72nd OREGON LEGISLATIVE ASSEMBLY--2003 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 1710
House Bill 3088
Sponsored by Representatives TOMEI, MERKLEY; Representatives
ACKERMAN, BACKLUND, BARKER, DALTO, DINGFELDER, GARRARD, HASS,
HOPSON, JENSON, KRUSE, MARCH, MONNES ANDERSON, WESTLUND,
Senators CARTER, DEVLIN, GORDLY, RINGO
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.
Prohibits certain lending activities in connection with high-
cost home loans. Creates private cause of action for damages.
Applies to loans for which application is first made on or after
January 1, 2004.
Declares emergency, effective on passage.
A BILL FOR AN ACT
Relating to lending practices; creating new provisions; amending
ORS 82.025 and 708A.255; and declaring an emergency.
Be It Enacted by the People of the State of Oregon:
SECTION 1. { + As used in sections 1 to 7 of this 2003 Act:
(1) 'Affiliate' means any company that controls, is controlled
by or is under common control with another company, as set forth
in the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.).
(2) 'Annual percentage rate' means the annual percentage rate
for a home loan calculated according to the provisions of the
Truth in Lending Act (15 U.S.C. 1601 et seq.), and the
regulations adopted thereunder by the Federal Reserve Board.
(3) 'Bona fide error' includes, but is not limited to, a
clerical error, a calculation error, an error resulting from a
computer malfunction, a programming error or a printing error. '
Bona fide error' does not include an error of legal judgment with
respect to a person's obligations under sections 2 to 5 of this
2003 Act.
(4)(a) 'Bona fide loan discount points' means loan discount
points knowingly paid by the borrower and funded through any
source:
(A) For the purpose of reducing the interest rate or time price
differential applicable to the home loan;
(B) That result in a bona fide reduction of the interest rate
or time price differential applicable to the home loan; and
(C) For which the amount of the interest rate reduction
purchased by the discount points is reasonably consistent with
established industry norms and practices for secondary mortgage
market transactions.
(b) For purposes of this subsection, a point is presumed to be
a bona fide loan discount point if it reduces the interest rate
by a minimum of 25 basis points, provided all other terms of the
loan remain the same.
(5) 'High-cost home loan' means a home loan in which the terms
of the loan exceed one or more of the thresholds defined in
subsection (11) of this section.
(6) 'Home loan' means a home loan, including an open-end loan
plan as defined in ORS 725.345, other than a reverse mortgage
transaction, in which:
(a) The principal amount of the loan does not exceed the lesser
of:
(A) The conforming loan size limit for a comparable dwelling as
established from time to time by the Federal National Mortgage
Association; or
(B) $300,000;
(b) The borrower is a natural person;
(c) The debt is incurred by the borrower primarily for
personal, family or household purposes;
(d) The loan is secured by a mortgage or trust deed on real
estate upon which there is located or is to be located a
structure or structures, intended principally for occupancy of
one to four families, that is or will be occupied by the borrower
as the borrower's principal dwelling; and
(e) The property described in paragraph (d) of this subsection
is located in this state.
(7) 'Lender' means a financial institution as defined in ORS
706.008, a savings association as defined in ORS 722.004 or a
mortgage banker as defined in ORS 59.840.
(8) 'Loan flipping' means making a home loan to a borrower that
refinances an existing home loan when the new loan does not have
a tangible net benefit to the borrower considering all of the
circumstances, including the terms of both the new and refinanced
loans, the cost of the new loan and the borrower's situation.
(9) 'Points and fees' means:
(a) All items listed in 15 U.S.C. 1605(a)(1) to (4), except
interest or time price differential;
(b) All charges for items listed under 12 C.F.R. 226.4(c)(7),
if the lender receives direct or indirect compensation in
connection with the charge or the charge is paid to an affiliate
of the lender;
(c) All compensation paid directly or indirectly to a mortgage
broker that is not otherwise included under paragraphs (a) and
(b) of this subsection; and
(d) The cost of all premiums financed by the lender, directly
or indirectly, for any credit life, credit disability, credit
unemployment or credit property insurance, or any other life or
health insurance, or any payments financed by the lender directly
or indirectly for any debt cancellation or suspension agreement
or contract. For purposes of this paragraph, insurance premiums
calculated and paid on a monthly basis are not considered
financed by the lender.
