The Vermont Statutes Online
- Subchapter 001: INTEREST GENERALLY
§ 41. Repealed. 1979, No. 173 (Adj. Sess.), § 19, eff. April 30, 1980.
§ 41a. Legal rates
(a) Except as specifically provided by law, the rate of interest or the sum allowed for forbearance or use of money shall be 12 percent per annum computed by the actuarial method.
(b) The rate of interest or the sum allowed:
(1) For single payment loans by lenders regulated by Title 8 and federal savings and loan associations, the finance charge shall not exceed 18 percent per annum.
(2) For a retail installment contract the finance charge shall not exceed 18 percent per annum of the first $500.00 of the balance subject to finance charges and 15 percent per annum of the balance subject to finance charges in excess of $500.00.
(3) For a bank credit card account or revolving line of credit the rate shall be the rate agreed upon by the lender and the borrower. However, except for cash advances, no finance charge may be imposed for any monthly billing period in which there is no previous balance, or during which the sum of the payments received and other credits issued are equal to or exceed the amount of the previous balance.
(4) For a loan or extension of credit secured by motor vehicles, mobile homes, travel trailers, aircraft, watercraft, and farm equipment, of the current and previous model year, the interest rate shall not exceed 18 percent per annum. For a loan or extension of credit secured by such collateral older than the current or previous model year, the interest rate shall not exceed 20 percent per annum.
(5) For an installment loan not otherwise limited by the preceding subdivisions of this subsection, the interest rate shall not exceed 24 percent per annum on the first $1000.00 of the aggregate balance outstanding; and shall not exceed 12 percent per annum of the aggregate balance outstanding in excess of $1000.00; or 18 percent annual percentage rate on the aggregate balance outstanding whichever is higher.
(6) A lender may charge interest rates on loans secured by deposits in excess of the rates otherwise allowed in this section only to the extent that such higher rate is required to comply with Federal Deposit Insurance Corporation, Federal Home Loan Bank, and Federal Reserve Board regulations.
(7) For a loan or extension of credit secured by a subordinate lien against real estate, the interest rate shall not exceed 18 percent per annum. All such lien documents shall include a power of sale pursuant to 12 V.S.A. chapter 172, subchapter 4.
(8) For a loan or extension of credit secured by a first lien against real estate, the interest rate may be the same as may be charged by any financial institution or seller of residential real estate under the provisions of the federal Depository Institutions Deregulation and Monetary Control Act of 1980, as amended.
(9) For a retail charge agreement the finance charge shall be the rate or rates agreed upon by the parties to such charge agreement but not to exceed 21 percent per annum. However, no finance charge may be imposed for any monthly billing period in which there is no previous balance, or during which the sum of the payments received and other credits issued are equal to or exceed the amount of the previous balance. The term "billing period" shall mean the time interval between periodic statement dates. A billing period shall be considered a month or monthly if the last day of each billing period is on the same day of each month or does not vary by more than four days therefrom. For a retail charge agreement, the periodic billing can be no less than 1/48th of the balance as of the last advance.
(c) For the purpose of this section the term "lender" shall include natural persons, partnerships, associations, and corporations or other entities whether organized under the laws of Vermont, of the United States, or of any other state or country who make or who have made a loan or loans subject to the laws of Vermont.
(d) Actuarial method
(1) Unless otherwise specifically provided by law, all interest on closed-end accounts, loans, or extensions of credit charged under this or any section shall be computed only on the outstanding balance subject to finance charge by the actuarial method of calculation. On all closed-end accounts, loans, or extensions of credit, interest shall be based on a 365-day year and on a 366-day year during a leap year, except in the case of loans secured by residential properties or to finance income producing business or activity where a 30-day month 360-day year interest calculation may be used. Interest shall not be paid, deducted, or added to principal in advance, except that the advance collection of interest for a period not to exceed 30 days shall be permitted upon origination of a mortgage loan.
(2) "Actuarial method" means the method of allocating payments made on a debt between the amount financed and the finance or other charges pursuant to which a payment is applied first to the accumulated finance or other charges and any remainder is subtracted from, or any deficiency is added to the unpaid balance of the amount financed. The Commissioner may adopt rules not inconsistent with the Federal Truth in Lending Act further defining the term and prescribing its application. (Added 1979, No. 173 (Adj. Sess.), § 12, eff. April 30, 1980; amended 1981, No. 89, § 7, eff. May 13, 1981; 1981, No. 126 (Adj. Sess.), eff. March 9, 1982; 1983, No. 37; 1983, No. 214 (Adj. Sess.), §§ 1, 2; 1985, No. 36, §§ 1, 2; 1987, No. 32, § 2; 1995, No. 9, § 1; 1995, No. 162 (Adj. Sess.), § 41, eff. Jan. 1, 1997.)
§ 41b. Rent-to-own agreements; disclosure of terms
(a) Definitions. In this section:
(1) "Advertisement" means a commercial message that solicits a consumer to enter into a rent-to-own agreement for a specific item of merchandise that is conveyed:
(A) at a merchant's place of business;
(B) on a merchant's website; or
(C) on television or radio.
