The credit provider must refund unearned finance charges when a precomputed consumer credit transaction is prepaid in full, subject to a formula and limited deductions.
§3532. Rebate upon prepayment A. Upon prepayment in full of a precomputed consumer credit transaction, the extender of credit shall refund unearned loan finance charges or credit service charges and such refund shall represent at least as great a proportion of the loan finance charge or credit service charge after first deducting from such charge a prepayment charge of not more than twenty-five dollars as the sum of the monthly time balances beginning one month after the month in which prepayment is made, bears to the sum of all the monthly time balances under the schedule of payments in the contract; this method of rebate upon prepayment is commonly referred to as the "Rule of 78's" or the "Sum of Digits" rebate method. If more than one-half of the term of the installment contract has elapsed, the rebate shall be computed without deducting a prepayment charge. For the purposes of rebate upon prepayment, deferral charges are not required to be rebated. No rebate less than one dollar, or to the extent provided for by federal law is required. B.(1) There is no requirement that prepaid finance charges be rebated upon prepayment in full of a simple interest transaction prior to maturity, provided that all of the following conditions are satisfied: (a) The original amount financed under the transaction was ten thousand dollars or more. (b) The original scheduled term of the transaction was thirty-six months or longer. (c) Prepaid finance charges assessed under the transaction did not exceed five percent of the original amount financed or amount deferred. (2) Where any one or more of the foregoing conditions are not satisfied, prepaid finance charges shall be subject to rebate upon prepayment in full of a simple interest transaction under the same method in Subsection A of this Section. C. Compliance with the provisions of this Section shall constitute compliance with the provisions of R.S. 9:3519. Acts 1972, No. 454, §1, eff. Jan. 1, 1973; Acts 1978, No. 761, §1; Acts 1986, No. 584, §1, eff. July 2, 1986; Acts 1990, No. 685, §1; Acts 1990, No. 796, §1; Acts 1995, No. 1184, §2; Acts 1997, No. 237, §1.