THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY RAFFERTY, FONTANA, O'PAKE, GREENLEAF, COSTA, WONDERLING, DINNIMAN AND WASHINGTON, JUNE 5, 2009

REFERRED TO BANKING AND INSURANCE, JUNE 5, 2009  

AN ACT

Amending Title 7 (Banks and Banking) of the Pennsylvania

Consolidated Statutes, further providing for requirements as

to open-end loans.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 6126 of Title 7 of the Pennsylvania

Consolidated Statutes is amended to read:

§ 6126.  Requirements as to open-end loans.

The following shall apply:

(1)  A mortgage lender may make open-end loans and may

contract for and receive thereon interest and charges as set

forth under this chapter.

(2)  A mortgage lender shall not compound interest by

adding any unpaid interest authorized by this section to the

unpaid principal balance of the consumer's account, provided,

however, that the unpaid principal balance may include the

additional charges authorized by this subchapter.

(3) Interest authorized by this section shall be deemed

not to exceed the maximum interest permitted by this

subchapter if the interest is computed in each billing cycle

by any of the following methods:

(i)  by converting the monthly rate to a daily rate

and multiplying the daily rate by the applicable portion

of the daily unpaid principal balance of the account, in

which case the daily rate shall be 1/30 of the monthly

rate;

(ii)  by multiplying the monthly rate by the

applicable portion of the average monthly unpaid

principal balance of the account in the billing cycle, in

which case the average daily unpaid principal balance is

the sum of the amount unpaid each day during the cycle

divided by the number of days in the cycle; or

(iii)  by converting the monthly rate to a daily rate

and multiplying the daily rate by the average daily

unpaid principal balance of the account in the billing

cycle, in which case the daily rate shall be 1/30 of the

monthly rate.

(4)  For all of the methods of computation in paragraph

(3)(i), (ii) and (iii), the billing cycle shall be monthly,

and the unpaid principal balance on any day shall be

determined by adding to any balance unpaid as of the

beginning of that day all advances and other permissible

amounts charged to the consumer and deducting all payments

and other credits made or received that day.

(5)  The consumer may at any time pay all or any part of

the unpaid balance in the consumer's account without

prepayment penalty or, if the account is not in default, the

consumer may pay the unpaid principal balance in monthly

installments. Minimum monthly payment requirements shall be

determined by the licensee and set forth in the agreement

evidencing the open-end loan.

(6)  A mortgage lender may contract for and receive the

fees, costs and expenses permitted by this subchapter on

other first or secondary mortgage loans, subject to all the

conditions and restrictions set forth in this subchapter,

with the following variations:

(i)  If credit life or disability insurance is

provided and if the insured dies or becomes disabled when

there is an outstanding open-end loan indebtedness, the

insurance shall be sufficient to pay the total balance of

the loan due on the date of the consumer's death in the

case of credit life insurance or all minimum payments

which become due on the loan during the covered period of

disability in the case of credit disability insurance.

The additional charge for credit life insurance or credit

disability insurance shall be calculated in each billing

cycle by applying the current monthly premium rate for

insurance, as the rate may be determined by the Insurance

Commissioner, to the unpaid balances in the consumer's

account, using any of the methods specified in paragraph

(3) for the calculation of loan charges.

(ii)  No credit life or disability insurance written

in connection with an open-end loan shall be canceled by

the licensee because of delinquency of the consumer in

the making of the required minimum payments on the loan

unless one or more of the payments is past due for a

period of 90 days or more, and the licensee shall advance

to the insurer the amounts required to keep the insurance

in force during the period, which amounts may be debited

to the consumer's account.

(iii)  The amount, terms and conditions of any

insurance against loss or damage to property must be

reasonable in relation to character and value of the

property insured and the maximum anticipated amount of

credit to be extended.

(7)  Notwithstanding any other provisions in this chapter

to the contrary, a mortgage lender may retain any security

interest in real or personal property until the open-end loan

is terminated, provided that, if there is no outstanding

balance in the account and there is no commitment by the

licensee to make advances, the mortgage lender shall, within

ten days following written demand by the consumer, deliver to

the consumer a release of the mortgage, indenture, deed of

trust or any other similar instrument or document on any real

property taken as security for the open-end loan. The

mortgage lender shall include on all billing statements

provided in connection with an open-end loan a statement that

the licensee retains a security interest in the consumer's

real property whenever the security interest has not been

released.

(8)  A mortgage lender may charge, contract for, receive

or collect on any open-end loan account an annual fee not to

exceed $50 per year.

(9)  A mortgage lender may not reduce the available line

of credit on a home equity open-end loan unless:

(i)  the lender pays for and provides a copy to the

homeowner of a full written appraisal of the home

completed within 30 days of written notice to the

homeowner of proposed reduction of the available line of

credit and considers any contrary appraisal evidence

presented by the homeowner in writing at least ten days

prior to the proposed reduction date; or

(ii)  the lender provides written notice to the

homeowner at least 180 days prior to the date of the

proposed reduction of the available line of credit and

considers any appraisal evidence presented by the

homeowner in writing at least ten days prior to the

proposed reduction date.

Section 2.  This act shall take effect in 60 days.