GA Code § 7-3-11 (2021)
2021 Georgia Code|Title 7 - Banking and Finance|Chapter 3 - Installment Loans|Article 2 - Operating Procedures|§ 7-3-11. Maximum Loan Amount, Period, and Charges; Deferments

 Every licensee under this chapter may lend any sum of money not exceeding $3,000.00 for a period of 36 months and 15 days or less and may charge, contract for, collect, and receive interest and fees and may require the fulfillment of conditions on such loans as provided in this Code section:    INTEREST. A licensee may charge, contract for, receive, and collect interest at a rate not to exceed 10 percent per annum of the face amount of the contract, whether repayable in one single payment or repayable in monthly or other periodic installments. On loan contracts repayable in 18 months or less, the interest may be discounted in advance; and, on contracts repayable over a greater period, the interest shall be added to the principal amount of the loan. On all contracts, interest or discount shall be computed proportionately on equal calendar months;   LOAN FEE. In addition thereto, a licensee may charge, contract for, receive, or collect at the time the loan is made a fee in an amount not greater than 8 percent of the first $600.00 of the face amount of the contract plus 4 percent of the excess; provided, however, that such fee shall not be charged or collected on that part of a loan which is used to pay or apply on a prior loan or installment of a prior loan from the same licensee to the same borrower made within the immediately preceding six-month period; provided, however, if the loan balance is $300.00 or less, the said period shall be two months, not six months; provided, further, that nothing contained in this paragraph and paragraph (1) of this Code section shall be construed to permit charges, interest, or fees of any nature whatsoever in the aggregate in excess of the charges, interest, and fees which would constitute a violation of Code Section 7-4-18 and this chapter shall in no way affect Code Section 7-4-18. If a borrower prepays his or her entire loan to a licensee and within the following 15 days obtains a new loan from that licensee and if this is done within the six-month period or the two-month period above described, as may be applicable, the fee may be charged only on the excess by which the face amount of the new contract exceeds the amount which the borrower repaid to that licensee within the said 15 day period;   INSURANCE PREMIUMS. A licensee may charge and collect from the borrower premiums actually paid or to be paid for insurance obtained for the borrower. A licensee may accept as security on any loan or advance made under this chapter any one or any combination of the following:   Insurance on tangible property against substantial risks or loss;   Reasonable insurance on the life and health of the principal party; or   Reasonable insurance against accident of the principal party;  provided, however, that any such insurance shall be reasonably related to the type and value of the property insured and to the amount and term of the loan and shall be obtained from an insurance company authorized to conduct such business in the State of Georgia and at rates lawfully filed by such company with the Commissioner of Insurance and through a regular insurance agent licensed by the Commissioner of Insurance; provided, further, that the amount of life, health, or accident insurance required as security for loans made under this chapter shall not exceed the amount of the loan, including charges, to be secured; and the premiums on such insurance required of the principal party obligated shall be limited to premiums reasonably based upon reliable actuarial experience and sound insurance practice; and the Commissioner of Insurance is authorized and directed to promulgate rules and regulations to effectuate this provision related to insurance obtained by the borrower in accordance with the spirit and intent thereof. It shall be the duty of the Commissioner of Insurance to determine and promulgate by rule and regulation the rates and maximum premiums permissible to be charged for life, health, and accident insurance required as security for a loan made under this chapter and to make regulations incident thereto necessary to effectuate the same; such premiums, when thus established and as changed from time to time in the manner aforesaid, shall be the maximum effective and permissible charges under this paragraph. Premiums paid or to be paid pursuant to the authority of this paragraph shall not constitute interest. The insurance company in turn may pay to the party writing the insurance policy sold in connection with the loan a fee or commission in an amount which is reasonable in relationship to the transaction and in no event in excess of the amount of fee or commission customarily paid within the industry where comparable insurance is sold in a transaction not involving credit, as determined by the Commissioner of Insurance;      LATE CHARGE. A