(10) 'Special mortgage' means a mortgage originated, subsidized
or guaranteed by or through a state, tribal or local government
or a nonprofit organization that bears a below-market interest
rate at the time of origination or has nonstandard payment terms
beneficial to the borrower. For purposes of this subsection,
'nonstandard payment terms' includes, but is not limited to:
(a) Payments that vary with income;
(b) Payments that are limited to a percentage of income; and
(c) Specified conditions under which no payments are required.
(11) 'Thresholds' means:
(a) For a first lien mortgage loan, the annual percentage rate
of the home loan at consummation of the transaction exceeds eight
percentage points over the yield on United States Government
securities having comparable periods of maturity to the loan
maturity measured as of the 15th day of the month immediately
preceding the month in which the application for extension of
credit is received by the lender. If the terms of the home loan
offer any initial or introductory period and the annual
percentage rate is less during that period than the rate that
will apply after the end of the initial or introductory period,
the annual percentage rate considered for purposes of this
paragraph shall be the rate that applies after the initial or
introductory period;
(b) For a subordinate mortgage lien, the annual percentage rate
of the home loan at consummation of the transaction equals or
exceeds nine percentage points over the yield on United States
Government securities having comparable periods of maturity on
the 15th day of the month immediately preceding the month in
which the application for extension of credit is received by the
lender. If the terms of the home loan offer any initial or
introductory period and the annual percentage rate is less during
that period than the rate that will apply after the end of the
initial or introductory period, the annual percentage rate
considered for purposes of this paragraph shall be the rate that
applies after the initial or introductory period; or
(c) The total points and fees applicable to the home loan
exceed five percent of the total loan amount if the total loan
amount is $50,000 or more, six percent of the total loan amount
if the total loan amount is $50,000 or more and the loan is a
purchase money loan guaranteed by the Federal Housing
Administration or the United States Department of Veterans
Affairs or the greater of six percent of the total loan amount or
$1,500, if the total loan amount is less than $50,000. For
purposes of this paragraph, the following discount points are
excluded from the calculation of the total points and fees
payable by the borrower:
(A) Up to and including two bona fide loan discount points
payable by the borrower in connection with the loan transaction,
if the interest rate from which the loan's interest rate will be
discounted does not exceed by more than one percentage point the
yield on United States Government securities having comparable
periods of maturity to the loan maturity measured as of the 15th
day of the month immediately preceding the month in which the
application is received; and
(B) Any and all bona fide loan discount points funded directly
or indirectly through a grant from a federal, state or local
government agency or an organization that is recognized as tax
exempt under section 501(c)(3) of the Internal Revenue Code of
1986.
(12) 'Total loan amount' means the principal of the loan minus
points and fees that are included in the principal amount. + }
SECTION 2. { + (1)(a) A high-cost home loan may not contain a
provision that permits the lender, in the lender's sole
discretion, to accelerate payments required under the loan.
(b) This subsection does not prohibit any good faith
acceleration of payments required under the loan due to the
borrower's failure to abide by the material terms of the loan.
(2)(a) A high-cost home loan may not contain a scheduled
payment that is more than twice as large as the average of
earlier scheduled payments, unless the larger payment becomes due
and payable at least 15 years after the origination date of the
loan.
(b) This subsection does not apply when the payment schedule is
adjusted to the seasonal or irregular income of the borrower.
(3) A high-cost home loan may not contain a payment schedule
with regular periodic payments that cause the principal balance
of the loan to increase.
(4)(a) A high-cost home loan may not contain a provision that
increases the interest rate on the loan after default.
