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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. 6309

July 29, 1985

SAVINGS AND LOAN ACT:

Varied maximum interest rate limitation upon motor vehicle installment loans

SECONDARY MORTGAGE LOAN ACT:

Varied maximum interest rate limitation upon secondary mortgage loans

SUNSET LAW:

Application of varied maximum interest rate limitation in statutes

MCL 491.718(2); MSA 23.602(718)(2), which fixes a varied maximum interest rate limitation upon interest to be charged by a savings and loan association or a federal savings and loan association upon motor vehicle installment loans, is in full force and effect.

MCL 493.71; MSA 26.568(21), which fixes a varied maximum interest rate limitation to be charged on secondary mortgage loans, is in full force and effect.

Honorable Lad S. Stacey

State Representative

The Capitol

Lansing, Michigan

You have requested my opinion on two questions relating to 'two sunset provisions affecting the Savings and Loan Act of 1980 and the Secondary Mortgage Loan Act of 1980.'

Your first question is:

'The Savings and Loan Act of 1980 (Act 307 of 1980) contains a section (491.718) that provides for the 'sunset' of the 16.5% interest rate ceiling for installment loans for the purchase of a motor vehicle effective December 31, 1985. In view of your July 2, 1985 letter to Governor Blanchard in which you stated that the 'sunset' provisions in the Workers' Disability Compensation Act are unconstitutional because the title of the bill does not inform the legislators and the public of the 'sunset' provision, what is the legal status of the provision in MCL Section 491.718 that provides for a December 31, 1985 sunset of the 16.5% interest rate ceiling in light of the fact that the title of the act does not inform the legislators or the public of the 'sunset' provision?'

The title to the Savings and Loan Act of 1980, MCL 491.102 et seq; MSA 23.602(102) et seq, states:

'AN ACT to revise and codify the laws relating to savings and loan associations; to provide for the incorporation, regulation, supervision, and internal administration of associations; to prescribe the rights, powers, and immunities of associations; to provide for voluntary and involuntary changes in the corporate structure of associations; to prescribe the powers, rights, and duties of certain state agencies in relation to associations; to require certain reports and examinations of associations; to prescribe remedies and penalties for violations of this act; and to repeal certain acts and parts of acts.'

MCL 491.718(2); MSA 23.602(718)(2), provides:

'For an installment loan for the purchase of a motor vehicle, an association or federal association may charge simple interest computed on the basis of the unpaid balance in an amount not to exceed 16.5% per year, except that on installment contracts for a loan made after December 31, 1985, for the purchase of a motor vehicle, an association or federal association may charge simple interest computed on the basis of the unpaid balance in an amount not to exceed 14.55% per year. Notwithstanding any other provision of this act, on a loan made pursuant to this subsection an association or federal association may require a borrower to pay reasonable and necessary charges which are the actual expenses incurred by the association or federal association in connection with making, closing, disbursing, extending, readjusting, or renewing the loan. Charges pursuant to this subsection shall be in addition to the interest authorized by law and are not part of the interest collected or agreed to be paid on the loan.

The fixing of a varied finance charge or interest rate limitation upon interest to be imposed by a savings and loan association or a federal savings and loan association upon a motor vehicle installment loan is germane to the regulation of savings and loan associations and within the title to the Savings and Loan Act of 1980. See, National Loan & Investment Co v Detroit, 136 Mich 451; 99 NW 380 (1904).

The legislative history of MCL 491.718(2); MSA 23.602(718)(2), indicates that it was originally enacted to provide for a limitation upon the interest rate charged by a savings and loan association for an installment loan for the purchase of a motor vehicle in an amount not to exceed 16.5%, except that for a loan made after June 1, 1981, the interest rate shall not exceed 14.55%.

MCL 491.718(2); MSA 23.602(718)(2), was amended by 1981 PA 163 so as to substitute 'December 1, 1981' for 'June 1, 1981' in the first sentence; by 1981 PA 163 so as to substitute '1982' for '1981' in the first sentence; by 1982 PA 321 so as to substitute '1983' for '1982' in the first sentence; and by 1984 PA 359 so as to substitute 'December 31, 1985' for 'December 1, 1983' in the first sentence, and to add the last two sentences to the subsection.

