The Vermont Statutes Online

Title 8: Banking and Insurance

Chapter 143: Insurance Premium Finance Companies

• § 7001. Definitions

  As used in this chapter:

  (1) “Insurance premium finance company” means a person engaged in the business of entering into insurance premium finance agreements or acquiring insurance premium finance agreements from other insurance premium finance companies. For the purpose of this chapter and section 2201 of this title, insurance premium finance company includes any insurance company, insurance agent or broker, or other lender who finances insurance premiums.

  (2) “Insurance premium finance agreement” means an agreement by which an insured or prospective insured promises to pay to an insurance premium finance company the amount advanced or to be advanced under the agreement to an insurer or to an insurance agent or broker in payment of premiums of an insurance contract together with interest and a service charge as authorized and limited by this chapter.

  (3) “Licensee” means an insurance premium finance company holding a license issued under section 7002 of this title.

  (4) “Person” means an individual, partnership, association, business corporation, nonprofit corporation, common law trust, joint stock company, or any other group of individuals however organized.

  (5) “Commissioner” means the Commissioner of Financial Regulation. (Added 1983, No. 77, § 1; amended 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

• § 7002. License required

  (a) No person shall engage in the business of an insurance premium finance company in the State without first having obtained a license as an insurance premium finance company from the Commissioner.

  (b) The annual license fee shall be $200.00. Licenses may be renewed from year to year as of July 1 of each year upon payment of the fee of $200.00. The license fee shall be paid to the Commissioner.

  (c) The Commissioner shall have authority, at any time, to require the applicant to disclose fully the identity of all stockholders, partners, officers, and employees and he or she may, in his or her discretion, refuse to issue or renew a license in the name of any firm, partnership, or corporation if he or she is not satisfied that any officer, employee, stockholder, or partner thereof who may materially influence the applicant’s conduct meets the standards of this chapter.

  (d) This section shall not apply to any building or savings and loan association, bank, trust company, licensed lender, or credit union authorized to do business in this State, nor to an insurance company or to an insurance agent or insurance broker licensed to do business in this State financing premiums on policies written by such agent or broker; provided, however, that all other provisions of this chapter shall apply to the financing of insurance premiums. (Added 1983, No. 77, § 1.)

• § 7003. Issuance and renewal of license

  (a) Upon the filing of an application and the payment of the license fee, the Commissioner shall make an investigation of each applicant and shall issue a license, if the applicant is qualified in accordance with this chapter. If the Commissioner does not so find, he or she shall within 30 days after he or she has declined such application, at the request of the applicant, give the applicant a full hearing.

  (b) The Commissioner shall issue or renew a license as may be applied for when he or she is satisfied that the person to be licensed:

  (1) is competent and trustworthy and intends to act in good faith in the capacity involved by the license applied for;

  (2) has a good business reputation and has had experience, training, or education so as to be qualified in the business for which the license is applied for; and

  (3) if a corporation, is a corporation incorporated under the laws of this State or a foreign corporation authorized to transact business in this State. (Added 1983, No. 77, § 1.)

• § 7004. Revocation or suspension of license; appeal

  (a) The Commissioner may revoke or suspend the license of any insurance premium finance company when after investigation the Commissioner finds that:

  (1) the license issued to such company was obtained by fraud;

  (2) there was any misrepresentation or material omission in the application for the license;

  (3) the holder of such license has otherwise shown himself or herself untrustworthy or incompetent to act as an insurance premium finance company; or

  (4) such company has violated any of the provisions of this chapter.

  (b) Before the Commissioner shall revoke, suspend, or refuse to renew the license of any insurance premium finance company, the licensee shall be entitled to a hearing in accordance with 3 V.S.A. chapter 25, the Vermont Administrative Procedure Act. In lieu of revoking or suspending the license for any of the causes enumerated in this section, after hearing as provided in this section, the Commissioner may subject such company to a penalty of not more than $200.00 for each offense when in the Commissioner’s judgment the Commissioner finds that the public interest would not be harmed by the continued operation of such company. The amount of any penalty shall be paid by such company to the Commissioner.