(2) "Cash price" means the price of merchandise available under a rent-to-own agreement that the consumer may pay in cash to the merchant at the inception of the agreement to acquire ownership of the merchandise.
(3) "Clear and conspicuous" means that the statement or term being disclosed is of such size, color, contrast, or audibility, as applicable, so that the nature, content, and significance of the statement or term is reasonably apparent to the person to whom it is disclosed.
(4) "Consumer" has the same meaning as in subsection 2451a(a) of this title.
(5) "Merchandise" means an item of a merchant's property that is available for use under a rent-to-own agreement. The term does not include:
(A) real property;
(B) a mobile home, as defined in section 2601 of this title;
(C) a motor vehicle, as defined in 23 V.S.A. § 4;
(D) an assistive device, as defined in section 41c of this title; or
(E) a musical instrument intended to be used primarily in an elementary or secondary school.
(6) "Merchant" means a person who offers, or contracts for, the use of merchandise under a rent-to-own agreement.
(7) "Merchant's cost" means the documented actual cost, including actual freight charges, of merchandise to the merchant from a wholesaler, distributor, supplier, or manufacturer and net of any discounts, rebates, and incentives that are vested and calculable as to a specific item of merchandise at the time the merchant accepts delivery of the merchandise.
(8)(A) "Rent-to-own agreement" means a contract under which a consumer agrees to pay a merchant for the right to use merchandise and acquire ownership, which is renewable with each payment after the initial period, and which remains in effect until:
(i) the consumer returns the merchandise to the merchant;
(ii) the merchant retakes possession of the merchandise; or
(iii) the consumer pays the total cost and acquires ownership of the merchandise.
(B) A "rent-to-own agreement" as defined in subdivision (7)(A) of this subsection is not:
(i) a sale subject to 9A V.S.A. Article 2;
(ii) a lease subject to 9A V.S.A. Article 2A;
(iii) a security interest as defined in 9A V.S.A. § 1-201(a)(35); or
(iv) a retail installment contract or retail charge agreement as defined in chapter 61 of this title.
(9) "Rent-to-own charge" means the difference between the total cost and the cash price of an item of merchandise.
(10) "Total cost" means the sum of all payments, charges, and fees that a consumer must pay to acquire ownership of merchandise under a rent-to-own agreement. The term does not include charges or fees for optional services or charges or fees due only upon the occurrence of a contingency specified in the agreement.
(b) General requirements.
(1) Prior to execution, a merchant shall give a consumer the opportunity to review a written copy of a rent-to-own agreement that includes all of the information required by this section for each item of merchandise covered by the agreement and shall not refuse a consumer's request to review the agreement with a third party, either inside the merchant's place of business or at another location.
(2) A disclosure required by this section shall be clear and conspicuous.
(3) In a rent-to-own agreement, a merchant shall state a numerical amount or percentage as a figure and shall print or legibly handwrite the figure in the equivalent of 12-point type or greater.
(4) A merchant may supply information not required by this section with the disclosures required by this section, but shall not state or place additional information in such a way as to cause the required disclosures to be misleading or confusing, or to contradict, obscure, or detract attention from the required disclosures.
(5) Except for price cards on site, a merchant shall preserve an advertisement, or a digital copy of the advertisement, for not less than two years after the date the advertisement appeared. In the case of a radio, television, or Internet advertisement, a merchant may preserve a copy of the script or storyboard.
(6) Subject to availability, a merchant shall make merchandise that is advertised available to all consumers on the terms and conditions that appear in the advertisement.
(7) A rent-to-own agreement that is substantially modified, including a change that increases the consumer's payments or other obligations or diminishes the consumer's rights, shall be considered a new agreement subject to the requirements of this chapter.
(8) For each rent-to-own agreement, a merchant shall keep the following information in an electronic or hard copy for a period of four years following the date the agreement ends:
(A) the rent-to-own agreement covering the item; and
(B) a record that establishes the merchant's cost for the item.
(9) A rent-to-own agreement executed by a merchant doing business in Vermont and a resident of Vermont shall be governed by Vermont law.
(c) Cash price; reduction for used merchandise; maximum limits.
(1) Except as otherwise provided in subdivision (2) of this subsection, the maximum cash price for an item of merchandise shall not exceed:
(A) for an appliance, 1.75 times the merchant's cost;
(B) for an item of electronics that has a merchant's cost of less than $150.00, 1.75 times the merchant's cost;
(C) for an item of electronics that has a merchant's cost of $150.00 or more, 2.00 times the merchant's cost;
(D) for an item of furniture or jewelry, 2.50 times the merchant's cost; and
(E) for any other item, 2.00 times the merchant's cost.
(2) The cash price for an item of merchandise that has been previously used by a consumer shall be at least 10 percent less than the cash price calculated under subdivision (1) of this subsection.
(3) The total cost for an item of merchandise shall not exceed 2.00 times the maximum cash price for the item.
(d) Disclosures in advertising; prohibited disclosures.
