FOR IMMEDIATE RELEASE                                        

For more information contact:

Carleton Sales Team

574.243.6040 option #3

sales@carletoninc.com

 

Connecticut Threshold Adjustment for Loans and Retail Sales Going into Effect

 

As reported in Carleton's July 2023 Compliance Alert, Connecticut Senate Bill No. 1033 (Public Act No. 23-126) modified provisions relating to small loans, retail installment sales, and guaranteed asset protection (GAP) waivers. These changes go into effect October 1, 2023.

 

Provisions Impacting Computational Requirements:

• Loans

  • For small loans, Connecticut already requires the annual percentage rate (APR) be calculated according to the provisions in the Military Lending Act. SB 1033 expands the types of charges and fees included in the definition of the Finance Charge for the purposes of calculating a Military APR to include:

    • a charge set forth in 32 CFR 232.4(c)(1), as amended from time to time,

    • a charge for any ancillary product, membership, or service sold in connection or concurrent with a small loan,

    • any amount offered or agreed to by a borrower in furtherance of obtaining credit or as compensation for the use of money, and

    • any fee, voluntarily or otherwise, charged, agreed to, or paid by a borrower in connection or concurrent with a small loan.

  • Threshold Adjustment:

    • If a loan is between $5,000 and $50,000 (previously $15,000), the maximum Military APR (as modified above), is 25%.

    • If a loan is under $5,000, the maximum Military APR (as modified above) is 36%.

  • The law modifies the definition of “Small Loan” from a maximum amount of $15,000 to $50,000. This would in turn extend to the special exclusion for closed-end loans secured by a motor vehicle.

 

• Retail Installment Sales

  • The bill expands the threshold for “consumer goods”, including motor vehicles, from $50,000 to $75,000, and for “equipment” from $16,000 to $25,000. The applicable maximum finance charge rates remain unchanged for retail installment sales. The applicable tiered rate structure for motor vehicles also remains unchanged.  

 

• Guaranteed Asset Protection (GAP) Waivers

  • The bill includes a new section relating to GAP Waivers. Among other provisions, the new section:

    • Clarifies that GAP waivers are not insurance,

    • Requires GAP waivers be refunded using a pro rata method, and

    • Allows lenders to charge a cancellation fee not to exceed $50, to be deducted from a refund.

 

Carleton maintains regular communication with industry professionals and trade associations to ensure we are assisting our clients to implement these necessary updates. The information contained herein is for informational purposes only and shall not be construed as legal advice.

 

About Carleton, Inc.:

Carleton is the country's leading provider of financial calculation software, loan origination compliance support, and document generation software. With over 50 years of experience, our ongoing expertise and industry knowledge reaffirms why we are a trusted partner.  Founded in conjunction with the Truth In Lending Act, Carleton provides expert compliance support with continuous accuracy in all our calculations and disclosures at a state and federal level. To learn more about Carleton's lending solutions, visit www.carletoninc.com or contact our sales team at sales@carletoninc.com or 574-243-6040 option #3.