Arizona

6-634. Precomputation of consumer loan

A. A precomputed consumer loan shall require repayment in substantially equal consecutive monthly installments of principal and finance charges combined. The first installment of a precomputed consumer loan is due not less than fifteen days but not more than forty-five days after the precomputed consumer loan is made. The licensee may precompute finance charges at the agreed consumer loan rate on scheduled unpaid principal balances and add those charges to the principal amount of the precomputed consumer loan. The licensee shall calculate the finance charges on precomputed loans on an annual basis of twelve months of thirty days per month. All computations are based on the assumption that all payments are made as scheduled. The licensee may round the consumer loan rate to the nearest one-quarter of one per cent.

B. If a precomputed consumer loan is prepaid in full, the licensee shall provide the consumer with a refund or credit of the precomputed finance charges that apply to all of the fully unexpired months of the precomputed consumer loan as originally scheduled, or if deferred, as deferred, and that follow the installment date nearest to the date of the prepayment. For this purpose the applicable finance charge is the total of those finance charges that would have been made for each unexpired month by applying scheduled payments to unpaid balances of principal according to the actuarial method at that single consumer loan rate that would result in the original amount of precomputed finance charges on the consumer loan, assuming finance charges had not been precomputed at the agreed to consumer loan rate but had been computed by the actuarial method at the agreed to single consumer loan rate from the inception of the consumer loan.

C. The licensee may agree to defer payment of all wholly unpaid installments for one or more full months and extend the due date of each installment and the maturity of the precomputed consumer loan for the same amount of time. The deferment period is the month or months in which the consumer makes no scheduled payment or in which no payment is required by reason of the deferment. If a deferment is made, the licensee may charge and collect a deferral fee that is not more than the agreed to consumer loan rate applied to the amount or amounts deferred for the period of deferral without regard to differences in the lengths of months, but applied proportionately for a part of a month by counting each day as one-thirtieth of a month. The licensee may collect a deferral fee at the time the licensee assesses the deferral fee or at any time after the assessment. No rebate of deferral fees is required unless prepayment occurs before the due date of the first deferred installment.

D. If the maturity of a precomputed consumer loan is accelerated, the licensee shall reduce the outstanding balance of that precomputed consumer loan by the refund or credit of precomputed finance charges that the consumer would be entitled to receive pursuant to subsection B on prepayment in full on the date of acceleration. After application of that refund or credit, the licensee may charge and receive finance charges at the agreed to consumer loan rate computed on the unpaid balances of the consumer loan for the actual time outstanding from the installment date nearest the date of acceleration until paid in full.

E. The note or agreement evidencing a precomputed consumer loan may provide that the licensee, with or without accelerating maturity, may recompute the entire consumer loan on a per cent per month basis or may reduce the outstanding balance as of any installment date by the refund or credit of precomputed finance charges that the consumer would be entitled to receive pursuant to subsection B on prepayment in full on the installment date. After recomputing the loan or applying the refund or credit of precomputed finance charges, the licensee may charge and receive finance charges at the agreed to consumer loan rate computed on unpaid balances of the consumer loan for the actual time outstanding from the installment date until the consumer loan is paid in full.

6-636. Insurance securing loan; cancellation; notice

A. The following types of insurance may be sold to the consumer in connection with a consumer lender loan and the consumer may contract for:

1. Property insurance covering any property securing a consumer lender loan.

2. Life insurance insuring the life of one or more consumers obligated on a consumer lender loan.

3. Credit disability insurance that provides indemnity for payments due on a consumer lender loan while any covered consumer is disabled.

4. Credit involuntary unemployment insurance that provides indemnity for payments due on a consumer lender loan while one or more consumers are involuntarily unemployed.