(1) An advertisement that refers to or states the dollar amount of any payment for merchandise shall state:
(A) the cash price of the item;
(B) that the merchandise is available under a rent-to-own agreement;
(C) the amount, frequency, and total number of payments required for ownership;
(D) the total cost for the item;
(E) the rent-to-own charge for the item; and
(F) that the consumer will not own the merchandise until the consumer pays the total cost for ownership.
(2) A merchant shall not advertise that no credit check is required or performed, or that all consumers are approved for transactions, if the merchant subjects the consumer to a credit check.
(e) Disclosures on site. In addition to the information required in subsection (d) of this section, an advertisement at a merchant's place of business shall include:
(1) whether the item is new or used;
(2) when the merchant acquired the item; and
(3) the number of times a consumer has taken possession of the item under a rent-to-own agreement.
(f) Disclosures in rent-to-own agreement.
(1) The first page of a rent-to-own agreement shall include:
(A) a heading and clause in bold-face type that reads: "IMPORTANT INFORMATION ABOUT THIS RENT-TO-OWN AGREEMENT. Do Not Sign this Agreement Before You Read it or if it Contains any Blank Spaces. You have a Right to Review this Agreement or Compare Costs Away from the Store Before You Sign."; and
(B) the following information in the following order:
(i) the name, address, and contact information of the merchant;
(ii) the name, address, and contact information of the consumer;
(iii) the date of the transaction;
(iv) a description of the merchandise sufficient to identify the merchandise to the consumer and the merchant, including any applicable model and identification numbers;
(v) a statement whether the merchandise is new or used, and in the case of used merchandise, a statement that the merchandise is in good working order, is clean, and is free of any infestation.
(2) A rent-to-own agreement shall include the following cost disclosures, printed and grouped as indicated below, immediately preceding the signature lines:
(1) Cash Price: $ ____
(2) Payments required to become owner:
$ ____ /(weekly)(biweekly)(monthly) /ts (# of payments) = $ ____
(3) Mandatory charges and fees required to become owner (itemize):
__________________ $ ____
__________________ $ ____
__________________ $ ____
Total required fees and charges: $ ____
(4) Total cost: (2) + (3) = $ ____
(5) Rent-to-Own Charge: (4) - (1) = $ ____
(6) Tax: $ ____
(7) Do not sign before reading this agreement carefully
(g) Required provisions of rent-to-own agreement. A rent-to-own agreement shall provide:
(1) a statement of payment due dates;
(2) a line-item list of any other charges or fees the consumer could be charged or have the option of paying in the course of acquiring ownership or during or after the term of the agreement;
(3) that the consumer will not own the merchandise until he or she makes all of the required payments for ownership;
(4) that the consumer has the right to receive a receipt for a payment and, upon reasonable notice, a written statement of account;
(5) who is responsible for service, maintenance, and repair of an item of merchandise;
(6) that, except in the case of the consumer's negligence or abuse, if the merchant, during the term of the agreement, must retake possession of the merchandise for maintenance, repair, or service, or the item cannot be repaired, the merchant is responsible for providing the consumer with a replacement item of equal quality and comparable design;
(7) that the maximum amount of the consumer's liability for damage or loss to the merchandise is limited to an amount equal to the cash price multiplied by the ratio of:
(A) the number of payments remaining to acquire ownership under the agreement; to
(B) the total number of payments necessary to acquire ownership under the agreement;
(8) a statement that if any part of a manufacturer's express warranty covers the merchandise at the time the consumer acquires ownership the merchant shall transfer the warranty to the consumer if allowed by the terms of the warranty;
(9) a description of any damage waiver or insurance purchased by the consumer, or a statement that the consumer is not required to purchase any damage waiver or insurance;
(10) an explanation of the consumer's options to purchase the merchandise;
(11) an explanation of the merchant's right to repossess the merchandise; and
(12) an explanation of the parties' respective rights to terminate the agreement, and to reinstate the agreement.
(1) Upon transfer of ownership of merchandise to a consumer, a merchant shall transfer to the consumer any manufacturer's or other warranty on the merchandise.
(2) A merchant creates an implied warranty to a consumer, which may not be waived, in the following circumstances:
(A) an affirmation of fact or promise made by the merchant to the consumer which relates to merchandise creates an implied warranty that the merchandise will substantially conform to the affirmation or promise;
(B) a description of the merchandise by the merchant creates an implied warranty that the merchandise will substantially conform to the description; and
(C) a sample or model exhibited to the consumer by the merchant creates an implied warranty that the merchandise actually delivered to the consumer will substantially conform to the sample or model.
(i) Maintenance and repairs.
(1) During the term of a rent-to-own agreement, the merchant shall maintain the merchandise in good working condition.
(2) If a repair cannot be completed within three days, the merchant shall provide a replacement to the consumer to use until the original merchandise is repaired. Replacement merchandise shall be at least comparable in quality, age, condition, and warranty coverage to the replaced original merchandise.
(3) A merchant is not required to repair or replace merchandise that has been damaged as a result of negligence or an intentional act by the consumer.