(b) This subsection does not apply to interest rate changes in
a variable rate loan if the changes are consistent with the
provisions of the loan documents and are not triggered by the
event of default or the acceleration of payments required under
the loan.
(5) A high-cost home loan may not include terms under which
more than two periodic payments required under the loan are
consolidated and paid in advance from the loan proceeds provided
to the borrower.
(6)(a) A lender may not charge a borrower any fees to modify,
renew, extend or amend a high-cost home loan or to defer any
payment due under the terms of a high-cost home loan if, after
the modification, renewal, extension or amendment:
(A) The loan is still a high-cost home loan; or
(B) The loan is no longer a high-cost home loan, but the annual
percentage rate has not been decreased by at least two percentage
points.
(b) For purposes of this subsection, fees do not include
interest that is otherwise payable and consistent with the
provisions of the loan documents.
(c) This subsection does not prohibit a lender from charging
points and fees in connection with any additional proceeds, over
and above the current principal balance of the existing high-cost
home loan, received by the borrower in connection with the
modification, renewal, extension or amendment. Points and fees
charged on the additional proceeds must reflect the lender's
typical point and fee structure for high-cost home loans.
(7) A high-cost home loan may not be subject to a mandatory
arbitration clause that is oppressive, unfair, unconscionable or
substantially in derogation of the rights of consumers.
(8)(a) A high-cost home loan may not finance, directly or
indirectly, any credit life, credit disability, credit
unemployment or credit property insurance premiums, any other
life or health insurance premiums or any payments directly or
indirectly for any debt cancellation or suspension agreement or
contract.
(b) For purposes of this subsection, insurance premiums or debt
cancellation or suspension fees calculated and paid on a monthly
basis are not considered financed by the loan.
(9) A lender or mortgage broker making or arranging a high-cost
home loan may not engage in loan flipping.
(10)(a) A lender making a high-cost home loan may not refinance
an existing home loan that is a special mortgage if, as a result
of the refinancing, the borrower will lose one or more of the
benefits of the special mortgage.
(b) This subsection does not apply if the lender receives,
prior to the date the refinancing loan closes, written
documentation stating that the borrower has received home loan
counseling that describes the advantages and disadvantages of the
refinancing. The counseling must have been received from a
consumer credit counselor certified under federal law or from the
lender who originated, subsidized or guaranteed the special
mortgage loan.
(11) A lender or mortgage broker may not make or arrange a
high-cost home loan without regard to the ability of the borrower
to repay the loan. The lender or mortgage broker shall consider
the borrower's current and expected income, current obligations,
employment status and other financial resources, other than the
borrower's equity in the dwelling that secures repayment of the
loan, as verified by detailed documentation of all sources of
income and corroborated by independent verification. There is a
rebuttable presumption that a loan is made with regard to
repayment ability if the lender or mortgage broker demonstrates
that at the time the loan is consummated the borrower's total
monthly debts, including amounts owed under the loan, do not
exceed 50 percent of the resident borrower's monthly gross income
and the lender follows the residual income guidelines established
in 38 C.F.R. 36.4337(e).
(12) In making a high-cost home loan, a lender may not,
directly or indirectly, finance any points and fees in an amount
that exceeds three percent of the principal amount of the loan.
(13) A lender may not pay a contractor under a home improvement
contract from the proceeds of a high-cost home loan other than:
(a) By an instrument payable to the borrower or jointly to the
borrower and the contractor; or
(b) At the election of the borrower, through a third-party
escrow agent in accordance with terms established in a written
agreement signed by the borrower, the lender and the contractor
prior to the disbursement.
(14) In making or arranging a high-cost home loan, a lender or
mortgage broker may not recommend or encourage default on an
existing loan or other debt prior to and in connection with the
closing or planned closing of a high-cost home loan that
refinances all or any portion of the existing loan or debt.
(15) In making or arranging a high-cost home loan, a lender or
mortgage broker may not accept or give any fee, kickback, thing
of value, portion, split or percentage of charges, other than as
payment for goods or facilities that were actually furnished or
services that were actually performed. The payment must be
reasonably related to the value of the goods or facilities that
were actually furnished or services that were actually performed.
