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Barbara Reid Alexander (207)289-3731
Offices located at:
Harry W. Giddinge Central Building
DEPUTY SUPERINTENDENT Hallowell Annex
DEPARTMENT OF BUSINESS REGULATION
BUREAU OF CONSUMER PROTECTION
STATE HOUSE STATION 35
AUGUSTA, MAINE 04333
ADVISORY RULING #55
JULY 21, 1981
July 21, 1981
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.
/s/ Barbara R. Alexander
Barbara R. Alexander