(j) Prohibited provisions of rent-to-own agreement. A rent-to-own agreement shall not include any of the following provisions, which shall be void and unenforceable:
(1) a provision requiring a confession of judgment;
(2) a provision requiring a garnishment of wages;
(3) a provision requiring arbitration or mediation of a claim that otherwise meets the jurisdictional requirements of a small claims proceeding under 12 V.S.A. chapter 187;
(4) a provision authorizing a merchant or its agent to enter unlawfully upon the consumer's premises or to commit any breach of the peace in the repossession of property;
(5) a provision requiring the consumer to waive any defense, counterclaim, or right of action against the merchant or its agent in collection of payment under the agreement or in the repossession of property; or
(6) a provision requiring the consumer to purchase a damage waiver or insurance from the merchant to cover the property.
(k) Option to purchase. Notwithstanding any other provision of this section, at any time after the first payment a consumer who is not in violation of a rent-to-own agreement may acquire ownership of the merchandise covered by the agreement by paying an amount equal to the cash price of the merchandise minus 50 percent of the value of the consumer's previous payments.
(l) Payment; notice of default. If a consumer fails to make a timely payment required in a rent-to-own agreement, the merchant shall deliver to the consumer a notice of default and right to reinstate the agreement at least 14 days before the merchant commences a civil action to collect amounts the consumer owes under the agreement.
(m) Collections; repossession of merchandise; prohibited acts. When attempting to collect a debt or enforce an obligation under a rent-to-own agreement, a merchant shall not:
(1) call or visit a consumer's workplace after a request by the consumer or his or her employer not to do so;
(2) use profanity or any language to abuse, ridicule, or degrade a consumer;
(3) repeatedly call, leave messages, knock on doors, or ring doorbells;
(4) ask someone, other than a spouse, to make a payment on behalf of a consumer;
(5) obtain payment through a consumer's bank, credit card, or other account without authorization;
(6) speak with a consumer more than six times per week to discuss an overdue account;
(7) engage in violence;
(9) call or visit a consumer at home or work after receiving legal notice that the consumer has filed for bankruptcy;
(10) impersonate others;
(11) discuss a consumer's account with anyone other than a spouse of the consumer;
(12) threaten unwarranted legal action; or
(13) leave a recorded message for a consumer that includes anything other than the caller's name, contact information, and a courteous request that the consumer return the call.
(n) Reinstatement of agreement.
(1) A consumer who fails to make a timely payment may reinstate a rent-to-own agreement without losing any rights or options that exist under the agreement by paying all past-due charges, the reasonable costs of pickup, redelivery, and any refurbishing, and any applicable late fee:
(A) within five business days of the renewal date of the agreement if the consumer pays monthly; or
(B) within three business days of the renewal date of the agreement if the consumer pays more frequently than monthly.
(2) If a consumer promptly returns or voluntarily surrenders merchandise upon a merchant's request, the consumer may reinstate a rent-to-own agreement during a period of not less than 180 days after the date the merchant retakes possession of the merchandise.
(3) In the case of a rent-to-own agreement that is reinstated pursuant to this subsection, the merchant is not required to provide the consumer with the identical item of merchandise and may provide the consumer with a replacement item of equal quality and comparable design.
(o) Reasonable charges and fees; late fees.
(1) A charge or fee assessed under a rent-to-own agreement shall be reasonably related to the actual cost to the merchant of the service or hardship for which it is charged.
(2) A merchant may assess only one late fee for each payment regardless of how long the payment remains due.
(p) Prohibition on rent-to-own businesses and licensed lenders. A person engaged in the business of selling merchandise under a rent-to-own agreement subject to this section shall not engage in any conduct or business at the same physical location that would require a license under 8 V.S.A. chapter 73 (licensed lenders).
(q) Enforcement; remedies; damages. A person who violates this section commits an unfair and deceptive act in commerce in violation of section 2453 of this title. (Added 1993, No. 221 (Adj. Sess.), § 15a; amended 2015, No. 55, § 1, eff. Sept. 1, 2015.)
§ 41c. Rent-to-own; assistive devices
(a) As used in this section:
(1) "Assistive device" means any item, piece of equipment, or product system, whether acquired commercially off-the-shelf, modified, or customized, that is used or designed to be used to increase, maintain, or improve any functional capability of an individual with disabilities. An assistive device system, that as a whole is within the definition of this term, is itself an assistive device, and, in such cases, this term also applies to each component product of the assistive device system that is itself ordinarily an assistive device. This term includes:
(A) wheelchairs and scooters of any kind, and other aids that enhance the mobility or positioning of an individual, such as motorization, motorized positioning features, and the switches and controls for any motorized features;
(B) computer equipment with voice output, artificial larynges, voice amplification devices, and other alternative and augmentative communication devices or any devices used for the purpose of communication;
(C) computer equipment and reading devices with voice output, optical scanners, talking software, braille printers, and other aids and devices that provide access to text;
(D) hearing aids, telephone communication devices for people who are deaf, and other assistive listening devices;
(E) voice recognition computer equipment, software and hardware accommodations, switches, and other forms of alternative access to computers;
(F) environmental control units;
(G) simple mechanical aids that enhance the functional capabilities of an individual with disabilities; and
(H) durable medical equipment.
