Relating to the calculation of finance charges for consumer loans pursuant to open-end credit

This bill relates to the calculation of finance charges for consumer loans pursuant to open-end credit. A consumer loan made pursuant to open-end credit is considered a supervised loan if the finance charge associated with the consumer loan exceeds the finance charge permitted in Code chapter 535. Current law allows creditors that are authorized to make supervised loans to contract for and receive finance charges with respect to a loan pursuant to open-end credit. Pursuant to the Iowa consumer credit code, the amount of that finance charge may not exceed the greater of the average daily balance of the open-end account in the billing cycle for which the charge is made (average daily balance limitation); the balance of the open-end account at the beginning of the first day of the billing cycle (first day of billing cycle limitation); or the median amount within a specified range including the balance of the open-end account not exceeding that permitted by the average daily balance limitation or the first day of billing cycle limitation (median amount limitation). The bill adds that, as an alternative to the average daily balance limitation, the first day of billing cycle limitation, and the median amount limitation, for each billing cycle a charge may be made which is the sum of the charges determined by applying a percentage to the actual balance of the open-end account on each day in the billing cycle for which the charge is made. The bill establishes that the actual balance on a day is determined by adding to the unpaid balance as of the beginning of that day all purchases and other debits and deducting all payments and other credits made or received as of that day.