licensee may charge and collect from the borrower a late or delinquent charge of $10.00 or an amount equal to 5› for each $1.00 of any installment which is not paid within five days from the date such payment is due, whichever is greater, provided that this late or delinquent charge shall not be collected more than once for the same default; and   MAINTENANCE CHARGE. In addition thereto, a licensee may contract for, charge, receive, and collect a maintenance charge of $3.00 for each month in the term of the loan contract on each loan made, whether repayable in one single payment or repayable in weekly, monthly, or other periodic installments. Refunds of unearned maintenance charges shall be made in accordance with the method prescribed in Code Section 7-3-14, and such maintenance charges will be subject to paragraph (4) of this Code section. Nothing contained in Code Section 7-4-18, as now or hereafter amended, shall be construed to apply to this paragraph; and loans made in conformity with this paragraph shall in no way constitute a violation of Code Section 7-4-18, as now or hereafter amended.   Deferment.   Hardship deferment: Nothing in this article shall be construed as prohibiting any licensee and borrower from contracting to defer periodic payments consisting of principal payments, interest, fees, premiums, and charges provided that no additional interest, fees, premiums, or charges are incurred or otherwise imposed as a result of such deferment. Nothing in subparagraph (B) of this paragraph shall be construed as limiting the duration of a hardship deferment or the number of hardship deferments that can be granted during a loan term.   Convenience deferment: A licensee and a borrower may, at any time, contract to defer all of or part of one or more unpaid installments, and the licensee may make and collect a charge therefor, subject to the following provisions:   A convenience deferment may be for any duration agreed upon by the licensee and the borrower but shall not exceed four months. A licensee may agree to multiple convenience deferments during the loan term provided that the total duration of all convenience deferments does not exceed four months;   A licensee may charge a fee for the deferment. The deferment fee shall not exceed an amount equal to the result of applying the interest rate provided in the original loan agreement to the amount deferred for the deferment period. The deferment fee shall be calculated without regard to the difference in lengths of months by counting each day of the deferment period as one-thirtieth of a month. The fee may be collected at the time it is assessed or at any later date as agreed upon by the licensee and the borrower; provided, however, that the deferment fee is earned pro rata during the deferment period and is fully earned on the last day of the deferment period;   A licensee shall not charge any fees, premiums, interest, or charges other than the deferment fee for the duration of the deferment period and such fees, premiums, interest, or charges other than the deferment fee shall not accrue during the deferment period;   If a licensee renews or refinances an installment loan within three months after the end of the convenience deferment period, the licensee must refund or credit the entire convenience deferment fee to the borrower;   If a licensee enters into a convenience deferment agreement with a borrower and the licensee enters into a hardship deferment agreement with the borrower within three months of the end of the convenience deferment period, the licensee must refund or credit the entire convenience deferment fee to the borrower; and   If a loan is prepaid during a deferment period, the licensee shall refund or credit to the borrower any unearned portion of the deferment fee as calculated pursuant to division (ii) of this subparagraph in addition to any other refund or credit due to the borrower for prepayment.     Any deferment agreement shall be evidenced in writing and shall include:   The amount or amounts deferred;   The length of the deferment period, including the due date for the borrower's next payment;   The amount of the deferment fee, if applicable; and   Where any credit insurance or ancillary product with a specific term was purchased by the borrower, the following disclosure to the borrower: "You have purchased a credit insurance product(s) and/or [identify the specific ancillary product ] in connection with this loan. The deferment agreed to herein will not extend the term of coverage of those products."     Whenever a licensee enters into a deferment agreement with the borrower hereunder, the deferment shall not be considered to be an improper extension of the loan term, and the original loan term shall be extended by the period deferred. For purposes of granting a deferment, licensees may extend the term of the loan beyond the maximum term limit of 36 months and 15 days.   