Louisiana Administrative Code › Title 10 - FINANCIAL INSTITUTIONS, CONSUMER CREDIT, INVESTMENT SECURITIES AND UCC › Part I - Financial Institutions › Chapter 7 - Powers › Section I-703 - Variable Rate Loans

Current through Register Vol. 50, No. 6, June 20, 2024
A. Pursuant to
				R.S. 6:25.1 (Act 640 of 1981) and
				R.S.
				9:3554(B), banks, savings
				and loan associations, other supervised financial organizations, and licensed
				lenders are hereby authorized to make, purchase or participate in loans bearing
				simple interest from date on a variable rate basis consistent with the
				following regulations promulgated by the Commissioner of Financial
				Institutions.
1. Purpose. This regulation is
				issued by the commissioner of Financial Institutions under authority granted by
				R.S. 6:25.1 (Act 640 of 1981) and
				R.S.
				9:3554(B).
2. Scope. This regulation shall apply to all
				loans or other extensions of credit which are made, purchased, or participated
				in by banks, savings and loan associations, other supervised financial
				organizations and licensed lenders, and which bear simple interest from date on
				a variable rate basis.
3.
				Definitions. As used herein, the following definitions shall apply.
Bank
- any bank organized under the laws of
				  the United States of America or of any state or foreign nation, and any
				  subsidiary or parent holding company of a bank. (Nonbank subsidiaries of bank
				  holding companies are considered to be banks or other supervised financial
				  organizations for the purposes of this regulation.)
Index
- any basis on which the interest rate
				  charged on a loan may vary in accordance with the agreement of the
				  parties.
Licensed Lender
- shall have the same meaning
				  as defined under
				  R.S.
				  9:3516(19), that is, a
				  person, other than a supervised financial organization, engaged in the business
				  of making supervised loans.
Prime Rate
or
Base Rate
-
				  the interest rate established from time to time, one or more times, by the
				  board of directors and/or management of a bank, savings and loan association,
				  or any supervised financial organization as its "prime" or "base" lending rate,
				  whether or not that interest rate is published or otherwise made known to the
				  general public.
Savings and Loan Association
- any savings
				  and loan association, thrift institution, or savings bank organized under the
				  laws of the United States of America or of any state, and any wholly-owned
				  subsidiary or parent holding company of a savings and loan association.
Supervised Financial Organization
- shall
				  have the same meaning as defined under
				  R.S. 9:3516 (26),
				  that is, a banking or similar organization organized, certified and supervised
				  by an agency of either the United States of America or of the state of
				  Louisiana pursuant to the banking, currency, and related laws of the United
				  States of America or of the State of Louisiana.
Variable Rate
- the manner of computing
				  simple interest on a loan whereby the rate of simple interest varies from time
				  to time, one or more times, over the term of the extension of credit with
				  changes in a contractual index rate or is adjusted in accordance with a formula
				  specified in the promissory note or credit agreement governing the loan.
4. General Rule. Banks, savings
				and loan associations, other supervised financial organizations, and licensed
				lenders are authorized to make, purchase or participate in loans bearing simple
				interest from date on a variable rate basis.
5. Calculation of and Basis for Change in
				Rate
a. The simple rate of interest on a
				variable rate loan may vary with changes in an index or may be adjusted in
				accordance with a formula specified in the promissory note or credit agreement
				governing the loan.
b. It shall be
				permissible for a supervised financial organization to charge and collect
				simple interest on a variable rate basis indexed to the institution's own
				"prime" or "base" lending rate.
6. Rate Adjustment. This regulation sets no
				limitations on the frequency of interest rate adjustments or on the amount of
				any incremental change in the interest rate in variable rate loans.
7. Relationship to Other Laws
a. This regulation shall not be construed to
				limit the manner or method of contracting for interest in connection with any
				loan or other extension of credit.
b. Banks, savings and loan associations,
				other supervised financial organizations and licensed lenders are permitted to
				enter into variable rate loan transactions pursuant to this regulation which
				are governed by any applicable Louisiana or federal credit laws and
				regulations, including but not limited to:
i.Article 2924 of the Louisiana Civil
				Code;
ii. the Louisiana Consumer
				Credit Law (R.S.
				9:3510, et seq.);
iii. the Louisiana Motor Vehicle Sales
				Finance Act (R.S. 6:951, et
				seq.);
iv.R.S.
				9:3503, et seq.;
v.R.S.
				6:654;
vi.R.S.
				9:3509;
vii.R.S.
				12:703.
c. This regulation shall not supersede the
				requirements of
				R.S.
				6:957(F) as added by Act 580
				of 1981 with regard to variable rate retail installment contracts for the
				purchase of a residential mobile home.
d. This regulation shall additionally not
				supersede the adjustable rate mortgage regulations promulgated by the Office of
				Financial Institutions for state banks as published in Volume 7, Number 7,
Louisiana Register
, July 20, 1981, as well as the adjustable
				rate mortgage regulations promulgated by the Office of the Comptroller of the
				Currency for National banks (  12 CFR §29.1  et seq.).
e. This regulation shall additionally not
				supersede the adjustable mortgage loan regulations promulgated by the Office of
				Financial Institutions for state savings and loan associations as published in
				Volume 7, Number 7,
Louisiana Register
, July 20, 1981, as well
				as the adjustable mortgage loan regulations promulgated by the Federal Home
				Loan Bank Board for federal savings and loan associations (  12 CFR §545 .
				6-4 a).
f. Notwithstanding any
				other laws to the contrary, particularly
				Article
				1939 of the Louisiana Civil Code, loans
				subject to these regulations shall be exempt from the application of the
				prohibition against interest on interest.
8. Effect on Other Variable Rate Loans. The
				promulgation of this regulation shall not be construed to raise questions as
				to, or provide a basis for any challenge to, the validity or enforceability of
				variable rate loans which may have been entered into prior to the promulgation
				hereof or as to the validity or enforceability of variable rate loans or other
				extensions of credit by creditors not subject to this regulation.
9. ARM/AML Regulations
a. The Office of Financial Institutions does
				hereby reissue and re-promulgate the adjustable-rate mortgage regulations
				promulgated by the Office of Financial Institutions for state banks as
				published in Volume 7, Number 7,
Louisiana Register
, July 20,
				1981, said regulations to be promulgated under authority granted by R.S.
				6:237(B).
b. The Office of
				Financial Institutions does hereby reissue and repromulgate the adjustable
				mortgage loan regulations promulgated by the Office of Financial Institutions
				for state savings and loan associations as published in Volume 7, Number 7,
Louisiana Register
, July 20, 1981, said regulations to be
				promulgated under the authority granted by
				R.S.
				6:902(B).
10. Effective Date. This
				regulation shall take effect on the date of final publication.