38 MARCH / APRIL 2023 Brett J. Ashton Partner Krieg DeVault LLP BAshton@KDLegal.com Krieg DeVault LLP is a Diamond Associate Member of the Indiana Bankers Association. The information herein is provided for general education purposes and is not intended to be legal advice. Please consult legal counsel for specific guidance as to how this information applies to your institution’s circumstances or situation. Consumer Lending Regulations COMPLIANCE CONNECTION Question: I recently heard the Indiana law with respect to consumer lending had changed effective Jan. 1, 2023 – is this true? Answer: While the Indiana statute governing consumer lending, the Indiana Uniform Consumer Credit Code (IUCCC), did not change at the start of this year, IUCCC regulations did. The IUCCC contains a feature that is somewhat unique to Uniform Consumer Credit Code states that you should be aware of, and track carefully. This feature is an “indexing” mechanism provided by Ind. Code § 24-4.5-1-106 that adjusts certain dollar limits contained in the IUCCC on a biannual basis, based on the Consumer Price Index. The Indiana Department of Financial Institutions (IDFI) publishes updates to these indexed provisions of the IUCCC at the start of every odd numbered year by issuing an Emergency Rule (the “Indexing Rule”) amending Title 750 of the Indiana Administrative Code. These changes are generally published on the IDFI website1 and in the Indiana Register2. The indexing section of the IUCCC provides for changes to several different sections of the code, including those that impact the minimum permissible credit service charge, minimum permissible loan finance charge, maximum permissible delinquency fees, the dollar amounts for maximum permissible finance charges on consumer credit sales and supervised loans, dollar amounts impacting when land may no longer be taken as security on a loan, and limits as to when a deficiency judgment may be pursued. While generally the changes provided by the Indexing Rule will only apply to new loans made after the effective date of the new regulation, depending on the manner in which your loan documents are drafted it 1 IN.gov/DFI 2 IAC.iga.IN.gov/IAC/irtoc.htm may present an opportunity to increase fees on loans made prior to that date. For example, the IUCCC was amended in 2019 to eliminate the indexing provision that related to delinquency fees, and increasing the permitted delinquency fee on a consumer loan to a maximum of $25 as opposed to the prior indexed limit of $19. The IDFI issued Advisory Letter 2019-01 on June 27, 2019 (IDFI AL-2019-01), to provide guidance to lenders who may have existing loan agreements in place prior to the effective date of this change (July 1, 2019) as to what delinquency fees would be permitted upon enactment of the new law. IDFI AL-2019-01 provided in part, “If a contract is an open end agreement that permits the lender to notify the customer of delinquency charge increases, or for Creditors that believe another contractual basis exists to increase the delinquency charge based on the new statutory maximums permitted after July 1, the terms should be carefully reviewed to confirm a legal basis exists for the lender to increase the delinquency charge ... ” For those consumer loans made prior to July 1, 2019, without a contractual basis to increase a delinquency charge based on the 2019 law changes, the permissible delinquency fee as of Jan. 1, 2023, is $20.50. For all other consumer loans the permissible delinquency fee remains $25. The Indexing Rule made several other changes effective Jan. 1, 2023, that you should review to ensure ongoing compliance, including an increase in the deficiency judgment limit from $4,000 to $4,800. HB
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