State of Maine
Department of professional and
financial regulation
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Bureau of Financial Institutions
36 state house station augusta, maine 04333-0036 (207) 624-8570 (207) 624-8590 (FAX) Lloyd P. LaFountain III Superintendent |
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Bureau of Consumer Credit Protection
35 state house station augusta, maine 04333-0035 (207) 624-8527 (207) 582-7699 (FAX) William N. Lund Superintendent |
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December 10, 2007
Re: PL 2007, Chapter 273,
Request for Guidance regarding “odd days’” or “per diem” interest
This is in response to your recent correspondence in
which you asked the Bureau of Financial Institutions and the Bureau of Consumer
Credit Protection for guidance regarding the treatment of “odd days’ interest”
under the definition "points and fees" in PL 2007 Chapter 273.
"Odd days' interest" refers to the practice of collecting at closing
the “per diem” interest that will accrue between the closing date and the day of the month when regular monthly
payments are due. For example, if a loan
closes on December 15, the lender will collect 16 days’ per diem interest
(through December 31), and the first regular monthly
payment of principal plus one month’s interest will be due on February 1. This practice allows all
mortgage payments in a
lender’s portfolio to come due on the
same day of each calendar month.
Under PL 2007 Chapter 273, 9-A MRSA,
section 8-103(1-A)(U) “points and fees” include all items included in the
definition of “finance charge” in 12 CFR, section 226.4(a) and 226.4(b) “except
interest or the time price differential.”
It is your position that odd days’ interest does not constitute "points
and fees," as this term is used in 9-A MRSA, section 8-103(1-A)(U) because
it is excluded as "interest."
You note that, if the consumer were to prepay the contract in full on
the day after closing, odd days' interest would not be earned and would be
refundable, because it represents a collection of amounts to be earned in the
future and, thus, contractually, it is not yet due.
You have also noted that federal and Maine
interpretation of these same words in a similar context supports your
interpretation. This same language,
"except interest and time price differential,” is used in 12 CFR, section
226.32 in reference to loans under federal Regulation Z, and in the parallel
Maine statute that has now been replaced by Chapter 273. You have also noted that the federal Official
Staff Commentary regarding section
226.32(b)(1)(i) states that interest "including per diem interest"
paid at closing is not a "point or fee" for section 226.32 purposes.
As a general matter, the Bureaus have
stated in adopting Regulation Z-2 that