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(a) A borrower may prepay the outstanding balance due under a premium finance agreement or agreement to extend credit in full at any time before the due date of the final payment, and is entitled to receive a refund credit of interest, computed from the date the prepayment is received by the licensee. A refund must be computed on the total amount of precomputed charges, except that the nonrefundable charge of a maximum of $10 per premium finance agreement or agreement to extend credit must be excluded from the refund computation since interest may not be calculated on that charge.
(b) If a premium finance agreement or agreement to extend credit is terminated because of a borrower's default, the borrower is entitled to receive a refund credit of interest as though a prepayment had occurred. A refund credit allowed by this subsection must be computed from the date of cancellation of the insurance policy for which the premium loan was made.
(c) A refund credit of interest must be computed in accordance with the sum-of-the-digits method, commonly known as the Rule of 78's.
History: Eff. 3/11/98, Register 145
Authority: AS 21.06.090
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Last modified 7/05/2006