03 AAC 23.210. Premiums Financed By Licensee

(a) A licensee under AS 21.27 may, if acting in the licensee's own name, finance premiums or extend credit to a person whose insurance coverage has been placed through that licensee. A licensee under AS 21.27 may not, except through an affiliate or subsidiary, finance premiums or extend credit to a person to whom the licensee has not directly provided the insurance for which premiums are financed or credit is extended.

(b) If an affiliate or subsidiary of a licensee under AS 21.27 finances premiums or extends credit for insurance premiums, the affiliate or subsidiary must be licensed under AS 06.40.010 .

(c) Except through an affiliate or subsidiary properly licensed under AS 06.40.010 , a licensee may not finance premiums or extend credit to a person to whom the licensee has not directly provided the insurance for which premiums are financed or credit is extended.

Authority:

AS 06.40.010

AS 06.40.020

AS 21.06.090

AS 21.36.122

03 AAC 23.220. Limitation On Licensees' Financing Policies

Repealed.

Eff. 4/22/79, Register 70; repealed 3/11/98, Register 145

03 AAC 23.230. Revocation and Suspension of the Right to Finance Premiums or Extend Credit

Repealed.

Eff. 4/22/79, Register 70; repealed 3/11/98, Register 145

03 AAC 23.240. Compliance With Federal Truth in Lending Act

A licensee who finances premiums or extends credit under 3 AAC 23.210 - 3 AAC 23.380 shall make the disclosures required by 15 U.S.C. 1601 - 1693 (Federal Truth in Lending Act) and Regulation Z, 12 C.F.R. 226, as revised as of January 1, 1997.

Authority:

AS 21.06.090

AS 21.36.122

03 AAC 23.250. Credit and Loans Considered Premium Financing

(a) When a licensee extends credit beyond the date premiums are required to be remitted to the insurer, or loans funds to a person whose coverage has been placed through the licensee, the extension of credit or making a loan is premium financing and the terms of the financing must comply with 3 AAC 23.210 - 3 AAC 23.380.

(b) A licensee is not required to comply with 3 AAC 23.210 - 3 AAC 23.380 if the licensee

(1) does not charge the insured a service charge for the extension of credit or loan of funds to pay a premium; however, a licensee may charge the licensee's standard late fee; and

(2) notifies the insured, by a regular monthly statement or separate written notice within 30 days after extending credit, of the amount of credit or loan and for what purpose the credit or loan has been extended.

(c) A licensee who completes a transaction through an extension of credit or loan of funds in compliance with (b) of this section must

(1) take the risk of extending credit or loaning funds; and

(2) if notified by the insured that the extension of credit for the payment of premium is not desired, reverse the extension of credit from the insured's records effective to the date the credit was extended.

Authority:

AS 21.06.090

AS 21.36.122

03 AAC 23.260. Contents of Premium Finance Agreement; Cancellation If Default

(a) A licensee's premium finance agreement or agreement to extend credit must

(1) be dated and signed by the borrower, and the printed portion of it must be in at least eight-point type;

(2) contain a power of attorney enabling the licensee to cancel the insurance policy listed in the agreement in the name of the borrower if a payment under the agreement is in default;

(3) contain the name and place of business of the licensee negotiating the related insurance policy, the name and residence or the place of business of the borrower as specified by the borrower, the name and place of business of the licensee to whom payments are to be made, an identification of the insurance policy involved, and the amount of the premium charged for the policy; and

(4) set out all of the following items that apply:

(A) the total amount of the premiums;

(B) the amount of the down payment;

(C) the principal balance, calculated as the difference between (A) and (B) of this paragraph;

(D) the annual percentage rate of interest; and

(E) the number of payments required, the amount of each payment expressed in dollars, the payment due date, and the total period of the loan.

(b) The power of attorney required in (a)(2) of this section must provide that, if a payment under the agreement is in default,

(1) the licensee shall give the borrower at least 10 days' written notice, by certified mail addressed to the borrower's last known address, of the licensee's intent to cancel the insurance policy unless the default is cured within that 10-day period;

(2) after expiration of the 10-day period specified in (1) of this subsection, the licensee may, in the name of the borrower, cancel the insurance policy by notifying the borrower, at the borrower's last known address, and the insurer of the cancellation by certified mail; and

(3) all statutory, regulatory, and contractual restrictions providing that the insurance policy may not be canceled unless notice is given to a governmental agency, mortgagee, or other third party will apply if cancellation is effected under this section.

(c) If a licensee requests cancellation under (b)(2) of this section, the insurance policy must be canceled as if the notice of cancellation had been submitted by the borrower, but the return of the insurance policy is not required.

(d) If a statute, regulation, or contractual provision requires notice of cancellation to a governmental agency, mortgagee, or other third party, an insurer shall give notice on behalf of itself or the borrower no later than the fifth business day after the insurer receives the notice of cancellation from the licensee. The insurer shall determine the effective date of cancellation taking into consideration the number of days' notice required by statute, regulation, or contractual provision to complete the cancellation.

(e) The premium finance agreement or agreement to extend credit is not required to set out the items listed in (a) of this section in the order in which they are listed, but may use any logical sequence. The premium finance agreement or agreement to extend credit may include additional items to explain the computations made in determining the amount to be paid by the insured.

