Barbara Reid Alexander                                                                                                                (207)289-3731

SUPERINTENDENT                                                                                                               

Offices located at:

Harry W. Giddinge                                                                                                                     Central Building

DEPUTY SUPERINTENDENT                                                                                                              Hallowell Annex

                                                                                                                                                  Hallowell, Maine

DEPARTMENT OF BUSINESS REGULATION

BUREAU OF CONSUMER PROTECTION

STATE HOUSE STATION 35

AUGUSTA, MAINE 04333

ADVISORY RULING #55

JULY 21, 1981

July 21, 1981

Dear

            You have requested the Bureau's views on compliance with 9-A M.R.S.A. §3-310(1)(H), (P.L. 1981, c. 138, effective September 19, 1981) in an open-end agreement.  You point out that a hypothetical based on the effect of an increase in the APR cannot be easily devised in an open-end agreement because the unpaid balance would be unknown.  In the case of your client, the variable rate feature does not become effective until the unpaid balance exceeds $2,000.

            I agree with your concerns and will seek legislative clarification during the next session.

            In the meantime, the Bureau would view one of the following disclosures as constituting compliance with §3-310(1)(H):

A.        A disclosure of the dollar amount of finance charge which would be imposed as a result of the highest increase allowed at any one time on the amount of loan balance which triggers the variable rate feature (in this case $2,000) plus $100; OR

B.        If there is no split rate, a disclosure of the effect of the maximum rate increase allowed at any one time on an unpaid balance of $100 (or another sum which will allow the consumer to calculate the impact on an incremental basis).

            In either case, the disclosure should emphasize that the calculated finance charge represents one month's interest and that extension of the loan would increase the finance charge.

            I am hopeful that this guidance will assist you.

                                                                                    Sincerely,

                                                                                    /s/ Barbara R. Alexander

                                                                                    Barbara R. Alexander

                                                                                    Superintendent

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