(16) A lender may not charge a borrower points and fees in
connection with a high-cost home loan if the proceeds of the
high-cost home loan are used to refinance an existing high-cost
home loan held by the lender or an affiliate of the lender. + }
SECTION 3. { + (1) A lender or mortgage broker must deliver,
mail, fax or electronically transmit the following notice in at
least 12-point type to the borrower at the time the borrower
applies for a high-cost home loan: + }
________________________________________________________________
{ +
NOTICE TO BORROWER + }
{ + You should consider financial counseling prior to
executing loan documents. The enclosed list of consumer credit
counselors is provided by the Department of Consumer and Business
Services. + }
________________________________________________________________
{ + (2) In the event of a telephone application, the notice
described in subsection (1) of this section must be provided
immediately after receipt of the telephone application. The
notice shall be separate from any loan application documents. In
order to provide the notice or loan documents using an electronic
transmission, the lender or mortgage broker must first obtain
written or electronically transmitted permission from the
borrower.
(3) The Department of Consumer and Business Services shall
prepare and make available a list of consumer credit counselors
qualified to advise borrowers with respect to high-cost home
loans. The lender or mortgage broker shall provide the list of
consumer credit counselors to the borrower at the time that the
notice described in subsection (1) of this section is given. + }
SECTION 4. { + (1) A lender or mortgage broker may not make or
arrange a high-cost home loan unless the lender or mortgage
broker has given the following notice in writing to the borrower
within three days after determining that the loan is a high-cost
home loan, but no later than 10 days before the closing date of
the loan: + }
________________________________________________________________
{ +
CONSUMER CAUTION AND + }
{ +
HOME OWNERSHIP COUNSELING NOTICE + }
{ + If you obtain this loan, which under Oregon law is a
high-cost home loan, the lender will have a mortgage on your
home. You could lose your home, and any money you have put into
it, if you do not meet your obligations under the loan. + }
{ + You should shop around and compare loan rates and fees.
Mortgage loan rates and closing costs and fees vary based on many
factors, including your particular credit and financial
circumstances, your earnings history, the loan-to-value requested
and the type of property that will secure your loan. The loan
rate and fees could vary based on which lender or mortgage broker
you select. Higher rates and fees may be related to the
individual circumstances of a particular consumer's
application. + }
{ + You should consider consulting a qualified consumer credit
counselor or other experienced financial adviser regarding the
rate, fees and provisions of this mortgage loan before you
proceed. + }
{ + You are not required to complete any loan agreement merely
because you have received these disclosures or have signed a loan
application. + }
{ + If you proceed with this mortgage loan, you should also
remember that you may face serious financial risks if you use
this loan to pay off credit card debts and other debts in
connection with this transaction and then subsequently incur
significant new credit card charges or other debts. If you
continue to accumulate debt after this loan is closed and then
experience financial difficulties, you could lose your home and
any equity you have in it if you do not meet your mortgage loan
obligations. + }
{ + Property taxes and homeowner's insurance are your
responsibility. Not all lenders provide escrow services for
these payments. You should ask your lender about these
services. + }
{ + Your payments on existing debts contribute to your credit
ratings. You should not accept any advice to ignore your regular
payments to your existing creditors. Accordingly, it is important
that you make regular payments to your existing creditors. + }
________________________________________________________________
{ + (2) Documents creating a high-cost home loan must state
that the mortgage is a high-cost home loan subject to sections 1
to 7 of this 2003 Act. The statement must be printed in at least
12-point type on top of the first page of the mortgage
documents. + }
SECTION 5. { + (1) If a lender makes a high-cost home loan
subject to sections 1 to 7 of this 2003 Act, the lender shall
report both the favorable and unfavorable payment history of the
borrower to a nationally recognized consumer credit bureau at
least once per calendar year during the period that the lender
holds or services the high-cost home loan.