(2) "Assistive devise lessee" means an individual with a disability or a person renting or leasing on behalf of an individual with a disability who is renting or leasing an assistive device for the purpose of increasing, maintaining, or improving any functional capability related to the individual's disability.
(b) A person in the business of renting, or renting to own an assistive device to assistive device lessees, who rents an assistive device for more than 60 days or who rents an assistive device to own shall offer such assistive device lessees a purchase option with reasonable terms and conditions. Such a purchase option may be exercised at any time by the assistive device lessees, the reasonable terms and conditions of which shall be included with the consumer's periodic billing.
(1) A person in the business of renting products that may be assistive devices may include the following question in its rental application:
ARE YOU RENTING THIS PRODUCT AS AN ACCOMMODATION FOR A DISABILITY OR AS AN ASSISTIVE DEVICE?
YES ________ NO ________
(A) If an assistive device lessee answers "yes" to the question or requests additional information, the business entity shall provide the following statement:
ASSISTIVE DEVICE PURCHASE OPTION RIGHTS
IF YOU ARE RENTING THIS PRODUCT AS AN ACCOMMODATION FOR A DISABILITY OR AS AN ASSISTIVE DEVICE, THE DEALER IS REQUIRED TO OFFER YOU A RENTAL TRANSACTION THAT INCLUDES A PURCHASE OPTION. UNDER THE PURCHASE OPTION YOU MAY ACQUIRE OWNERSHIP OF THE PRODUCT AT ANYTIME BY TENDERING AN AMOUNT EQUAL TO THE CASH PRICE OF THE PRODUCT LESS 50% OF ALL PREVIOUS RENTAL PAYMENTS YOU HAVE MADE. OR, ONCE YOU HAVE MADE RENTAL PAYMENTS EQUAL TO 200% OF THE CASH PRICE YOU MAY ACQUIRE OWNERSHIP OF THE PRODUCT BY PAYING $1.00.
BEFORE YOU DETERMINE WHETHER TO ELECT A TRANSACTION WITH OR WITHOUT A PURCHASE OPTION, THE PERSON IN THE BUSINESS OF RENTING OR RENTING TO OWN THE ASSISTIVE DEVICE MUST FULLY DISCLOSE THE TERMS OF BOTH TRANSACTIONS.
THE VALUE OF A PURCHASE OPTION DEPENDS ON MANY FACTORS, WHICH MAY INCLUDE: (1) HOW LONG YOU INTEND TO USE THE PRODUCT; (2) THE CASH PRICE OF THE PRODUCT; AND (3) THE COST OF MAINTAINING THE PRODUCT.
ASSISTIVE DEVICE PURCHASE OPTION RIGHTS: IF YOU ELECT A RENTAL TRANSACTION WITHOUT A PURCHASE OPTION AND YOU CHANGE YOUR MIND AT A LATER DATE AND DECIDE TO ENTER INTO A PURCHASE OPTION TRANSACTION, PAYMENTS THAT YOU HAVE MADE WILL NOT BE APPLIED TO THE NEW TRANSACTIONS.
(B) The rental dealer may add additional information or explanations to the information required by subdivision (A) of this subsection, as long as the additional information is not stated, utilized, or placed in a manner that will confuse the assistive device lessee or that will contradict, obscure, or distract attention from the required information. The additional information or explanation shall not have the effect of circumventing, evading, or complicating the information required by subdivision (A) of this subsection.
(2) Failure to comply with this section is not a violation if the assistive device lessee fails to inform the rental dealer that the product is being rented as an assistive device after the rental dealer makes the written inquiry in subdivision (b)(1) of this section.
(c)(1) When periodic payments made by an assistive device lessee, exclusive of payments for service, total 200 percent of the bona fide cash price, the person in the business of renting or renting to own the assistive device shall notify the individual with a disability and the assistive device lessee that the individual with a disability and the assistive device lessee have the option of acquiring ownership of the assistive device upon payment of $1.00, at which time the rental or rent-to-own agreement shall terminate.
(2) The term "bona fide cash price" means the price at which a merchant, in the ordinary course of business, and taking into account the value of the merchandise and its retail price in the trade area, would offer to sell the merchandise to consumers for cash.
(d) Under a rent-to-own program, at any time after the initial payment, the assistive device lessee may acquire ownership of the property by tendering an amount equal to the cash price of the merchandise minus 50 percent of all previous rental-purchase payments made.
(e) When an assistive device lessee has acquired ownership of an assistive device under this section, the person in the business of renting or renting to own shall offer, for a reasonable price and term, a contract to maintain and service the device.
(f) This section shall not apply to assistive devices provided pursuant to a Medicare or Medicaid contract that either includes provisions for the acquisition of ownership or prohibits purchase or the acquisition of ownership by an assistive device lessee.
(g) A violation of this section is deemed to be an unfair or deceptive act or practice in commerce and a violation of chapter 63 of this title and all remedies and penalties available to a consumer or the Attorney General under that chapter shall apply, and the Attorney General shall have the same authority to make rules, conduct civil investigations, and enter into assurances of discontinuance as provided under subchapter 1 of chapter 63 of this title. (Added 1999, No. 104 (Adj. Sess.), § 2; amended 2013, No. 96 (Adj. Sess.), § 26.)
