Recent changes to two state laws have prompted us to change the late fee restrictions that apply to these states.
Alabama H.B. 3 amends the late fee restrictions set forth in Ala. Code §5-19-4(a) for consumer credit transactions. A late charge may now be assessed “. . . not exceeding the greater of eighteen dollars ($18) or five percent of the amount of the scheduled payment in default, not to exceed one hundred dollars ($100).”
We have changed our Late Fee Matrix and software to reflect these new restrictions, with the exception that the minimum charge of $18 will not be included. Ibid. clearly states that “the creditor may charge” the greater of $18 or 5%, but does not require that they do. Also, rules by FNMA/FHLMC require lenders to charge a 5% late charge, even if it is less than $18, so in order to comply with FNMA/FHLMC rules, the minimum charge will not be included.
Montana H.B. 90 (2011 Mont. Laws 317) changes the definition of a “consumer loan” as set forth in Mont. Code Ann. §32-5-102(2)(b). A consumer loan is subject to late fee restrictions under Ibid. §32-5-301(2) of a $15 minimum and a $50 maximum.
The new definition of a consumer loan excludes “residential mortgage loans”, which in effect excludes these loans from the late fee restrictions applicable to consumer loans.
Since our clients provide residential mortgage loans, as defined under Ibid. §32-9-103, we will be excluding the late charge restrictions for consumer loans from our Late Fee Matrix and software. A late fee in Montana may now be assessed of up to 5% of the late payment.
June 17, 2011