(a) Any amount due a borrower because of a correction
of an error or a violation may be credited to an amount due under
the promissory note or to the next payment or payments on the existing
account of the borrower. If the credit is applied to payments not
yet due, the licensee must notify the borrower in writing of the date
and amount of the next payment due after this credit has been given.
(b) In lieu of crediting an existing account, a refund
may be made directly to the borrower by cash, check, money order,
or other negotiable instrument. The licensee must maintain sufficient
records that the refund was made.
(1) Cash refunds. If the refund is made directly to
the borrower in cash, the licensee must obtain a signed or authenticated
acknowledgment from the borrower. The signed or authenticated acknowledgment
must contain the following information:
(A) the borrower's full name;
(B) the borrower's account number (the account number
upon which the refund was made);
(C) the amount of the refund; and
(D) a statement that the borrower received the refund
in cash and that the licensee has not instructed or required the borrower
to repay the cash refund.
(2) Refunds made by check, money order, or other negotiable
instrument. If the refund is made directly to the borrower by check,
money order, or other negotiable instrument, the licensee must, at
a minimum, mail the refund to the last known address of the borrower
by first-class mail. The licensee must maintain a complete paper or
electronic copy of the check, money order, or other negotiable instrument.
The licensee must also maintain sufficient information that could
be used to determine whether the check, money order, or other negotiable
instrument was successfully negotiated.
(c) If the error correction or adjustment to an account
is related to an improper charge or proceeds improperly held by the
licensee on which interest has been precomputed (regular transaction
using the sum of the periodic balances method or scheduled installment
earnings method), the licensee may alternatively credit the final
maturing installment or installments of the promissory note. In addition
to the error correction or adjustment, a licensee must also deduct
from the precomputed balance the proportionate amount of interest
originally charged on the amount being credited.
(d) If the licensee applies the refund to an existing
account of the licensee, the licensee may be required to refund the
amount due a borrower plus the amount of accrued interest on the correction
or adjustment amount or a proportionate amount of interest originally
charged on the amount being credited. If more than half of the precomputed
time balance (regular transaction using the sum of the periodic balances
method or scheduled installment earnings method) has been paid before
applying the credit to the account, the licensee may be required to
refund the proportionate amount of interest originally charged on
the amount being credited.
(e) If the error correction or adjustment is made to
an account where the interest charge is earned using the true daily
earnings method, the licensee must refund or credit to the account
the amount due to the borrower for the error correction or adjustment
in addition to the amount of accrued interest on the correction or
adjustment amount.
(f) The commissioner may make adjustments or exceptions
to the requirements under this section for unusual situations or when
necessary to achieve an appropriate, practical, and workable result.
(g) If the licensee corrects a violation of law in
compliance with any instructions on any examination report, that correction
will satisfy the requirements of this section with respect to the
violation being corrected. Documentation must be maintained regarding
all corrections made under this section.
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