(f) The repayment schedule relating to personal insurance, as that term is defined in AS 21.36.310 , must be arranged so that the total amount due the licensee at any time does not exceed the unearned premium on the policy being financed at that time. A deficiency balance may not be established or collected from the borrower. This section does not preclude the licensee from establishing or collecting a deficiency balance to the extent the insurer offsets unearned premiums on the policy financed by premiums earned by reason of endorsements to that same policy not paid for by the insured or financed by the licensee.

(g) The licensee shall deliver a complete copy of the premium finance agreement or agreement to extend credit to the borrower at the time the agreement is executed.

Authority:

AS 21.06.090

AS 21.36.122

03 AAC 23.270. Delivery of Agreement

Repealed.

Eff. 4/22/79, Register 70; repealed 3/11/98, Register 145

03 AAC 23.280. Operating Funds to Finance Premiums

A licensee may use only operating funds to finance premiums. By the close of business on the day the loan is made, the licensee shall deposit the amount loaned to a borrower and the down payment paid by the borrower in the licensee's fiduciary account. The licensee may not deliver loan proceeds to the borrower.

Authority:

AS 21.06.090

AS 21.36.122

03 AAC 23.290. Records Required

(a) A licensee shall maintain books, accounts, and records relating to premium finance transactions and agreements to extend credit in accordance with accepted accounting practices. A licensee shall keep the required books, accounts, and records at the licensee's place of business, and in a manner that will make them readily available for inspection, examination, and audit by the director.

(b) During normal business hours, the director will, in the director's discretion, require a licensee to bring the books, accounts, and records required under (a) of this section to the director's office for examination.

(c) A licensee shall preserve the books, accounts, and records required under (a) of this section for at least five years following the year in which the final entry relating to a premium finance agreement or agreement to extend credit was made.

Authority:

AS 21.06.090

AS 21.36.122

03 AAC 23.300. Loan Amount

Repealed.

Eff. 4/22/79, Register 70; repealed 3/11/98, Register 145

03 AAC 23.310. Service Charge; Maximum Interest Rate

(a) A licensee entering into a premium finance agreement or agreement to extend credit may charge, contract for, receive, or collect a service charge only as permitted by this section.

(b) The service charge may not exceed a simple interest equivalent annual rate of 15 percent, plus an additional, nonrefundable charge of no more than $10 per premium finance agreement or agreement to extend credit. Unless computed under (c) of this section, the service charge must be computed on the balance of the premiums due, after subtracting the down payment made by the borrower, from the effective date of the insurance coverage for which the premiums are being advanced, to and including the date when the final payment of the premium finance agreement or agreement to extend credit is payable.

(c) If the service charge is computed monthly, the interest rate may not exceed 1.25 percent per month on the unpaid principal balance. The unpaid principal balance does not include the unpaid interest balance or any other unpaid charges.

Authority:

AS 21.06.090

AS 21.36.122

03 AAC 23.315. Refund On Prepayment

(a) A borrower may prepay the outstanding balance due under a premium finance agreement or agreement to extend credit in full at any time before the due date of the final payment, and is entitled to receive a refund credit of interest, computed from the date the prepayment is received by the licensee. A refund must be computed on the total amount of precomputed charges, except that the nonrefundable charge of a maximum of $10 per premium finance agreement or agreement to extend credit must be excluded from the refund computation since interest may not be calculated on that charge.

(b) If a premuim finance agreement or agreement to extend credit is terminated because of a borrower's default, the borrower is entitled to receive a refund credit of interest as though a prepayment had occurred. A refund credit allowed by this subsection must be computed from the date of cancellation of the insurance policy for which the premium loan was made.

(c) A refund credit of interest must be computed in accordance with the sum-of-the-digits method, commonly known as the Rule of 78's.

Authority:

AS 21.06.090

AS 21.36.122

03 AAC 23.320. Adjustment For Cancellation or Prepayment

Repealed.

Eff. 4/22/79, Register 70; repealed 3/11/98, Register 145

03 AAC 23.330. Cutoff Date For Computing Refunds

Repealed.

Eff. 4/22/79, Register 70; repealed 3/11/98, Register 145

03 AAC 23.340. Late Charge

(a) A premium finance agreement or agreement to extend credit may require the borrower to pay a late charge for any payment that is not made within 10 days after it is due. A late charge may be imposed for each month or fraction of a month that the payment is late. The charge allowed is a minimum of $1 and a maximum of:

(1) for a delinquent payment of less than $250, five percent of the payment or $5, whichever is less; or

(2) for a delinquent payment of $250 or more, two percent of the payment.

Authority:

AS 21.06.090

AS 21.36.122

03 AAC 23.350. Cancellation of Policy Requirements

Repealed.

Eff. 4/22/79, Register 70; repealed 3/11/98, Register 145

03 AAC 23.360. Security For Financed Premiums

The only allowable security for financed premiums is the unearned premium or cash surrender value of the policy being financed, except that notes may be used to secure audit premiums that are financed after expiration of the policy or where the premium is fully earned before policy expiration.

Authority:

AS 21.06.090

AS 21.36.122

03 AAC 23.370. Delegation of Payment

A payment made as required by a premium finance agreement or agreement to extend credit must be attributed only to the policy or policies financed under that agreement.

Authority:

AS 21.06.090

AS 21.36.122

03 AAC 23.380. Exemption

3 AAC 23.210 - 3 AAC 23.380 do not apply to credit life or credit disability insurance as defined in AS 21.57.

Authority:

AS 21.06.090

AS 21.36.122

03 AAC 23.390. Statement Fees

Repealed.

Eff. 4/22/79, Register 70; repealed 3/11/98, Register 145