6-633. Computation of finance charges

A. A licensee shall compute and measure finance charges on consumer loans on unpaid balances outstanding from time to time. A licensee may also precompute finance charges on consumer loans on scheduled unpaid principal balances as provided in section 6-634. For the purposes of computing finance charges on consumer loans that are not precomputed, a licensee may calculate the finance charges on an annual basis of twelve months of thirty days each month or on a daily basis if a day is counted either as 1/360th, 1/365th or 1/366th of a year, as the licensee and consumer may agree in writing.

B. A licensee shall compute periodic finance charges on consumer revolving loans or home equity revolving loans on the unpaid balance of the consumer revolving loan or home equity revolving loan by either of the following methods:

1. By multiplying the daily periodic rate by the actual unpaid balance of the consumer revolving loan or home equity revolving loan each day during the billing cycle period. The daily periodic rate shall be determined by dividing the annual percentage rate by three hundred sixty-five.

2. By multiplying the monthly periodic rate by the average daily balance of the consumer revolving loan or home equity revolving loan during the billing cycle. The average daily balance is the sum of the unpaid balances of the consumer revolving loan or home equity revolving loan each day during the billing cycle period divided by the number of days in the billing cycle period. The monthly periodic rate is determined by dividing the annual percentage rate by twelve. The unpaid balance on any day is determined by adding to any balance unpaid as of the beginning of that day all advances and allowed additional fees and deducting all payments and other credits to the consumer revolving loan or home equity revolving loan that day.

C. A licensee may compute finance charges only on the unpaid principal balance, allowed additional fees and prepaid finance charges. A licensee shall not compound finance charges. Precomputation of the finance charges on a consumer loan does not constitute compounding of finance charges.

D. If part or all of the principal of a consumer loan is the unpaid principal balance of a prior precomputed consumer loan, the principal amount payable under such consumer loan may include any unpaid finance charges on the prior loan that have accrued within sixty days before the making of that consumer loan.