(2) Sections 1 to 7 of this 2003 Act apply to any person who in
bad faith attempts to avoid the application of sections 1 to 7 of
this 2003 Act by any subterfuge, including but not limited to
splitting or dividing any loan transaction into separate parts
for the purpose of evading the provisions of sections 1 to 7 of
this 2003 Act. + }
SECTION 6. { + (1) Except as provided in subsection (2) of
this section, a lender employs an unconscionable tactic under ORS
646.607 if the lender violates any provision of sections 2 to 5
of this 2003 Act.
(2) If a lender making a high-cost home loan fails to comply
with the provisions of sections 2 to 5 of this 2003 Act and the
lender is acting in good faith, the lender is not considered to
have violated a provision of sections 2 to 5 of this 2003 Act if:
(a) Within 30 days after the loan closing date and prior to the
institution of any action under section 7 of this 2003 Act, the
lender:
(A) Notifies the borrower of the compliance failure;
(B) Makes appropriate restitution to the borrower; and
(C) Adjusts the terms of the loan in a manner beneficial to the
borrower so that the loan, at the choice of the borrower,
satisfies the requirements of sections 1 to 7 of this 2003 Act or
is no longer a high-cost home loan subject to the provisions of
sections 1 to 7 of this 2003 Act; or
(b) Within 60 days after the loan closing date and prior to the
institution of any action under section 7 of this 2003 Act or
receipt of written notice of the compliance failure, the lender:
(A) Notifies the borrower of the compliance failure;
(B) Makes appropriate restitution to the borrower;
(C) Adjusts the terms of the loan in a manner beneficial to the
borrower so that the loan, at the choice of the borrower,
satisfies the requirements of sections 1 to 7 of this 2003 Act or
is no longer a high-cost home loan subject to the provisions of
sections 1 to 7 of this 2003 Act; and
(D) Can show that the compliance failure resulted from a bona
fide error made despite maintenance of procedures reasonably
intended to prevent the type of error. + }
SECTION 7. { + (1) Any party to a high-cost home loan who is
damaged by a violation of any provision of sections 2 to 5 of
this 2003 Act may bring a civil action to recover damages as
described in this section.
(2) Upon commencement of an action brought under this section,
the party bringing the action shall mail a copy of the complaint
or other initial pleading to the Attorney General and, upon entry
of a judgment or decree in the action, shall mail a copy of the
judgment or decree to the Attorney General. Failure to mail a
copy of the complaint is not a jurisdictional defect, but a
judgment may not be entered for the plaintiff until proof of
mailing is filed with the court. Proof of mailing may be by
affidavit or by return receipt of mailing.
(3) Except as provided in this subsection (4) of this section,
any person found to have violated any provision of sections 2 to
5 of this 2003 Act shall be liable to the borrower for:
(a) Actual damages; and
(b) An amount equal to all of the interest, earned or unearned,
points and fees and closing costs paid on the loan.
(4) Any person found to have violated section 2 (9) or (11) of
this 2003 Act shall be liable to the borrower for $5,000 per
violation or twice the amount of points and fees and closing
costs, whichever is greater.
(5) A court may award reasonable attorney fees to a prevailing
plaintiff.
(6) A plaintiff may be granted injunctive, declaratory and such
other equitable relief as the court deems appropriate in an
action to enforce compliance with sections 2 to 5 of this 2003
Act.
(7) A permanent injunction or final judgment or order of the
court based on a violation of any provision of sections 2 to 5 of
this 2003 Act and made under ORS 646.632 or 646.636 shall be
prima facie evidence in an action brought under this section that
the defendant violated sections 2 to 5 of this 2003 Act. An
assurance of voluntary compliance, whether or not approved by the
court, is not evidence of a violation.
(8) Upon a finding by a court of an intentional violation by a
lender of any provision of sections 2 to 5 of this 2003 Act, the
home loan agreement shall be rendered void and the lender shall
have no right to collect, receive or retain any principal,
interest or other charges with respect to the loan. The borrower
may recover any payments made under the agreement.