§ 42. Permitted charges
(a) Except for interest as herein and hereinafter provided, a lender shall make no charges against a borrower for the use or forbearance of money other than:
(1) the reasonable cost of credit investigation and appraisal fees;
(2) the reasonable cost of title evidence, including abstracts, legal opinions, or title insurance;
(3) the reasonable cost of protection against insurable hazards;
(4) the reasonable cost of creditor life or disability insurance, or of a debt protection agreement as set forth in 8 V.S.A. § 10405, if agreed to by the borrower;
(5) the filing and recording fees, and other official fees, including fees required by Federal Housing Agencies, the Federal Home Loan Mortgage Corporation, and the Federal National Mortgage Corporation;
(6) the reasonable value of services rendered in connection with the making of any loan of $4,000.00 or less or any loan or loan commitment of any amount or manner of payment to finance an income producing business or activity subject to such rules as the Commissioner of Financial Regulation adopts;
(7) the reasonable cost of private mortgage guaranty insurance subject to such limitation as the Commissioner of Financial Regulation has approved; and
(8) the reasonable fees associated with a credit card, agreed upon by the lender and borrower, including late charges and over-limit charges.
(b) A borrower may procure an opinion and abstract of title from an attorney of his or her choice acceptable to the lender, or hazard insurance in a company or in companies of his or her choice acceptable to the lender, and in such cases the lender's acceptance shall not be unreasonably withheld. (Added 1967, No. 377 (Adj. Sess.), eff. March 26, 1968; amended 1969, No. 66, § 2, eff. April 17, 1969; 1973, No. 222 (Adj. Sess.), § 5, eff. April 3, 1974; 1975, No. 216 (Adj. Sess.), § 4, eff. March 27, 1976; 1979, No. 173 (Adj. Sess.), § 13, eff. April 30, 1980; 1985, No. 36, § 3; 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 9, § 2; 1995, No. 180 (Adj. Sess.), § 38; 2005, No. 70, § 3; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)
§ 43. Deposit requirement prohibited; exception
A lender shall not, as a condition to granting or extending a loan, require a borrower to keep or place any sum on deposit with the lender or nominee of the lender, except for deposit arrangements directly related to secured credit cards in a manner consistent with rules adopted by the Commissioner, rules that shall include disclosure requirements, and specific types of alternative mortgages approved by the Commissioner as provided in 8 V.S.A. § 1256. (Added 1967, No. 377 (Adj. Sess.), eff. March 26, 1968; amended 1977, No. 184 (Adj. Sess.), § 2; 1995, No. 9, § 3.)
§ 44. Certain charges not usurious
Agreements to maintain with the lender non-interest bearing reserves or deposits with which to pay when due taxes and insurance premiums, or agreements clearly set forth in the loan contract for the payment of reasonable delinquency or deferral charges, shall not be construed to be interest or a prohibited charge within the meaning of this chapter. (Added 1967, No. 377 (Adj. Sess.), eff. March 26, 1968.)
§ 45. Prepayment of loans
A borrower may prepay a loan at any time, without prepayment premium or penalty. (Added 1967, No. 377 (Adj. Sess.), eff. March 26, 1968.)
§ 46. Exceptions
Section 43 of this title, relating to deposit requirements, and section 45 of this title, relating to prepayment penalties, shall not apply and the parties may contract for a rate of interest in excess of the rate provided in section 41a of this title in the case of:
(1) obligations of corporations, including municipal and nonprofit corporations; or
(2) obligations incurred by any person, partnership, association, or other entity to finance in whole or in part income-producing business or activity, but not including obligations incurred to finance family dwellings of four units or less when used as a residence by the borrower or to finance real estate which is devoted to agricultural purposes as part of an operating farming unit when used as a residence by the borrower; or
(3) obligations to finance the purchase, construction, or improvement of property for seasonal or part-time occupancy and not as a place of legal residence; or
(4) obligations guaranteed or insured by the United States of America or any agency thereof. (Added 1967, No. 377 (Adj. Sess.), eff. March 26, 1968; amended 1969, No. 66, § 3, eff. April 17, 1969; 1973, No. 222 (Adj. Sess.), § 6, eff. April 3, 1974; 1975, No. 216 (Adj. Sess.), § 5, eff. March 27, 1976; 2009, No. 134 (Adj. Sess.), § 24i.)
§ 47. Application of payments
(a) On a note, bill, or other similar obligation, payable on demand or at a specified time, with interest, when a payment is made, the payment shall be applied: first, to liquidate the interest accrued at the time of the payment; and second, to extinguish the principal.
(b) Notwithstanding any other provision of this chapter to the contrary, payments shall be applied to interest, principal, and escrow charges, if any, before any portion of the payment is applied to late fees, delinquency charges, deferral charges, or any similar fees or charges. (Added 1967, No. 377 (Adj. Sess.), eff. March 26, 1968; amended 2019, No. 20, § 104.)
