Indiana Raises Interest Rate Ceiling to 25%
Written By: Rex A. Collins, CPA, CVA – Somerset CPAs – 317-504-7900
Effective July 1, 2013, the state of Indiana has raised the maximum interest rate that lenders may charge customers from 21% to 25%. This will result in increased profit opportunities for banks and BHPH dealers.
A couple of words of caution…
First, if you are a BHPH dealer or operate an RFC (related finance company), you will want to ensure that all of your documents and agreements permit you to charge this increased rate.
Second, special care should be taken when writing loans with extremely high interest rates to not participate in any discriminatory lending practices as viewed by the CFPB (Consumer Financial Protection Bureau). We know of a few instances in which subpoenas have been issued to dealers seeking information on sales practices, pricing and disclosure. Ultimately, the CFPB has the authority to sue your related finance company (or your dealership if you have not yet set up an RFC) if they determine that you are funding discriminatory loans. If found to be violating the anti-discrimination provisions of the rules, the dealer will be subjected to supervision by the CFPB which will require the dealer to accumulate data, issue reports and allow the CFPB to conduct regular examinations. After two years of CFPB supervision, the dealer may petition the CFPB to terminate its supervision.
The bottom line: As long as you are not utilizing the increased rate in a discriminatory manner (as defined by the CFPB), we encourage you to consider raising your maximum interest rate to 25%.
For further information, please contact Rex Collins, Manager of Somerset CPAs Dealership Industry Group at 317-504-7900 or at email@example.com.