(9) Upon a finding by a court that a high-cost home loan
violates any provision of sections 2 to 5 of this 2003 Act,
whether the violation is raised as an affirmative claim or as a
defense, the loan transaction may be rescinded. The remedy of
rescission shall be available without time limitation.
(10) The remedies provided in this section are not intended to
be the exclusive remedies available to a borrower of a high-cost
home loan.
(11) An action against a lender or mortgage broker under this
section must be commenced within six years of origination of the
high-cost home loan. When a complaint is filed by a prosecuting
attorney to prevent, restrain or punish violation of any
provision of sections 2 to 5 of this 2003 Act, running of the
statute of limitations with respect to a private right of action
under this section and based in whole or in part on a matter
complained of in the proceeding shall be suspended during the
pendency of the proceeding. + }
SECTION 8. { + Section 9 of this 2003 Act is added to and made
a part of ORS chapter 88. + }
SECTION 9. { + (1) Any complaint served in a suit initiated
under this chapter and relating to a high-cost home loan, as
defined in section 1 of this 2003 Act, must contain an
affirmative allegation that the plaintiff has complied with the
provisions of sections 2 to 6 of this 2003 Act. The allegation
must be proven to the satisfaction of the court before entry of
judgment by default or otherwise.
(2) It is a defense to an action to foreclose a mortgage that
the high-cost home loan, as defined in section 1 of this 2003
Act, violates any provision of sections 2 to 6 of this 2003 Act.
(3) In any action by an assignee to enforce a high-cost home
loan, as defined in section 1 of this 2003 Act, against a
borrower in default more than 60 days or in foreclosure, the
borrower may assert any claims in recoupment and defenses to
payment under sections 2 to 6 of this 2003 Act with respect to
the loan, without time limitations, that the borrower could
assert against the original lender of the loan. + }
SECTION 10. { + Sections 1 to 9 of this 2003 Act and the
amendments to ORS 82.025 and 708A.255 by sections 12 and 13 of
this 2003 Act become operative January 1, 2004. + }
SECTION 11. { + The Director of the Department of Consumer and
Business Services may take any action under sections 1 to 9 of
this 2003 Act and the amendments to ORS 82.025 and 708A.255 by
sections 12 and 13 of this 2003 Act prior to the operative date
of sections 1 to 9 of this 2003 Act and the amendments to ORS
82.025 and 708A.255 by sections 12 and 13 of this 2003 Act that
is necessary to enable the director to exercise, on and after the
operative date of sections 1 to 9 of this 2003 Act and the
amendments to ORS 82.025 and 708A.255 by sections 12 and 13 of
this 2003 Act, all the duties, functions and powers conferred on
the director by sections 1 to 9 of this 2003 Act and the
amendments to ORS 82.025 and 708A.255 by sections 12 and 13 of
this 2003 Act. + }
SECTION 12. ORS 82.025 is amended to read:
82.025. ORS 82.010 (3) and (4) and 82.020 do not apply to:
(1) Any financial institution or trust company, as those terms
are defined in ORS 706.008, any consumer finance licensee under
ORS chapter 725, or any pawnbroker licensed under ORS chapter
726.
(2) Any lender approved by the Secretary of Housing and Urban
Development of the United States for participation in any
mortgage insurance program under the National Housing Act (12
U.S.C. 1701 et seq.).
(3) Any loan secured by a first lien on real property or made
to finance the acquisition of real property and secured by any
lien on that property.
(4) Any loan which is secured by real property, which is
scheduled under the loan agreement to be repaid in substantially
equal payments and which is made by a lender described in this
subsection. A lender under this subsection is one who makes,
invests in or arranges real property loans, including loans
secured by first liens on residential manufactured homes,
aggregating more than $1 million per year. Under this subsection,
payments shall be 'substantially equal' if, under the terms of
the loan agreement, no single scheduled payment is more than
twice the amount of any other scheduled payment.
