Code of Virginia

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Code of Virginia
Title 38.2. Insurance
Chapter 47. Insurance Premium Finance Companies
12/8/2021

Chapter 47. Insurance Premium Finance Companies.

§ 38.2-4700. What persons deemed insurance premium finance companies.

A. Any person engaged in whole or in part in financing premiums for insurance on subjects of insurance resident, located or to be performed in this Commonwealth shall be an insurance premium finance company subject to this chapter. Any person who acquires agreements for this financing from an insurance premium finance company shall be deemed an insurance premium finance company subject to this chapter.

B. No person shall be deemed an insurance premium finance company by reason of any transaction lawful under the laws of this Commonwealth without regard to the provisions of this chapter. No bank, trust company, savings institution, industrial loan association, credit union, consumer finance company licensed under Chapter 15 (§ 6.2-1500 et seq.) of Title 6.2, licensed insurance agent extending credit as authorized in § 38.2-1806, or insurer shall be licensed under the provisions of this chapter, nor be subject to the restrictions and obligations imposed by this chapter.

1964, c. 147, § 38.1-735; 1986, c. 562; 1996, c. 77.

§ 38.2-4701. License required; application; fee.

No person shall act as an insurance premium finance company in this Commonwealth until that person has obtained a license from the Commission as provided in this chapter. Application for a license shall be made in writing in the form prescribed by the Commission and shall be accompanied by a nonrefundable application fee of $500.

1964, c. 147, § 38.1-736; 1981, c. 107; 1986, c. 562.

§ 38.2-4702. Investigation of applicant; issuance of license.

Upon the filing of an application and the payment of the application fee, the Commission shall make an investigation of the applicant. The Commission shall issue a license, expiring on June 30 immediately following the date of issuance, if it finds that (i) the application is in proper form and the required fee has been paid; (ii) the financial responsibility, experience, character, and general fitness of the applicant indicate that the business will be operated lawfully, honestly, fairly and efficiently within the purpose of this chapter, the same criteria being applicable to members of the applicant if the applicant is a partnership or association and to officers and directors of the applicant if the applicant is a corporation; (iii) if the applicant is a corporation, it is a corporation of this Commonwealth or a foreign corporation that has a certificate of authority to transact business in this Commonwealth; and (iv) the applicant has assets equal to or greater than its liabilities and has working capital sufficient for the operation of its business.

1964, c. 147, § 38.1-737; 1981, c. 107; 1986, c. 562.

§ 38.2-4703. Renewal of license.

Subject to the provisions of § 38.2-4704, a licensed insurance premium finance company may renew its license on July 1 of each year, upon payment of a nonrefundable annual license fee of $200, unless the license has been surrendered, suspended or revoked.

1964, c. 147, § 38.1-738; 1975, c. 175; 1981, c. 107; 1986, c. 562.

§ 38.2-4704. Suspension, revocation or failure to renew license; imposition of penalty.

The Commission may suspend, revoke or refuse to renew a license of any insurance premium finance company whenever it finds that:

1. The licensee has (i) failed to pay the annual license fee, (ii) violated or failed to comply with any of the provisions of this chapter or with any rule or regulation made by the Commission pursuant to this chapter, or (iii) violated or failed to comply with any order, demand, ruling, provision or requirement of the Commission lawfully made pursuant to or within the authority of this chapter; or

2. The licensee no longer meets the standards required for the initial issuance of a license.

1964, c. 147, § 38.1-739; 1986, c. 562.

§ 38.2-4705. Maximum interest rate and maximum service charge on premium finance agreement.

A. The Commission shall periodically investigate the economic conditions and other factors relating to and affecting the business of insurance premium finance companies. The Commission shall ascertain all pertinent facts necessary to determine what maximum interest rate and what maximum service charge shall be permitted. Upon the basis of those facts and subject to this chapter, the Commission shall determine and fix by regulation or order the maximum interest rate and maximum service charge that may be charged in advance upon the amount financed by any insurance premium finance company.

B. The Commission shall initially fix the maximum interest rate at one percent per month charged in advance upon the entire amount financed payable in installments, and shall initially fix the maximum service charge at fifteen dollars. Thereafter, the maximum interest rate and maximum service charge shall be determined by the Commission after giving due consideration to such factors as (i) prevailing market interest rates, (ii) other relevant cost indices, and (iii) the industry-wide experience of premium finance companies operating in this Commonwealth. Before redetermining the maximum interest rate or maximum service charge, the Commission shall give all licensees notice and opportunity to be heard and to introduce evidence with respect to the maximum interest rate or service charge.