§ 48. Excess insurance, proceeds
If a loan is paid before its due date as the result of the death of a borrower insured under a creditor life insurance policy and the insurance proceeds exceed the amount owing on the loan with interest, the excess shall be refunded to a beneficiary designated by the borrower, or to the estate of the insured, or applied in reduction of the debt. (Added 1967, No. 377 (Adj. Sess.), eff. March 26, 1968.)
§ 49. Computation of interest
When a note, bill, or other similar obligation is payable on demand or at a specified time, with interest annually, the annual interest that remains unpaid shall bear simple interest from the time it becomes due to the time of final settlement; but if in a year, reckoning from the time the annual interest began to accrue, payments are made, the amount of those payments at the end of that year, with interest thereon from the time of payment, shall be applied: first, to liquidate the simple interest accrued from the unpaid annual interest; second, to liquidate the annual interest due; and third, to extinguish the principal. (Added 1967, No. 377 (Adj. Sess.), eff. March 26, 1968.)
§ 50. Penalties
(a) When a greater rate of interest than is allowed by law is paid, the person paying it may recover the amount so paid above the legal interest, with interest thereon from the time of payment and all expenses of collection, including reasonable attorney's fees, in a civil action on this statute.
(b) Except as otherwise expressly authorized by law, a lender shall not knowingly or willfully make any contract, express or implied, which directly or indirectly calls for the payment of any interest or finance charge in excess of the legal rate as set forth in section 41a of this title. The section shall be enforceable only to the extent herein provided and the lender shall have no right to collect any interest or charges whatsoever and shall have a right to collect only one-half of the principal.
(c) Any person, partnership, association, or corporation and the several members, officers, directors, agents, and employees thereof, who knowingly or willfully contracts for or collects any sum in excess of legal interest for the loan, use, or forbearance of money, unless expressly authorized by law to do so, shall, for the first offense, be fined not more than $500.00 or imprisoned for not more than six months, or both. Upon conviction for violating this section in any transaction entered into or consummated after a first conviction hereunder, the offender shall be fined not more than $1,000.00 or imprisoned for not more than one year, or both. (Added 1967, No. 377 (Adj. Sess.), eff. March 26, 1968; amended 1979, No. 173 (Adj. Sess.), § 14, eff. April 30, 1980.)
- Subchapter 002: DISCLOSURE
§ 101. Borrower's notice
A demand note shall contain on its face the following notice in a size equal to at least 10-point bold type:
NOTICE TO BORROWER: THIS IS A DEMAND NOTE AND SO MAY BE COLLECTED BY THE LENDER AT ANY TIME. A NEW NOTE MUTUALLY AGREED UPON AND SUBSEQUENTLY ISSUED MAY CARRY A HIGHER OR LOWER RATE OF INTEREST. (Added 1975, No. 106, § 3.)
§ 102. Co-signer's notice
If a lender requires the signature of an obligor jointly and severally the instrument evidencing the obligation shall contain on its face the following notice, conspicuously placed, in a size equal to at least 10-point bold type:
NOTICE TO CO-SIGNER: YOUR SIGNATURE ON THIS NOTE MEANS THAT YOU ARE EQUALLY LIABLE FOR REPAYMENT OF THIS LOAN. IF THE BORROWER DOES NOT PAY, THE LENDER HAS A LEGAL RIGHT TO COLLECT FROM YOU. (Added 1975, No. 106, § 3.)
§ 103. Residential real estate loans
(a) For any fixed-rate loan, secured by a lien against real estate, used or to be used by the borrower as a residence, the rate of interest and other terms of the loan shall be for the duration of the loan at no more than the rate and terms established in the commitment letter for the loan by the lender, whether or not conditioned on future actions or events, and not the date of execution or closing of the transaction, unless specifically disclosed to and agreed to by the borrower on the date the commitment letter issues. The provisions of section 50 of this title shall apply to any violation of this section.
(b) For any variable-rate loan, secured by a lien against real estate used or to be used by the borrower as a residence, the lender shall disclose any introductory discount or similar reduction from the index or other measure fixing the rate or other terms of the loan at the time the loan commitment letter issues. Any subsequent adjustment above the initial amount discounted, not disclosed as provided in this subsection, shall have no legal force and effect.
(c) The Commissioner of Financial Regulation may adopt rules specifying the form, content, and timing of commitment letters required by this section. The Commissioner may order any person to make restitution to any person injured as a result of a violation of this subchapter and may impose an administrative penalty of up to $1,000.00 for a violation of this subchapter. The Commissioner may order any person to cease violating this subchapter. (Added 1985, No. 131 (Adj. Sess.); amended 1997, No. 98 (Adj. Sess.), § 6, eff. April 16, 1998; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2015, No. 23, § 88.)
§ 104. High rate loans
(a) The Commissioner may adopt disclosure rules for loans secured by a first lien on residential real estate in which the borrower is expected to be charged in excess of four points or interest in excess of three percent over the rate established pursuant to 32 V.S.A. § 3108, or both, on the loan. The rules may provide for restrictions on representations by the lender regarding the disclosures required by the rules.
