Article 4. Limitation On Finance Charges of California Financial Code >> Division 7. >> Chapter 8. >> Article 4.
A premium finance agency shall not, except as otherwise
provided by law, impose, take, receive, reserve or charge a finance
charge which in the aggregate is greater than that which is permitted
by this article.
A premium finance agency may, in a premium finance
agreement, contract for, charge, receive, and collect a finance
charge which shall not exceed in the aggregate:
(a) Two percent per month on that part of the unpaid principal
balance of any loan up to, including, but not in excess of, one
thousand dollars ($1,000).
(b) One percent per month on any remainder of such unpaid
principal balance in excess of one thousand dollars ($1,000).
As used in this article "consumer insurance premium finance loan"
shall mean an insurance premium finance loan where the insurance
policies which are security for the loan are for personal, family or
(c) As an alternative to the charges authorized by subdivisions
(a) and (b), a premium finance agency may contract for and receive
charges at a rate not exceeding 1.6 percent per month on the unpaid
If the finance charge computed under Section 18626 is less
than twenty-five dollars ($25), a minimum finance charge of
twenty-five dollars ($25) may be imposed.
The finance charge may be computed from the effective date
of the insurance coverage, provided that the company shall pay the
premium due the insurer, either:
(a) Within 30 days from the effective date of the insurance
(b) Within 30 days after the receipt by the company of a proper
premium finance agreement; or
(c) Within 15 days after the company has mailed to the insured,
notice of a revised finance agreement pursuant to Section 18606
whichever is later.
If the conditions of subdivision (a), (b), or (c) are not met the
finance charge shall be computed from the date the proceeds of the
loan are forwarded to the insurer. In the event the company receives
a proper premium finance agreement later than 60 days from the
effective date of the policy financed, a proportioned adjustment of
the finance charge shall be made after such 60-day period.
Notwithstanding the provisions of any premium finance
agreement to the contrary, any insured may pay the obligation in full
at any time before maturity of the final installment. If he does so,
he shall receive a refund credit of the unearned finance charge
computed in accordance with Section 18635 or 18637, except where the
amount of the refund credit is less than one dollar ($1) no refund
need be made, and except that where the earned finance charge amounts
to less than the minimum finance charge permitted by Section 18627,
the company may retain as an earned finance charge a sum equal to the
minimum permitted by Section 18627 or the maximum prescribed by
Section 18627, whichever is applicable.
In the event that the insurance policy or policies which are
the subject of a premium finance agreement are canceled by the
insured or by the insurer, for any cause, the insured shall be
entitled to receive a refund credit of the unearned finance charge.
This refund credit shall be calculated in the same manner as
prescribed in Section 18629, and shall be paid to the insured within
a reasonable time.
(a) A premium finance agreement may provide for the payment
of a default charge of one dollar ($1) to a maximum of 5 percent of
the delinquent installment, in the event of a default for a period of
not less than 10 days in the payment of any scheduled installment
under the terms of a premium finance agreement. That charge may not
be collected more than once for the same default and may be collected
at the time of the default or at any time thereafter. If the default
charge is deducted from any payment received after default occurs,
and the deduction results in the default of a subsequent installment,
no charge may be made for the resulting default.
(b) A premium finance agreement may provide for the payment of a
dishonored check fee not to exceed fifteen dollars ($15) for actual
expenses incurred in the processing of a dishonored check.