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#234269 - 08/19/04 03:40 PM Finance Charge - UCC Direct
upstateNY Offline
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Joined: Apr 2003
Posts: 933
New York State
We pay a company, UCC Direct, a fee to process our UCC filings electronically for us. I know that the UCC filing fee that is paid to the County or State is not a FC. I also know that the fee paid to UCC Direct is passed on the the customer by being financed into the installment contract. I need to confirm that this fee for UCC Direct is a finance charge and not a prepaid finance charge. I understand that prepaids are either paid at closing or subtracted from the proceeds. We are not doing either of these. We are financing it.

So this probably seems very straight-forward, the fee is not a prepaid. Whats bothering me is that part of what we finance is going to pay for future events, continuations and terminations. Does that have any impact on whether the fee is prepaid or not?

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#234270 - 08/19/04 04:01 PM Re: Finance Charge - UCC Direct
rlcarey Offline
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rlcarey
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Posts: 83,219
Galveston, TX
Quote:

I understand that prepaids are either paid at closing or subtracted from the proceeds. We are not doing either of these. We are financing it.





If this is a one time fee and you are financing it, how is it not substracted from the proceeds the customer receives?? Since the fee to UCC DIrect is not prescribed by law - it would be a prepaid F/C.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#234271 - 08/19/04 04:19 PM Re: Finance Charge - UCC Direct
Dan Persfull Offline
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Dan Persfull
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Posts: 47,517
Bloomington, IN
Quote:

If this is a one time fee and you are financing it, how is it not substracted from the proceeds the customer receives?? Since the fee to UCC DIrect is not prescribed by law - it would be a prepaid F/C.




I agree.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#234272 - 08/19/04 06:52 PM Re: Finance Charge - UCC Direct
upstateNY Offline
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Joined: Apr 2003
Posts: 933
New York State
Let's say we have a loan request for $10,000.00. UCC Fee is $20.00, UCC Direct is $15.00. We finance the $35.00 so the amount financed is $10,035.00. The customer receives $10,000 and we send the $35.00 off to UCC Direct. Prepaid?

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#234273 - 08/19/04 06:58 PM Re: Finance Charge - UCC Direct
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Your loan amount is $10,035
Prepaid FC is $15 (assuming no other charges)
Your amount financed is $10,020

The $15 is subtracted from the loan proceeds and is a PPFC. The $20 is exempt under 226.4.

PS. If the $20 is not being itemized as filing fee being paid to public officials it becomes a finance charge. 226.4(e).
Last edited by dpersfull; 08/19/04 07:03 PM.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#234274 - 08/19/04 07:26 PM Re: Finance Charge - UCC Direct
upstateNY Offline
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Joined: Apr 2003
Posts: 933
New York State
We use a system call PowerCalc for installment loans. I am able to input the proceeds, financed fees, and prepaid fees. So I am starting with proceeds $10,000, financed fees $20.00 and prepaid of $15.00. This results in an amount financed of $10,005.00 (10,000 + 20.00- 15.00) Does this make sense?

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#234275 - 08/19/04 07:32 PM Re: Finance Charge - UCC Direct
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 83,219
Galveston, TX
Not if your note amount is $10,035.00.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#234276 - 08/19/04 07:35 PM Re: Finance Charge - UCC Direct
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
I'm not familiar with PowerCalc, but your itemization should look something like this if you are financing the PPFC:

Amount to Borrower = $10,000
Paid to Public Officials = $20
PPFC to UCC Direct = $15
Total Loan Amount = $10,035
Less PPFCs = $15
AMOUNT FINANCED = $10,020

If the borrower is paying the $15 in cash, or the amount to the borrower is $9,985, then the $10,005 would be correct.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#234277 - 08/20/04 12:44 PM Re: Finance Charge - UCC Direct
upstateNY Offline
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Joined: Apr 2003
Posts: 933
New York State
Quote:

I'm not familiar with PowerCalc, but your itemization should look something like this if you are financing the PPFC:

Amount to Borrower = $10,000
Paid to Public Officials = $20
PPFC to UCC Direct = $15
Total Loan Amount = $10,035
Less PPFCs = $15
AMOUNT FINANCED = $10,020

If the borrower is paying the $15 in cash, or the amount to the borrower is $9,985, then the $10,005 would be correct.



I may be expecting too much but here goes. Power Calc defines a finance charge as "any fees financed into the loan. Financed fees do not affect the APR. If there is a prepaid finance charge which will be added to the loan instead of backed out of the loan amount, enter that figure as a financed fee and as a prepaid fee.

Prepaid Fee definition:" In this field enter fees which are prepaid finance charges. Prepaid fees will affect the APR. THere are two cases that are common with prepaid fees:
Case 1: The fees are backed out of the amount financed and added to the finance charge.
Case 2: The fees are not backed out of the amount financed, but still added to the finance charge.

For case 1, enter the fee in the Prepaid Fees;for case 2 enter the fee in both Prepaid Fees and Financed Fees."

So in my example where the customer wants to borrow $10,000. We do not want to back anything out of the proceeds, so I'm thinking case 2

I enter:
Proceeds $10,000
Fin Fees $35.00
Prepaid Fees $15.00

System tell me that we have Amount financed: $10,020.00
Paid to Public Officials $20.00
Paid to UCC Direct $15.00

Does this make sense?

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#234278 - 08/20/04 01:29 PM Re: Finance Charge - UCC Direct
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Quote:

Does this make sense?





Yes.

Keep in mind the Total Loan Amount and the Amount Financed are two different figures for Reg Z purposes. The total loan amount is the total of everything being added to the loan and the amount financed is the total loan amount MINUS prepaid finance charges.
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The opinions expressed are mine and they are not to be taken as legal advice.

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