(b) The Commissioner shall notify all mortgage lenders of the interest rate determined under 32 V.S.A. § 3108 annually.
(c) The Commissioner may impose an administrative penalty of not more than $5,000.00 on any person that fails to comply with the provisions of this section. The Commissioner may order a lender to refund any discount points or other charges paid by a borrower who has not received disclosures required by the rule. (Added 1997, No. 98 (Adj. Sess.), § 7, eff. April 16, 1998; amended 2015, No. 23, § 89.)
- Subchapter 003: FUNDED SETTLEMENTS
§ 201. Definitions
As used in this subchapter:
(1) "Disbursement of loan funds" means the delivery of the loan funds by the lender to the settlement agent in one or more of the following forms:
(B) wired funds or electronic transfer;
(C) certified check;
(D) checks issued by a governmental entity or instrumentality;
(E) cashier's check, teller's check, or any transfer of funds by check or otherwise that is fully collected and unconditionally available to the settlement agent;
(F) checks or other drafts issued by a State-chartered or federally chartered financial institution; checks or other drafts issued by a State-chartered or federally chartered credit union; and
(G) checks issued by an insurance company licensed in the State of Vermont.
(2) "Disbursement of the settlement proceeds" means the payment of all proceeds of the transaction by the settlement agent to the persons or accounts designated to receive the proceeds.
(3) "Lender" means any person who is in the business of making loans secured by a mortgage on real estate and to whom the debt is initially payable on the face of the loan documents.
(4) "Loan closing" means the time a borrower executes any loan document or becomes contractually obligated on a credit transaction, whichever occurs sooner.
(5) "Loan documents" means the note evidencing the debt due the lender, the mortgage securing the debt due the lender, and any other documents required by the lender to be executed by the borrower as part of the transaction.
(6) "Loan funds" means the proceeds of the loan to be disbursed by the lender to others at closing.
(7) "Settlement" means the time when the settlement agent has received the loan funds, loan documents, and other documents and funds to carry out the terms of the contract between the parties, and the settlement agent reasonably determines that all conditions of such contracts have been satisfied. "Parties," as used in this subdivision, means the seller, purchaser, borrower, lender, and settlement agent.
(8) "Settlement agent" means the person responsible for conducting the settlement and disbursement of the settlement proceeds, and includes an individual, corporation, partnership, or other entity conducting the settlement and disbursement of the settlement proceeds. The lender may be the settlement agent. (Added 2001, No. 55, § 2.)
§ 202. Applicability
This subchapter applies only to transactions involving loans made by lenders, which loans are secured by a first lien on owner-occupied one-to-four-unit residential real estate, including first and second homes. (Added 2001, No. 55, § 2.)
§ 203. Duty of lender
(a) The lender shall, at or before the loan closing, cause disbursement of loan funds to the settlement agent; however, in the case of a refinancing, or any other loan where a right of rescission applies but has not been exercised, the lender shall, prior to 2:00 p.m. Eastern Standard Time of the first business day after the expiration of the rescission period required under the federal Truth-in-Lending Act (15 U.S.C. § 1601 et seq.), cause disbursement of loan funds to the settlement agent.
(b) If the lender is acting as settlement agent, the lender shall cause disbursement of the settlement proceeds at the loan closing, or, for any other loan where a right of rescission applies, the lender shall cause disbursement of the settlement proceeds on the first business day after the expiration of the rescission period.
(c) The lender shall not be entitled to receive or charge any interest on the loan until disbursement of the settlement proceeds. (Added 2001, No. 55, § 2.)
§ 204. Duty of settlement agent that is not a lender
A settlement agent that has received the loan funds from the lender shall cause disbursement of settlement proceeds at the loan closing, or, for any other loan where a right of rescission applies, the settlement agent shall cause disbursement of the settlement proceeds on the first business day after the expiration of the rescission period. (Added 2001, No. 55, § 2.)
§ 205. Commissioner's powers
(a) The Commissioner may:
(1) impose an administrative penalty of not more than $1,000.00 for each violation upon any person who violates or participates in the violation of this subchapter, or any lawful regulation or order issued thereunder;
(2) order any person to make restitution to any person injured as a result of a violation of this subchapter; and
(3) order any person to cease and desist in any specified conduct.
(b) The powers vested in the Commissioner by this subchapter shall be in addition to any other powers to enforce any penalties, fines, or forfeitures authorized by law. (Added 2001, No. 55, § 2.)
§ 206. Consumer remedies
(a) A lender or settlement agent who violates any provision of this subchapter and causes actual damage to a consumer is subject to a civil action by the aggrieved consumer in which the consumer has the right to recover the greater of actual damages in an amount determined by the Court or, except as provided in subsection (b) of this section, an amount determined by the Court of not less than $250.00 nor more than $1,000.00, plus costs of the action, together with reasonable attorney's fees.
(b) Liability under subsection (a) of this section is limited to actual damages, plus costs of the action, together with reasonable attorney's fees, if the lender or settlement agent shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adopted to avoid any such error.
(c) An action may not be brought pursuant to this section more than two years after the loan closing has occurred. (Added 2001, No. 55, § 2.)