purchased
by the line of credit lender; or
(D) Under the circumstances as set forth in regulations adopted by the director
or the
director's
designee pursuant to this chapter;
(5) "Licensee" means an entity licensed under this chapter;
(6) "Loan" means any advance of money or credit including, but not
limited to:
(i) Loans secured by mortgages;
(ii) Insurance premium finance contracts; agreements;
(iii) The purchase or acquisition of retail installment contracts or advances
to the holders
of
those contracts;
(iv) Educational loans;
(v) Any other advance of money; or
(vi) Any transaction such as those commonly known as "pay day loans,"
"pay day
advances,"
or "deferred presentment loans," in which a cash advance is made to a
customer in
exchange
for the customer's personal check, or in exchange for the customer's
authorization to
debit
the customer's deposit account, and where the parties agree either that the
check will not be
cashed
or deposited, or that customer's deposit account will not be debited, until a
designated
future
date.
(7) "Loan broker" means any person who, for compensation or gain, or
in the expectation
of
compensation or gain, either directly or indirectly, solicits, processes,
negotiates, places or sells
a
loan within this state for others in the primary market, or offers to do so. A
loan broker shall
also
mean any person who is the nominal mortgagee or creditor in a table funding
transaction. A
loan
is brokered within this state if any of the following conditions exist:
(i) The loan is secured by real property located in this state;
(ii) An application for a loan is taken by an employee, agent or representative
of the loan
broker
within this state;
(iii) The loan closes within this state; or
(iv) The loan solicitation is done by an individual with a physical presence in
this state
acting
in the capacity of an employee, agent, or representative of the loan broker.
(8) "Personal money order" means any instrument for the transmission
or payment of
money
in relation to which the purchaser or remitter appoints or purports to appoint
the seller as
his
or her agent for the receipt, transmission, or handling of money, whether the
instrument is
signed
by the seller or by the purchaser or remitter or some other person;
(9) "Primary market" means the market in which loans are made to
borrowers by lenders,
whether
or not through a loan broker or other conduit;
(10) "Principal owner" means any person who owns, controls, votes or
has a beneficial
interest
in, directly or indirectly, ten percent (10%) or more of the outstanding
capital stock of a
licensee;
(11) "Sell" means to sell, to issue, or to deliver a check;
(12) "Small loan" means a loan of less than five thousand dollars
($5,000), not secured
by
real estate, made pursuant to the provisions of chapter 14.2 of this title;
(13) "Small loan lender" means a lender engaged in the business of
making small loans
within
this state;
(14) "Table funding transaction" means a transaction in which there
is a
contemporaneous
advance of funds by a lender and an assignment by the mortgagee or creditor of
the
loan to the lender;
(15) "Check casher" means a person or entity that, for compensation,
engages, in whole
or in
part, in the business of cashing checks; and
(16) "Deferred deposit transaction" means any transaction such as
those commonly
known
as "pay-day loans," "pay-day advances," or "deferred
presentment loans" in which a cash
advance
is made to a customer in exchange for the customer's personal check or in
exchange for
the
customer's authorization to debit the customer's deposit account and where the
parties agree
either
that the check will not be cashed or deposited, or that the customer's deposit
account will
not
be debited until a designated future date. ;
(17)
“Insurance premium finance agreement” means an agreement by which an insured,
or
prospective insured, promises to pay to an insurance premium finance company
the amount
advanced
or to be advanced, under the agreement to an insurer or to an insurance
producer, in
payment
of a premium or premiums on an insurance contract or contracts, together with
interest
and
a service charge, as authorized and limited by this title;
(18)
“Insurance premium finance company” means a person engaged in the business of
making
insurance premium finance agreements or acquiring insurance premium finance
agreements
from other insurance premium finance companies; and
(19)
“Simple interest” means interest computed on the principal balance outstanding
immediately
prior to a payment for the actual number of days between payments made on a
loan
over
the life of a loan.
SECTION
3. Section 19-14.1-2 of the General Laws in Chapter 19-14.1 entitled
"Lenders
and
Loan Brokers" is hereby amended to read as follows:
19-14.1-2.
Maximum rate of interest. -- (a) Every lender may lend or loan broker
may
negotiate
the lending of any sum of money and may charge, contract for and receive
points, fees,
charges
and interest on the unpaid balance of the loan at a rate not to exceed that
provided in
section
6-26-2, or as otherwise permitted under applicable federal law or regulation.
(b) Rebates of finance charges on precomputed loans, made for an original term
of sixty
(60)
months or less, may be calculated on the method commonly referred to as the
rule of 78 or
sum
of the digits. Rebates of finance charges on precomputed loans, made for an
original term
greater
than sixty (60) months, must be calculated on the simple interest method.
at least the
amount
as would be produced by the application of the rule of anticipation.
SECTION
4. Title 19 of the General Laws entitled "Financial Institutions" is
hereby
amended
by adding thereto the following chapter:
CHAPTER
14.6
INSURANCE
PREMIUM FINANCE AGREEMENTS
19-14.6-1.
Form of agreement. - - (a) Every agreement shall:
(1)
Be dated and signed by, or on behalf of, the insured, and the printed portion
thereof
shall
be in at least eight (8) point type;
(2)
Contain the names and place of business of the insurance producer negotiating
the
insurance
contract or contracts thereto relating, the name and residence, or place of
business, of
the
insured, as specified by the insured, the name and place of business of the
company to which
payments
under the agreement are to be made, a brief description of the insurance
contract or
contracts,
and the amount of the premium or premiums therefore; and
(3)
Set forth following items where they are applicable;
(i)
The total amount of the premium or premiums;
(ii)
The amount of the down payment;
(iii)
The principal balance, the difference between (i) and (ii);
(iv)
The amount of interest to be charged;
(v)
The balance payable by the insured, sum of items (iii) and (iv); and
(vi)
The number of installments required, the amount of each installment expressed
in
dollars,
and the due date or period thereof.
