                                 CODE OF VIRGINIA

MAXIMUM INTEREST RATE AND MAXIMUM SERVICE CHARGE ON PREMIUM FINANCE AGREEMENT
(§ 38.2-4705)

A. The Commission shall periodically investigate the economic conditions and
other factors relating to and affecting the business of insurance premium
finance companies. The Commission shall ascertain all pertinent facts necessary
to determine what maximum interest rate and what maximum service charge shall be
permitted. Upon the basis of those facts and subject to this chapter, the
Commission shall determine and fix by regulation or order the maximum interest
rate and maximum service charge that may be charged in advance upon the amount
financed by any insurance premium finance company.

B. The Commission shall initially fix the maximum interest rate at one percent
per month charged in advance upon the entire amount financed payable in
installments, and shall initially fix the maximum service charge at fifteen
dollars. Thereafter, the maximum interest rate and maximum service charge shall
be determined by the Commission after giving due consideration to such factors
as (i) prevailing market interest rates, (ii) other relevant cost indices, and
(iii) the industry-wide experience of premium finance companies operating in
this Commonwealth. Before redetermining the maximum interest rate or maximum
service charge, the Commission shall give all licensees notice and opportunity
to be heard and to introduce evidence with respect to the maximum interest rate
or service charge.

C. Interest at the authorized rate may be charged from the effective date of the
premium finance agreement or the inception date of the insurance contract for
which the premiums are being financed, whichever is earlier, through the date
when the final installment of the premium finance agreement is payable. Interest
charged under a premium finance agreement shall not be fully earned at the
inception of the agreement. The insurance premium finance company may earn
interest through the date the principal amount financed under a premium finance
agreement has been paid in full for any reason. Upon such payment in full, a
refund credit of any unearned interest shall be due the insured and shall be
computed on a short rate or prorata basis as set forth in the agreement,
provided that the interest charged does not exceed the maximum interest rate
established by the Commission pursuant to subsection A. The service charge
received by an insurance premium finance company shall be fully earned upon its
receipt and no portion of the service charge need be refunded upon prepayment of
the loan for any reason. Only one service charge shall be made for each premium
finance agreement, and no insurance agent or insurance premium finance company
shall induce any person to enter into more than one premium finance agreement
for the purpose of obtaining more than one service charge. Notwithstanding the
foregoing, one additional charge not to exceed ten dollars may be charged if
additional premiums are added to an existing finance agreement at the
insured&#8217;s request. Such additional charge may be applied only once during
the term of any premium finance agreement. No part of any charges shall be paid
to any insurance agent by an insurance premium finance company, nor shall any
insurance premium finance company pay, allow or give, or offer to pay, allow or
give, directly or indirectly, to any insurance agent, any valuable consideration
as an inducement to finance the premium of any insurance policy. No insurance
agent shall accept any valuable consideration as an inducement to finance the
premium of any insurance policy. No person shall be in violation of this section
solely by reason of ownership in an insurance premium finance company.

D. Notwithstanding the foregoing, the Commission by rule or order may exempt any
premium finance agreement, any class of premium finance agreements or any market
segment from any of the provisions of this section, if it finds their
application unnecessary to achieve the purposes of this chapter.

HISTORY: 1981, c. 107, § 38.1-740.1; 1986, c. 562; 1994, cc. 8, 123.