(5) Any loan wholly or partially secured or covered by
guarantees or insurance by the Federal Housing Administration,
the United States Department of Veterans Affairs or the Farmers
Home Administration of the United States, any department, bureau,
board, commission or agency of the United States, or any
corporation wholly owned, directly or indirectly by the United
States.
(6) Any loan permitted under applicable federal law and
regulations from a tax qualified retirement plan to a person then
a participant under the plan.
(7) Any bona fide sale or resale of securities or commercial
paper.
(8) Any interest charge by broker-dealers registered under the
Securities Exchange Act of 1934 for carrying a debit balance in
an account for a customer if the debit balance is payable on
demand and secured by stocks or bonds.
{ + (9) Any high-cost home loan, as defined in section 1 of
this 2003 Act. + }
SECTION 13. ORS 708A.255 is amended to read:
708A.255. (1) Except as otherwise provided in this section { +
or sections 2 to 5 of this 2003 Act + }, there is no limitation
on the rate of interest or on the amount of other charges that a
financial institution may contract for and receive for a loan or
use of money.
(2) If a loan made by a financial institution is repaid before
maturity, the unearned portion of the charges, if any, shall be
refunded or credited to the borrower as provided in this
subsection. The amount of the refund shall not be less than the
total interest contracted for to maturity, less the greater of:
(a) Ten percent of the amount financed, or $75, whichever is
less; or
(b) The interest earned to the installment due date nearest the
date of prepayment, computed by applying the simple interest rate
of the loan to the actual principal balances outstanding, for the
periods of time the balances were actually outstanding. For
purposes of rebate computations under this paragraph, the
installment due date preceding the date of prepayment shall be
considered to be nearest if prepayment occurs 15 days or less
after that installment date. If prepayment occurs more than 15
days after the preceding installment due date, the next
succeeding installment due date shall be considered to be nearest
the date of prepayment. In determining the simple interest rate,
the lender may apply to the scheduled payments the actuarial
method, by which each scheduled payment is applied first to
accrued and unpaid interest and any amount remaining is applied
to reduction of the principal balance.
(3) Any installment of an installment loan or payment under an
open-end credit arrangement that is not paid when due shall
continue to bear interest until paid. In addition, if the
installment or payment is not paid when due, the installment or
payment may bear a late charge in such amount as is agreed to by
the lender and the borrower. However, except for loans secured by
real property, the lender may impose a late charge only if:
(a) The installment or payment is not received by the lender
within 10 days after the due date or, if the open-end credit
arrangement is a credit card account, the payment is not received
by the lender on or before the due date;
(b) The loan agreement or open-end credit arrangement provides
for a late charge upon delinquent installments or payments; and
(c) A monthly billing, coupon or notice is provided by the
lender disclosing the date on which installments or payments are
due and that a late charge may be imposed if payment is not
received by the lender within 10 days thereafter or, in the case
of an open-end credit arrangement that is a credit card account,
that a late charge may be imposed if payment is not received by
the lender on or before the date on which the payment is due.
However, if the lender and the borrower have provided in the note
or other written loan agreement that the payments on the loan
shall be made by the means of automatic deductions from a deposit
account maintained by the borrower, the lender shall not be
required to provide the borrower with a monthly billing, coupon
or notice under this paragraph with respect to any occasion on
which there are insufficient funds in the borrower's account to
cover the amount of a loan payment on the date the loan payment
becomes due and within the periods described in paragraph (a) of
this subsection.
SECTION 14. { + Sections 1 to 7 and 9 of this 2003 Act and the
amendments to ORS 82.025 and 708A.255 by sections 12 and 13 of
this 2003 Act apply to loans for which application is first made
on or after the operative date of sections 1 to 9 of this 2003
Act and the amendments to ORS 82.025 and 708A.255 by sections 12
and 13 of this 2003 Act. + }
SECTION 15. { + This 2003 Act being necessary for the
immediate preservation of the public peace, health and safety, an
emergency is declared to exist, and this 2003 Act takes effect on
its passage. + }
----------