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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 5917 June 9, 1981 BANKS AND BANKING: Loan processing fee not includable within interest rate A state or national bank may impose a reasonable loan processing fee on any loan made by the bank and the amount of the fee is not considered interest in the absence of any specific statute to the contrary. Honorable Dana Wilson State Representative The Capitol Lansing, Michigan You have requested my opinion on the following questions: 1. May a state or national bank rely on 1966 PA 326, Sec. 1a to charge the reasonable and necessary charges listed therein when making loans at the maximum interest rate allowed by any state or federal statute which does not limit or prohibit fees and charges without the loan being considered usurious, so long as such reasonable and necessary charges are provided for by the loan agreement? 2. Does 1966 PA 326, Sec. 1a apply to all loans made by a state or national bank, as opposed to only loans secured by real estate mortgages? 1966 PA 326, Sec. 1a, as amended by 1978 PA 27; MCLA 438.31a; MSA 19.15(1a) provides: 'A state or national bank, except as federal law and regulation provide otherwise, insurance company, or lender approved as a mortgagee under the national housing act, 12 U.S.C. 1701 to 1750g, or regulated by a federal agency, may require a borrower to pay reasonable and necessary charges which are the actual expenses incurred by the lender in connection with the making, closing, disbursing, extending, readjusting, or renewing of a loan. The charges shall be in addition to interest authorized by law, and are not a part of the interest collected or agreed to be paid on the loan within the meaning of a law of this state which limits the rate of interest which may be exacted in a transaction. Reasonable and necessary charges shall consist of recording fees; title examination or title insurance; the preparation of a deed, appraisal, or credit report; plus a loan processing fee. The charges shall be paid only once by the borrower to either the seller of the mortgage or the lender. A charge for inspection required by a local unit of government shall be paid by the seller and shall not be charged to the borrower. This section does not apply to a corporation organized under Act No. 156 of the Public Acts of 1964, as amended, being sections 489.501 to 489.920 of the Michigan Compiled Laws, or a federally chartered savings and loan association.' One of the principal rules of statutory construction is to construe and enforce the clear and unambiguous language of a statute. Attorney General ex rel Insurance Commissioner v Michigan Property & Casualty Guaranty Association, 80 Mich App 653; 263 NW2d 918 (1978). 1966 PA 326, Sec. 1a, as amended, supra, clearly permits any state or national bank or insurance company to charge borrowers reasonable and necessary charges actually incurred by the lender in connection with the making of a loan. There is no limitation in the statute restricting such charges to any particular type of loan, such as a real estate loan. Until amended by 1978 PA 327, 1966 PA 326, Sec. 1a, supra, limited such charges to fees specifically incurred and paid by the lender, such as recording fees, title examinations and insurance premiums, deed preparation fees and charges for credit reports. 1978 PA 327, however, amended the statute to permit an additional charge, known as the 'loan processing fee.' The effect of this amendment was to permit lenders or the seller of the mortgage to pass on part of their overhead expense to borrowers provided only that such charges are exacted once in any one transaction. Therefore, in answer to your first question, it is my opinion that state and national banks may rely on 1966 PA 326, Sec. 1a, as amended, supra, to exact certain fees from borrowers. As stated in 1966 PA 326, Sec. 1a, supra, such fees are not considered interest and are in addition to the maximum rate permitted by law. However, banks and other lenders are cautioned that their ability to exact such fees may be restricted by the language of the statute governing the interest rate under which a particular loan is made. For example, 1969 PA 319, Sec. 19(1)(c), as amended; MCLA 487.419(c); MSA 23.710(191)(c), limits interest on installment loans made by state banks to 12.83 percent (16.5 percent for motor vehicles). Since 1969 PA 319, Sec. 19(1)(c), supra, only permits 'a charge for expenses' up to a maximum of $15.00, a lender may not rely on 1966 PA 326, Sec. 1a, supra, to exact a greater fee. People v Shaw, 27 Mich App 325; 183 NW2d 390 (1970). Turning to your second question, 1966 PA 326, Sec. 1a, as amended, supra, is not limited to real estate loans. This fact may be contrasted with 1980 PA 307, Sec. 730; MCLA 491.730; MSA 23.602(730), which permits state and federal savings and loan associations to require borrowers to pay reasonable and necessary charges actually incurred by the association in connection with 'a real estate loan.' Moreover, previous opinions of this office have recognized the applicability of 1966 PA 326, Sec. 1a, supra, to bank credit card loans, OAG, 1979-1980, No 5605, p 490 (December 5, 1979), and to corporate loans, letter opinion to Senator William Faust, dated October 25, 1977. Accordingly, it is my opinion that 1966 PA 326, Sec. 1a, as amended, supra, is applicable to any type of loan made by a state or federally chartered bank or insurance company. Frank J. Kelley Attorney General
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