  (c) If the Commissioner refuses to issue to any person a license as an insurance premium finance company, or the Commissioner revokes, suspends, or refuses to renew the license of any insurance premium finance company, or the Commissioner imposes a penalty on such company after a hearing as provided under subsection (b) of this section, the applicant or licensee may appeal from such refusal to issue a license or from such adjudication in accordance with 3 V.S.A. chapter 25, the Vermont Administrative Procedure Act. (Added 1983, No. 77, § 1; amended 2021, No. 105 (Adj. Sess.), § 247, eff. July 1, 2022.)

• § 7005. Books and records

  (a) Every insurance premium finance company shall maintain complete and accurate records of each of its insurance premium finance transactions and these records shall be open to examination and investigation by the Commissioner. The Commissioner may at any time during regular business hours examine such records at any location at which such records are maintained. The reasonable and necessary expenses for the examination and investigation, as determined by the Commissioner, shall be paid by the insurance premium finance company.

  (b) Every insurance premium finance company shall preserve its records of such insurance premium finance transactions, including cards used in a card system, if any, for at least two years after making the final entry in respect to any insurance premium finance agreement. The preservation of records in photographic, microfilm, microfiche, computer, or data processing form shall constitute compliance with this requirement. (Added 1983, No. 77, § 1.)

• § 7006. Form of insurance premium finance agreement

  (a) An insurance premium finance agreement shall:

  (1) be dated and signed by or on behalf of the insured, and the printed portion thereof shall be in at least eight-point type;

  (2) contain the name and place of business of the insurance agent or broker negotiating the related insurance contract, the name and residence or the place of business of the insured as specified by the insured, the name and place of business of the insurance premium finance company to which payments are to be made, a brief description of the insurance contracts involved, and the amount of premiums under the insurance contracts; and

  (3) set forth the following items where applicable:

  (A) the total amount of the premiums;

  (B) the amount of the down payment;

  (C) the principal balance (the difference between subdivisions (A) and (B) of this subdivision (3));

  (D) the amount of the interest;

  (E) the balance payable by the insured (total of items listed in subdivisions (C) and (D) of this subdivision (3));

  (F) the number of installments required, the amount of each installment expressed in dollars, and the due date or period thereof; and

  (G) the annual percentage rate of interest charged under the agreement.

  (b) The items set out in subdivision (a)(3) of this section need not be stated in the sequence or order in which they appear in such subdivision (a)(3), and additional items may be included only to explain the computations made in determining the amount to be paid by the insured. (Added 1983, No. 77, § 1; amended 2021, No. 105 (Adj. Sess.), § 248, eff. July 1, 2022.)

• § 7007. Limitation on interest and other charges

  (a) An insurance premium finance company shall not charge, contract for, receive, or collect an interest charge or any fee, other than as permitted by this chapter.

  (b) The interest is to be computed on the balance of the premiums due (after subtracting the down payment made by the insured in accordance with the insurance premium finance agreement) from the effective date of the insurance contract, for which the premiums are being advanced, to and including the date when the final installment of the insurance premium finance agreement is payable.

  (c) The interest rate shall not exceed the rates permitted by 9 V.S.A. § 41a(b)(5), or a nonrefundable charge of $15.00 per insurance premium finance agreement, whichever is greater, except as provided in this section. If the insurance policy that is the subject of the insurance premium finance agreement is for other than personal, family, or household purposes, then the parties to the contract may agree upon any rate of interest that shall be stated in the insurance premium finance agreement. The interest permitted by this subsection anticipates timely repayment in consecutive monthly installments equal in amount for a period of one year. For repayment in greater or lesser periods or in unequal, irregular, or other than monthly installments, the interest may be computed at an equivalent effective rate having due regard for the timely payments of installments.