C. Interest at the authorized rate may be charged from the effective date of the premium finance agreement or the inception date of the insurance contract for which the premiums are being financed, whichever is earlier, through the date when the final installment of the premium finance agreement is payable. Interest charged under a premium finance agreement shall not be fully earned at the inception of the agreement. The insurance premium finance company may earn interest through the date the principal amount financed under a premium finance agreement has been paid in full for any reason. Upon such payment in full, a refund credit of any unearned interest shall be due the insured and shall be computed on a short rate or prorata basis as set forth in the agreement, provided that the interest charged does not exceed the maximum interest rate established by the Commission pursuant to subsection A. The service charge received by an insurance premium finance company shall be fully earned upon its receipt and no portion of the service charge need be refunded upon prepayment of the loan for any reason. Only one service charge shall be made for each premium finance agreement, and no insurance agent or insurance premium finance company shall induce any person to enter into more than one premium finance agreement for the purpose of obtaining more than one service charge. Notwithstanding the foregoing, one additional charge not to exceed ten dollars may be charged if additional premiums are added to an existing finance agreement at the insured's request. Such additional charge may be applied only once during the term of any premium finance agreement. No part of any charges shall be paid to any insurance agent by an insurance premium finance company, nor shall any insurance premium finance company pay, allow or give, or offer to pay, allow or give, directly or indirectly, to any insurance agent, any valuable consideration as an inducement to finance the premium of any insurance policy. No insurance agent shall accept any valuable consideration as an inducement to finance the premium of any insurance policy. No person shall be in violation of this section solely by reason of ownership in an insurance premium finance company.

D. Notwithstanding the foregoing, the Commission by rule or order may exempt any premium finance agreement, any class of premium finance agreements or any market segment from any of the provisions of this section, if it finds their application unnecessary to achieve the purposes of this chapter.

1981, c. 107, § 38.1-740.1; 1986, c. 562; 1994, cc. 8, 123.

§ 38.2-4706. Default charge; bad check charge.

A. If any installment under a premium finance agreement is not paid in full within seven days after it is due, Sundays and holidays included, the insurance premium finance company may charge and collect a default charge not to exceed five percent of the installment. The default charge shall be collected only once on any installment.

B. An insurance premium finance company may charge and collect a fee, not in excess of twenty dollars, for each check returned to the insurance premium finance company because the drawer had no account or insufficient funds in the payor bank.

1981, c. 107, § 38.1-740.2; 1986, c. 562; 1994, c. 123.

§ 38.2-4707. Forms of premium finance agreements and related forms to be approved by Commission; false or misleading statements or omissions prohibited.

No form of premium finance agreement or any related form shall be used until it is approved by the Commission. No such form shall contain any statements that are materially false or misleading or omit statements necessary to prevent the form from being in any material way false or misleading.

1964, c. 147, § 38.1-741; 1981, c. 107; 1986, c. 562.

§ 38.2-4708. Examination of books and records of company; bond; rules and regulations; order by Commission to remedy concerns.

A. 1. The Commission is empowered to examine the books and records of an insurance premium finance company.

2. The Commission is empowered to require an insurance premium finance company to enter into bond with surety approved by the Commission, in the amount determined as reasonable by the Commission, and conditioned to protect its customers and the public in the manner required by law. The aggregate liability of the surety for all breaches of the conditions of the bond shall in no event exceed the penalty of the bond. The surety on the bond shall have the right to cancel the bond upon thirty days' notice in writing to the Commission and shall be relieved of liability for any breach of condition occurring after the effective date of the cancellation.

3. Any rules and regulations issued by the Commission with respect to the operation of insurance premium finance companies may include, without limitation, rules and regulations for the cancellation of policies by insurance premium finance companies, for the notice required to be given to the insured and the insurer, and for the mutual obligations and duties of insurers and insurance premium finance companies with regard to the cancellation of policies and the required notice.

B. If the Commission finds (i) that an insurance premium finance company's financial condition, method of operation or manner of doing business does not satisfy the Commission that the company can meet its obligations to all customers or (ii) that the company's continued operation in this Commonwealth is hazardous to customers and creditors in this Commonwealth and to the public, it may order the company to take appropriate action within a specified time to remedy the concerns of the Commission. The Commission shall give the insurance premium finance company ten days' notice of its finding and shall grant it the opportunity to be heard and to introduce evidence on its behalf. Any hearing with regard to the order may be informal, and the required notice may be waived with the mutual consent of the Commission and the company.

1964, c. 147, § 38.1-742; 1981, c. 107; 1986, c. 562.

§ 38.2-4709. Disposition of license and other fees.

The Commission shall collect and pay directly into the state treasury licensing fees and all other fees. These fees shall be credited to the fund for the maintenance of the Bureau of Insurance.

1964, c. 147, § 38.1-743; 1981, c. 107; 1986, c. 562.

§ 38.2-4710. Penalty for engaging in business without license.

Any person engaging in the business of financing insurance premiums in this Commonwealth without obtaining a license as required under this chapter shall be subject to a fine of not more than $100 for each day that person operates without a license. The fine shall be imposed and judgment entered by the Commission after ten days' notice has been given to the defendant by rule to show cause.

1964, c. 147, § 38.1-744; 1986, c. 562.

§ 38.2-4711. Exemptions.

This chapter shall not apply to the inclusion of a charge for insurance in a sale of property, goods or services payable in installments, or in a loan made for purposes other than the financing of insurance premiums only.

1964, c. 147, § 38.1-745; 1981, c. 107; 1986, c. 562.

§ 38.2-4712. Validity of secured transactions.

No filing of the premium finance agreement or recording of a premium finance transaction shall be necessary to validate the agreement as a secured transaction.

1964, c. 147, § 38.1-745; 1981, c. 107; 1986, c. 562.