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SS/SB 792 - This act modifies provisions applicable to interest on small loans and second mortgage loans and provisions addressing consumer notice about consumer credit loans.

SMALL LOANS AND SECOND MORTGAGE LOANS. This act modifies provisions relating to certain real estate and agricultural (small) loan rates, and second mortgage loan rates by allowing the unpaid principal balance at rates agreed to by the parties. Current law provides specific rate limits based on the amount of the unpaid principal balance.

SMALL LOANS. With regard to small loans, this act modifies provisions regarding additional fees which may be charged on loans for more than thirty days which are not on "open end credit". Currently, fees may be made of no more than 2% of the principal amount loaned or $25, whichever is less. This act states that the fee cannot exceed 5% and not more than $50. Charges for late minimum payments which are in default may be made. An annual fee of not more than $50 may be made on an open end credit contract.

SECOND MORTGAGE LOANS. Currently, a nonrefundable origination fee cannot exceed 2% of the principal on second mortgage loans. This act changes the 2% to 5%, and specifies that such fee may be used to reduce the second mortgage loan rate. An annual fee of not more than $50 may be made on revolving loans. Charges for late minimum payments which are in default may be made.

CONSUMER CREDIT LOANS. With regard to non-depository financial institutions licensed under the consumer credit loan provisions of Chapter 367, this act provides that a warning be included on the contract informing the borrower of the consequences of default (loss of property) and that the agreement may be canceled. This act also requires lenders to consider the size and duration of a contract and financial ability of borrowers to repay when negotiating loans. Lenders shall post rates and fees charged.

MARGARET J. TOALSON