B. Any insurance purchased by a consumer from or through a licensee, except insurance on property securing a consumer lender loan, is optional, and a licensee shall not refuse to make a consumer lender loan based on the consumer's refusal to purchase the insurance. The consumer may cancel any insurance purchased in connection with a consumer lender loan for any reason at any time within thirty days after the consumer lender loan is made and shall mail or deliver a written notice of the cancellation to the licensee's place of business. If the consumer cancels the insurance pursuant to this subsection, the consumer is entitled to a full refund of any premiums paid for the insurance. Before executing the note or agreement evidencing a consumer lender loan that includes a premium for insurance, the licensee shall give the consumer the disclosures required to exclude those insurance premiums from the finance charge in accordance with the truth in lending act.

C. At the time the insurance is sold the licensee shall mail or deliver a written receipt or binder to the consumer. Within thirty days after mailing or delivering the written receipt or binder, the licensee shall deliver to the consumer, or if more than one, to any one of them, a policy or certificate of insurance covering any insurance purchased by or through the licensee or any employee or affiliate of the licensee in connection with the consumer lender loan that sets forth the amount of any premium that the consumer has paid or is obligated to pay, the amount of insurance, the term of insurance and a description of the coverage. The policy or certificate may contain a mortgagee clause or other appropriate provisions to protect the insurable interest of the licensee.

D. All property insurance sold pursuant to this section shall bear a reasonable bona fide relation to the existing hazard or risk of loss and shall be written by an agent licensed in this state and by an insurance company authorized to conduct property insurance business in this state. A licensee shall not require the purchase of property insurance from the licensee or any employee, affiliate or associate of the licensee as a condition precedent to the making of a consumer lender loan. The licensee may otherwise designate the company in which the insurance shall be placed as long as the insurance company is authorized to conduct business in this state.

E. Property insurance, if sold by a licensee in connection with a consumer loan, is at the option of the consumer in an amount not exceeding the greater of the reasonable value of the property insured as designated in writing by the consumer or the approximate amount of the consumer loan and shall be for a term not exceeding the approximate term of the consumer loan. However, the amount of this property insurance may not exceed the designated value of the property insured.

F. If a licensee sells property insurance in connection with a consumer revolving loan or a home equity revolving loan, the amount of the property insurance shall not exceed the greater of the reasonable value of the property insured as designated in writing by the consumer or the agreed on credit limit. However, the amount of property insurance shall not exceed the designated value of the insured property. The licensee may sell property insurance for renewable terms of not more than two years. Alternatively, the amount of property insurance may be equal to the balance outstanding on a consumer revolving loan or a home equity revolving loan from time to time with the premiums calculated on the basis of the actual daily unpaid balance or the average daily balance of the account during each billing cycle period. Premiums for property insurance may be charged as an advance on a consumer revolving loan or a home equity revolving loan.

G. If the licensee sells the consumer property insurance for a renewable term, the licensee shall mail a notice to the consumer at least thirty days before the renewal date that states all of the following:

1. The consumer's property insurance is about to expire.

2. The consumer may obtain property insurance from any source chosen by the consumer subject to the licensee's right to reasonably reject the insurer chosen by the consumer by providing written notice to the consumer of those reasons for rejection.

3. The term, coverage and premium for the renewal of property insurance.

4. The property insurance will be renewed on expiration unless the consumer provides the licensee before the expiration date with evidence that the consumer has obtained other property insurance.

H. Notwithstanding any other provision of this chapter, any advantage, commission, dividend, gain or identifiable charge for insurance authorized by this section, or otherwise, to the licensee or any employee or affiliate of the licensee from that insurance or its sale is not an additional finance charge or other allowed fee in connection with the consumer lender loan. If the licensee provides a new consumer lender loan or renews a contract of a consumer lender loan and the licensee sells the consumer new insurance, the licensee shall apply the insurance provided for in this section to the new loan or renewal, or the licensee shall cancel the prior insurance and provide the consumer with a refund or credit of the unearned premium or identifiable charge before selling the new insurance to the consumer.

I. The licensee shall determine the refund of unearned premiums for credit life insurance and credit disability insurance on prepayment in full according to title 20, chapter 6, article 10.

