Appendix B to Part 113 - Standards of Fairness
32:1.1.1.4.37.0.44.7.25 : Appendix B
Appendix B to Part 113 - Standards of Fairness
1. No finance charge contracted for, made, or received under any
contract shall be in excess of the charge that could be made for
such contract under the law of the place in which the contract is
signed in the United States by the military member.
a. In the event a contract is signed with a U.S. company in a
foreign country, the lowest interest rate of the State or States in
which the company is chartered or does business shall apply.
b. However, interest rates and service charges applicable to
overseas military banking facilities shall be as established by the
Department of Defense.
2. No contract or loan agreement shall provide for an attorney's
fee in the event of default unless suit is filed, in which event
the fee provided in the contract shall not exceed 20 percent of the
obligation found due. No attorney fees shall be authorized if the
attorney is a salaried employee of the holder.
3. In loan transactions, defenses that the debtor may have
against the original lender or its agent shall be good against any
subsequent holder of the obligation. In credit transactions,
defenses against the seller or its agent shall be good against any
subsequent holder of the obligation, provided that the holder had
actual knowledge of the defense or under conditions where
reasonable inquiry would have apprised the holder of this fact.
4. The military member shall have the right to remove any
security for the obligation beyond State or national boundaries if
the military member or family moves beyond such boundaries under
military orders and notifies the creditor, in advance of the
removal, of the new address where the security will be located.
Removal of the security shall not accelerate payment of the
obligation.
5. No late charge shall be made in excess of 5 percent of the
late payment, or $5.00, whichever is the lesser amount, or as
provided by law or applicable regulatory agency determination. Only
one late charge may be made for any tardy installment. Late charges
shall not be levied where an allotment has been timely filed, but
payment of the allotment has been delayed. Late charges by overseas
banking facilities are a matter of contract with the Department of
Defense.
6. The obligation may be paid in full at any time or through
accelerated payments of any amount. There shall be no penalty for
prepayment. In the event of prepayment, that portion of the finance
charges that has inured to the benefit of the seller or creditor
shall be prorated on the basis of the charges that would have been
ratably payable had finance charges been calculated and payable as
equal periodic payments over the terms of the contract, and only
the prorated amount to the date of prepayment shall be due. As an
alternative, the “Rule of 78” may be applied.
7. If a charge is made for loan insurance protection, it must be
evidenced by delivery of a policy or certificate of insurance to
the military member within 30 days.
8. If the loan or contract agreement provides for payments in
installation, each payment, other than the down payment, shall be
in equal or substantially equal amounts, and installments shall be
successive and of equal or substantially equal duration.
9. If the security for the debt is repossessed and sold in order
to satisfy or reduce the debt, the repossession and resale shall be
governed by the laws of the State in which the security is
requested.
10. A contract for personal goods and services may be terminated
at any time before delivery of the goods or services without charge
to the purchaser. However, if goods made to the special order of
the purchaser result in preproduction costs, or require preparation
for delivery, such additional costs shall be listed in the order
form or contract.
a. No termination charge shall be made in excess of this amount.
Contracts for delivery at future intervals may be terminated as to
the undelivered portion.
b. The purchaser shall be chargeable only for that proportion of
the total cost that the goods or services delivered bear to the
total goods called for by the contract. (This is in addition to the
right to rescind certain credit transactions involving a security
interest in real estate provided by the Truth in Lending Act (15
U.S.C. 1601 note, 1601-1614, 1631-1646, 1661-1665a, 1666-1666j, and
1667-1667e) and Federal Reserve Board Regulation Z (12 CFR
226)).