A licensee shall not offer or require a borrower to obtain credit insurance or any other ancillary product for the extension of the original loan term due to a deferment.   After the conclusion of a deferment period, the borrower shall resume payments in the same amounts and intervals as set forth in the original loan agreement. Licensees shall not require borrowers to make a lump sum repayment.   Licensees shall maintain a monthly journal of loans that were deferred by identifying the specific borrower that entered into the deferment agreement, the type of deferment granted, and the status of such deferment.       (Ga. L. 1904, p. 79, §§ 10, 12; Civil Code 1910, §§ 3458, 3459, 3461; Ga. L. 1920, p. 215, §§ 13, 14; Code 1933, §§ 25-213, 25-214, 25-216, 25-301, 25-313, 25-315, 25-317; Ga. L. 1935, p. 394, § 1; Ga. L. 1955, p. 431, § 15; Ga. L. 1964, p. 288, § 5; Ga. L. 1975, p. 393, §§ 2, 3; Ga. L. 1977, p. 288, § 1; Ga. L. 1980, p. 509, §§ 1, 3; Code 1981, §7-3-14; Ga. L. 1981, p. 621, § 1; Ga. L. 1989, p. 14, § 7; Ga. L. 1997, p. 143, § 7; Ga. L. 2001, p. 205, § 1; Code 1981, §7-3-11, as redesignated by Ga. L. 2020, p. 156, § 2/SB 462; Ga. L. 2020, p. 493, § 7/SB 429; Ga. L. 2021, p. 323, § 37/HB 111.)    The 2020 amendments.  The first 2020 amendment, effective June 30, 2020, redesignated Code Section 7-3-14 as present Code Section 7-3-11, and substituted "lend" for "loan" near the beginning of the introductory paragraph; in the last sentence of paragraph (2), substituted "obtains" for "makes" and "from" for "with; rewrote the ending undesignated paragraph of paragraph (3), which read: "provided, however, that any such insurance shall be reasonably related to the type and value of the property insured and to the amount and term of the loan and shall be obtained from an insurance company authorized to conduct such business in the State of Georgia and at rates lawfully filed by such company with the Commissioner of Insurance and through a regular insurance agent licensed by the Commissioner of Insurance; provided, further, the amount of life, health, or accident insurance required as security for loans made under this chapter shall not exceed the amount of the loan, including charges, to be secured; and the premiums on such insurance required of the principal party obligated shall be limited to premiums reasonably based upon reliable actuarial experience and sound insurance practice; and the Commissioner is authorized and directed to promulgate rules and regulations to effectuate this provision in accordance with the spirit and intent thereof. It shall be the duty of the Commissioner from time to time under the foregoing direction, after public hearing in the manner provided in subsection (b) of Code Section 7-3-7, to determine and promulgate the rates and maximum premiums permissible to be charged for life, health, and accident insurance required as security for a loan made under this chapter and to make regulations incident thereto necessary to effectuate the same; such premiums, when thus established and as changed from time to time in the manner aforesaid, shall be the maximum effective and permissible charges under this paragraph. Premiums paid or to be paid pursuant to the authority of this paragraph shall not constitute interest. The insurance company in turn may pay to the party writing the insurance policy sold in connection with the loan a fee or commission in an amount which is reasonable in relationship to the transaction and in no event in excess of the amount of fee or commission customarily paid within the industry where comparable insurance is sold in a transaction not involving credit, as determined by the Commissioner;"; and substituted "Code Section 7-3-14" for "Code Section 7-3-17" in the second sentence of paragraph (5). The second 2020 amendment, effective July 29, 2020, part of an Act to revise, modernize, and correct the Code, substituted "provided, further, that the amount" for "provided, further, the amount" at the beginning of the second proviso of the undesignated ending paragraph in paragraph (3). See Editor's notes at the beginning of this chapter for applicability.    The 2021 amendment,  effective July 1, 2021, added paragraph (6).   Editor's notes.   - Former Code Section 7-3-11, concerning failure to begin business or suspending activities after license issued, was repealed by Ga. L. 2020, p. 156, § 2/SB 462, effective June 30, 2020. The former Code section was based on Ga. L. 1964, p. 288, § 3; Ga. L. 1989, p. 14, § 7.   Law reviews.   - For article, "Acceleration Clauses in Georgia: Consumer Installment Contracts and the Federal Truth-In-Lending Act," see 27 Mercer L. Rev. 969 (1976). For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978). For article, "Business Associations," see 53 Mercer L. Rev. 109 (2001).   JUDICIAL DECISIONS   ANALYSIS    General Consideration   Interest   Loan Fee   Face Amount of Contract   Acceleration of Interest   Insurance   Late Charges    OPINIONS OF THE ATTORNEY GENERAL    Former Code 1933, § 25-315 (see now O.C.G.A. § 7-3-11(1)) applied to banks since the statute set the maximum loan fee by regulating when the fee may be charged. 