J. Except as otherwise specifically provided in this chapter, insurance transactions pursuant to this chapter are subject in all respects to the applicable laws pertaining to that insurance pursuant to title 20 and to the applicable rules adopted pursuant to title 20.

6-637. Term; payments

A. The scheduled term of a consumer loan shall not be longer than the following:

1. Twenty-four months and fifteen days from the date of making a consumer loan of one thousand dollars or less.

2. Thirty-six months and fifteen days from the date of making a consumer loan of more than one thousand dollars but not more than two thousand five hundred dollars.

3. Forty-eight months and fifteen days from the date of making a consumer loan of more than two thousand five hundred dollars but not more than four thousand dollars.

4. Sixty months and fifteen days from the date of making a consumer loan of more than four thousand dollars but not more than six thousand dollars.

5. Any agreed on time period for a consumer loan of more than six thousand dollars.

B. The note evidencing a consumer loan shall provide for the scheduled repayment of principal and finance charges in approximately equal periodic installments.

C. Pursuant to the provisions of 12 United States Code section 3804, subsections A and B of this section shall not be superseded by the provisions of 12 United States Code section 3803.

D. Balloon payments, prepayment penalties, call options and other contract provisions that permit a consumer lender to accelerate payment of a consumer revolving loan or home equity revolving loan for any reason other than the consumer's default as provided in the agreement evidencing the consumer revolving loan or home equity revolving loan are prohibited, except that a licensee may include a call option to be exercised at least fifteen years after the date of the agreement. If the licensee exercises this call option and the consumer revolving loan or home equity revolving loan is not in default, the licensee shall amortize the amount due on the account over at least sixty monthly installments.

E. Except as provided in subsection D of this section, an agreement evidencing a consumer revolving loan or home equity revolving loan shall provide that on termination of the right to obtain advances the outstanding principal balance and finance charges at the time of termination of the right to obtain advances are repayable in installments if a consumer is not in default as provided in the agreement. These installments shall provide for the scheduled repayment of principal and finance charges in approximately equal periodic installments except as a result of an adjustment in the index on which a variable rate of periodic finance charges is based. These installments are payable within the following time limits:

1. Twenty-four months and fifteen days from the date of termination of the right to obtain advances for an outstanding principal balance on that date of one thousand dollars or less.

2. Thirty-six months and fifteen days from the date of termination of the right to obtain advances for an outstanding principal balance on that date that is more than one thousand dollars but not more than two thousand five hundred dollars.

3. Forty-eight months and fifteen days from the date of termination of the right to obtain advances for an outstanding principal balance on that date that is more than two thousand five hundred dollars but not more than four thousand dollars.

4. Sixty months and fifteen days from the date of termination of the right to obtain advances for an outstanding principal balance on that date that is more than four thousand dollars but not more than six thousand dollars.

5. Any agreed on time period for an outstanding principal balance that is more than six thousand dollars on the date of termination of the right to obtain advances.

F. A licensee shall permit a consumer to prepay any scheduled installment or additional amount due on any consumer lender loan in advance at any time during the licensee's regular business hours, but the licensee may apply that prepayment first to all finance charges accrued through the date of that prepayment.

G. On payment in full or renewal of a consumer lender loan, the licensee shall provide written notice of payment and release to the consumer, or if more than one consumer is obligated on the consumer lender loan, to any one of the consumers. The notice of payment and release shall include the date of the original note or agreement evidencing the consumer lender loan and the date of payment in full. In lieu of the notice of payment and release, the licensee may return the original note or agreement evidencing the consumer lender loan marked paid or renewed, as applicable. The licensee shall release any lien or security interest on property securing a consumer lender loan that is paid in full as provided in section 33-707 for real property and section 47-9513 for personal property. This subsection does not apply to a consumer revolving loan or home equity revolving loan on which there is no unpaid balance if the consumer's right to receive advances on the account continues in effect.

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