(b)
The items set forth in subsection (a)(3) need not be stated in the sequence in
which
they
appear in subsection (a)(3), and additional items may be included to explain
computations
made
in determining the amount to be paid by the insured.
19-14.6-2.
Limitation on interest and other charges. - - (a) An insurance premium
finance
company shall not charge, contract for, receive or collect any interest or
discount charges
at
a rate in excess of that provided in section 6-26-2.
(b)
Interest on any insurance premium finance agreement is to be computed on the
balance
of the premium or premiums due, after subtracting the down payment made by the
insured
in accordance with the agreement, from the effective date of the insurance
contract, for
which
the premium or premiums is or are being advanced, to and including the date
when the
final
installment provided for in the agreement is due and payable. The interest so
provided for by
this
chapter anticipates timely repayment, in consecutive equal monthly
installments, for a period
of
one year. With respect to contractual arrangements for repayment in greater or
lesser periods,
or
in unequal, irregular, or other than monthly installments, interest may be
computed at an
equivalent
effective rate, likewise, having due regard for timely payments of
installments.
(c)
A service charge of fifteen dollars ($15.00) per insurance premium finance
agreement,
which
need not be refunded upon cancellation or prepayment, may be imposed as long as
the
imposition
of said service charge does not cause the total charges provided for in the
agreement to
exceed
that specified in section 6-26-2.
(d)
Notwithstanding the provisions of any agreement, an insured may prepay the
obligation
in full at any time. In that event, the insured shall receive a refund credit.
The refund
credit
shall represent at least as great a proportion of the interest as the sum of
the periodic
balances
following the month in which prepayment is made bears the sum of all periodic
balances
under
the schedule of installments in the agreement. If the amount of a refund credit
is less than
one
dollar ($1.00), no actual refund need be made.
19-14.6-3.
Delinquency and cancellation charges. - - (a) An insurance premium
finance
agreement
may provide for payment by the insured of a delinquency charge ranging from one
dollar
($1.00) to a maximum of five percent (5%) of an installment which is in default
for a
period
of five (5) days or more.
(b)
The agreement may provide for payment by the insured of a cancellation charge
of
fifteen
dollars ($15.00), if the default results in cancellation of any insurance
contract or contracts
listed
in the agreement.
(c)
An agreement may also provide for payment, upon default, of reasonable costs of
collection,
including reasonable attorneys’ fees.
(d)
none of the charges referred to in this section shall be considered directly or
indirectly
in
determining whether a violation of the usury laws has occurred under an
agreement.
19-14.6-4.
Cancellation of insurance contract upon default. - - (a) When an
insurance
premium
finance agreement contains a power of attorney enabling the company to cancel
an
insurance
contract or contracts listed in the agreement, the insurance contract or
contracts shall
not
be cancelled by the company unless the cancellation is effectuated in
accordance with this
section.
(b)
Not less than ten (10) days written notice shall be mailed to the insured, at
his or her
last
known address, as shown on the records of the company, of the intention of the
company, to
cancel
the insurance contract or contracts unless the default is removed within the
ten (10) day
period.
(c)
After expiration of the ten (10) day period, the company may cancel the
insurance
contract
or contracts by mailing to the insurer a notice of cancellation. The insurance
contract or
contracts
shall be cancelled as if notice of cancellation had been submitted by the
insured
personally,
but without requiring return of the insurance contract or contracts. The
company shall
also
mail a notice of cancellation to the insured at his or her last known address
as shown on the
records
of the company. The insurance contract or contracts shall be cancelled by the
insurer on a
pro
rata basis.
(d)
All statutory, regulatory, and contractual restrictions providing that an
insurance
contract
may not be cancelled unless notice be given to a particular governmental
agency,
mortgagee,
or other third party shall be applicable to any cancellation effected under the
provisions
of this section. The insurer shall give the prescribed notice on behalf of
itself or the
insured
to any governmental agency, mortgagee, or other third party on or before the
second
business
day after the day it receives notice of cancellation from the company, and
shall
determine
the effective date of cancellation, taking into consideration the number of
days notice
required
to complete the cancellation.
19-14.6-5.
Return premiums. - - Whenever a financed insurance contract or
contracts is
cancelled,
the insurer shall return the gross unearned premium or premiums, if any, that
may be
due
under the insurance contract or contracts, directly to the insurance premium
finance company
for
the account of the insured, as soon as reasonably possible, but, in no event,
shall the period for
the
return exceed sixty (60) days after the effective date of cancellation. In the
event that crediting
of
a return premium or premiums to the account of an insured results in a surplus
over the amount
due
from the insured, the insurance premium finance company shall refund the excess
to the
insured,
provided that no refund shall be required if the refund amounts to less than
one dollar
($1.00).
19-14.6-6.
Exemption from filing requirements. – Filing of the insurance
premium
finance
agreement shall not be necessary to perfect validity thereof, as a secured
transaction
against
creditors, subsequent purchasers, pledgees, encumbrancers, trustees in
bankruptcy, or
other
insolvency proceeding under any law or any person having the status, power, or
authority of
the
aforementioned, or their successors or assigns.
SECTION
5. This act shall take effect upon passage.
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LC02209/SUB
A
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