1980 Op. Att'y Gen. No. 80-116.   Section incorporated into National Bank Act and Chapter 7-1 of this title.    - Effect of 12 U.S.C. § 85 and former Code 1933, § 41A-1313 (see now O.C.G.A. § 7-1-292) was incorporation by reference into National Bank Act and Financial Institutions Code (see now O.C.G.A. § 7-1-1 et seq.) respectively, those provisions of this chapter dealing with interest and fees which could be charged on certain designated types of loans. 1979 Op. Att'y Gen. No. 79-33.    Bank may again charge loan fees authorized by O.C.G.A. § 7-3-14(2) (now O.C.G.A. § 7-3-11(2)) if loan with maturity date in excess of six months made pursuant to the Georgia Industrial Loan Act (now Georgia Installment Loan Act), O.C.G.A. § 7-3-1 et seq., is renewed after the loan has been in existence in excess of six months. 1982 Op. Att'y Gen. No. 82-43.   Legislative intent regarding borrower's insurance.    - Language of former Code 1933, § 25-315 (see now O.C.G.A. § 7-3-11) made clear the legislative intent that insurance must be for the borrower's benefit; the borrower's insurance would, therefore, cover not only the amount owing on the loan, but also any equity the borrower might have in the property insured. 1963-65 Op. Att'y Gen. p. 131.   Licensee cannot charge borrower for insurance policy-writing fee.    - No statutory provision permits licensee to charge borrower for policy-writing fee; language of former Code 1933, § 25-315(3) clearly prohibited any charge in connection with insurance obtained as security on a loan other than actual established premium, and former Code 1933, §§ 25-214, 25-216, and 25-313 (see now O.C.G.A. § 7-3-12) clearly prohibits any charges other than those set out in this chapter. 1963-65 Op. Att'y Gen. p. 428.   Late charge not considered interest and fees.    - Late charge under former Code 1933, § 25-315(4) (see now O.C.G.A. § 7-3-11), being a penalty assessment for failure to meet payment when due, was not considered as interest and fees and was not limited by 5 percent per month maximum which can be charged as interest and fees under former Code 1933, § 25-315(1) and (2). 1957 Op. Att'y Gen. p. 158.   "Loan" synonymous with "note."   - "Loan" in this context should be interpreted as synonymous with "note," and thus two 90-day periods may not be cumulated to allow additional loan fee on second renewal. 1980 Op. Att'y Gen. No. 80-116.   Interest charge for partial 30-day periods permissible.   - So long as interest of 10 percent per annum is not exceeded, banks may charge interest for partial 30-day periods. 1980 Op. Att'y Gen. No. 80-116.    If a second imposition of fee permitted by O.C.G.A. § 7-3-14(2) (now O.C.G.A. § 7-3-11(2)) would result in a violation of usury provisions of O.C.G.A. § 7-4-18 such a second imposition would be illegal. 1982 Op. Att'y Gen. No. 82-43.   Calculation of refund of unearned maintenance charges.    - Calculation of a refund of unearned maintenance charges in connection with the prepayment or refinancing of a loan transaction is to be determined by the "Rule of 78s" as required by O.C.G.A. § 7-3-14(5) (now O.C.G.A.7-3-11). 1990 Op. Att'y Gen. No. 90-45.   RESEARCH REFERENCES   Am. Jur. 2d.   - 44B Am. Jur. 2d, Interest and Usury, § 156 et seq. 54 Am. Jur. 2d, Moneylenders and Pawnbrokers, §§ 1 et seq., 46 et seq.   C.J.S.   - 47 C.J.S., Interest and Usury; Consumer Credit, §§ 428 et seq., 436, 444, 445.   ALR.    - Usury: expenses or charges incident to loan of money, 21 A.L.R. 797; 53 A.L.R. 743; 63 A.L.R. 823; 105 A.L.R. 795; 52 A.L.R.2d 703.    Construction, application, and effect of provisions of small loan acts regarding fees, charges, in addition to interest, 143 A.L.R. 1323.   Retrospective application and effect of statutory provision for interest or changed rate of interest, 4 A.L.R.2d 932; 40 A.L.R.4th 147; 41 A.L.R.4th 694.   Usury: expenses or charges incident to loan of money, 52 A.L.R.2d 703.   Taking or charging interest in advance as usury, 57 A.L.R.2d 630.   Construction and application of provision of small loan statute limiting time period for loan contracts, 58 A.L.R.2d 1263.   What is "compound interest" within meaning of statutes prohibiting the charging of such interest, 10 A.L.R.3d 421.   Right of holder of commercial paper to interest or finance charges applicable to period after acceleration of maturity of obligation because of debtor's default, 63 A.L.R.3d 10.   Validity and construction of provision imposing "late charge" or similar exaction for delay in making periodic payments on note, mortgage, or installment sale contract, 63 A.L.R.3d 50.   Reformation of usurious contract, 74 A.L.R.3d 1239.   Validity and construction of state statute or rule allowing or changing rate of prejudgment interest in tort action, 40 A.L.R.4th 147.   Retrospective application and effect of state statute or rule allowing interest or changing rate of interest on judgments or verdicts, 41 A.L.R.4th 694.