  (d) Notwithstanding the provisions of any insurance premium finance agreement, an insured may prepay the obligation in full at any time. In such event, the insured shall receive a refund credit, which refund credit shall be computed according to the actuarial method on the assumption that all payments were made as originally scheduled. Where the amount of the refund credit is less than $1.00, no refund need be made, unless specifically requested by the insured. (Added 1983, No. 77, § 1; amended 2021, No. 105 (Adj. Sess.), § 249, eff. July 1, 2022.)

• § 7008. Delinquency and collection charges

  (a) An insurance premium finance agreement may provide for the payment by the insured of a delinquency charge of $1.00 to a maximum of five percent of the amount of the delinquent installment that is in default for a period of five days or more, whichever is greater.

  (b) An insurance premium finance agreement may provide for payment of reasonable collection and court costs, and attorney’s fees of not more than 25 percent of the outstanding indebtedness.

  (c) None of the charges referred to in this section shall be considered directly or indirectly in determining whether a violation of the usury laws has occurred under an insurance premium finance agreement. (Added 1983, No. 77, § 1.)

• § 7009. Cancellation of insurance contract upon default

  (a) When an insurance premium finance agreement contains a power of attorney enabling the insurance premium finance company to cancel any insurance contract or contracts listed in the agreement, the insurance contract or contracts shall not be cancelled by the insurance premium finance company unless such cancellation is effectuated in accordance with this section.

  (b) Not less than ten days’ written notice shall be mailed to the insured, at his or her last known address as shown on the records of the insurance premium finance company, of the intent of the insurance premium finance company to cancel the insurance contract unless the default is cured within such 10-day period.

  (c) After expiration of such 10-day period, the insurance premium finance company may thereafter cancel such insurance contract or contracts by mailing to the insurer a notice of cancellation. The insurance contract shall be cancelled as if such notice of cancellation had been submitted by the insured himself or herself, but without requiring the return of the insurance contract or contracts. Such cancellation shall be effective no less than 10 days after mailing of the notice to the insurer. The insurance premium finance company shall also mail at least 10 days’ notice of cancellation to the insured at his or her last known address as shown on the records of the insurance premium finance company. However, if the policy being cancelled is a policy defined in subdivision 4222(1) of this title, then the notice of cancellation shall be given by certified mail, return receipt requested, to the insured by the insurance premium finance company.

  (d) All statutory, regulatory, and contractual restrictions providing that the insurance contract may not be cancelled unless notice is given to a governmental agency, mortgagee, or other third party shall apply where cancellation is effected under the provisions of this section. The insurer shall give the prescribed notice on behalf of itself or the insured to any governmental agency, mortgagee, or other third party on or before the second business day after the day it receives the notice of cancellation from the insurance premium finance company and shall determine the effective date of cancellation taking into consideration the number of days’ notice required to complete the cancellation. (Added 1983, No. 77, § 1.)

• § 7010. Return premiums

  Whenever a financed insurance contract is cancelled, the insurer shall return whatever gross unearned premiums are due under the insurance contract directly to the insurance premium finance company for the account of the insured or insureds as soon as reasonably possible, but in no event shall the period for payment exceed 60 days after the effective date of cancellation of the insurance contract. In the event that the crediting of return premiums to the account of the insured results in a surplus over the amount due from the insured, the insurance premium finance company shall refund such excess to the insured provided that no such refund shall be required if it amounts to less than $1.00, unless specifically requested by the insured. (Added 1983, No. 77, § 1.)

• § 7011. Penalties for violations

  Any insurance premium finance company that willfully and knowingly violates the provisions of any section of this chapter shall be fined not more than $2,000.00 for each offense or imprisoned not more than five years, or both. Any insurance premium finance agreement, not invalid for any other reason, in the making or collection of which any act shall have been done that constitutes an offense under this section shall be void and the insurance premium finance company shall have no right to collect or receive any principal, interest, or charges whatsoever. Any insurance premium finance company that violates the provisions of this chapter shall be liable to pay an administrative penalty of not more than $2,000.00 for each such offense. (Added 1983, No. 77, § 1; amended 1995, No. 167 (Adj. Sess.), § 24.)