(1) If the agreement with respect to a consumer loan, refinancing, or consolidation contains covenants by the debtor to perform certain duties pertaining to insuring or preserving collateral and if the lender pursuant to the agreement pays for performance of the duties on behalf of the debtor the lender may add the amounts paid to the debt. In the case of covenants as to duties other than the payment of taxes and insuring the collateral, the lender shall give written notice to the debtor setting forth the duties to be performed and a statement of the amount to be charged for the performance of said duties. Said written notice shall be by certified mail to the last-known address of the debtor, at least thirty (30) days prior to the commencement of the performance of the specified duties, unless otherwise agreed in writing by the lender and debtor. The debtor, prior to commencement of performance, shall have the option to make alternative arrangements for compliance with the covenants. Within a reasonable time after advancing any sums, he shall state to the debtor in writing the amount of the sums advanced, any charges with respect to this amount, and any revised payment schedule, and, if the duties of the debtor performed by the lender pertain to insurance, a brief description of the insurance paid for by the lender including the type and amount of coverages. No further information need be given.
(2) A loan finance charge may be made for sums advanced pursuant to subsection (1) at a rate not exceeding the rate stated to the debtor pursuant to the provisions on disclosure (Part 3) with respect to the loan, refinancing, or consolidation, except that with respect to a revolving loan account the amount of the advance may be added to the unpaid balance of the debt and the lender may make a loan finance charge not exceeding that permitted by the provisions on loan finance charge for consumer loans (Section 3-201) or for supervised loans (Section 3-508A), whichever is appropriate.
Added by Laws 1969, c. 352, § 3-208, eff. July 1, 1969. Amended by Laws 1997, c. 288, § 4.