Thus, the Legislature has, since 1980, in fixing the maximum interest rate limitation which a savings and loan association may impose upon automobile installment loans, exercised its considered judgment with respect to the general level of interest rates based upon the state of the economy. At all times since the inception of MCL 491.718(2); MSA 23.602(718)(2), a maximum interest rate limitation has been operative; only the amount of the rate limitation is subject to change, depending upon the date of the installment loan, by virture of the foregoing amendments thereto. The section has never contained a provision for its nonapplication, expiration, or repeal. Although the Legislature is free to provide for its repeal, it has not, to date, done so.

It is my opinion, therefore, that MCL 491.718(2); MSA 23.602(718)(2), is in full force and effect and, accordingly, a savings and loan association or federal savings and loan association may charge simple interest on an installment loan for the purchase of a motor vehicle, computed on the basis of the unpaid balance, in an amount not to exceed 16.5% per year, except that on installment contracts for loans made after December 31, 1985, said interest may not exceed 14.55% per year.

Your second question is:

'The Secondary Mortgage Loans Act of 1981 (Act 125 of 1981) contains a section (493.71) that provides for the 'sunset' of the 18% interest rate ceiling for secondary mortgage loans effective December 31, 1985. In view of your July 2, 1985 letter to Governor Blanchard discussed above, what is the December 31, 1985 sunset of the 18% interest rate ceiling in light of the fact that the title of the act does not inform the legislators or the public of the 'sunset' provision?'

The title to the secondary mortgage loan act, MCL 493.51 et seq; MSA 26.568(1) et seq, provides:

'AN ACT to define and regulate secondary mortgage loans; to prescribe powers and duties of the financial institutions bureau and certain state agencies; to provide for the promulgation of rules; and to provide for civil fines and penalties.'

MCL 493.71; MSA 26.568(21), provides:

'A licensee may charge, contract for, receive, or collect on a secondary mortgage loan an interest rate not exceeding 18% per year, and on a secondary mortgage loan executed after December 31, 1985, an interest rate not exceeding 15% per year, computed by the actuarial method. The licensee shall make disclosures as required by the consumer credit protection act, Public Law 90-321, 82 Stat. 146, and the regulations promulgated under that act. Interest on a secondary mortgage loan under this act shall not be added or deducted in advance but shall be computed on the basis of the actual unpaid balance of the principal of the loan on a daily or monthly basis for the time actually outstanding until the loan is paid in full.'

The fixing of a varied maximum finance charge or interest rate limitation upon secondary mortgage loans is germane to the regulation of secondary mortgage loans and within the title to the secondary mortgage loan act. See, National Loan & Investment Co v Detroit, supra.

As originally enacted, this section limited persons making or negotiating secondary mortgage loans to a maximum finance charge, including interest, not to exceed a rate of 15% per year computed by the actuarial method. The section was amended by 1982 PA 361 to provide for varied finance charges, including interest, and increased the maximum charge to 18% 'until December 31, 1983, and 15% thereafter.' It was amended by 1983 PA 43 so as to rewrite this provision, in part, setting the maximum 'interest rate not exceeding 18% per year, and on a secondary mortgage loan executed after December 31, 1983, an interest rate not exceeding 15% per year'; by 1983 PA 251 so as to substitute '1984' for '1983'; and by 1984 PA 416 so as to substitute '1985' for '1984.'

Thus, the Legislature has, since 1981, in fixing the maximum finance charge or interest rate limitation on secondary mortgage loans, exercised its considered judgment as to the general level of interest rates based upon the state of the economy.

At all times since its inception, MCL 493.71; MSA 26.568(21), has provided a maximum secondary mortgage loan interest rate limitation; only the amount of the rate limitation is subject to change, depending upon the date of the execution of the secondary mortgage loan, by virtue of the foregoing amendments thereto. The section has never contained a provision for its nonapplication, expiration, or repeal. Although the Legislature is free to provide for its repeal, it has not, to date, done so.

It is my opinion, therefore, that MCL 493.71; MSA 26.568(21), is in full force and effect and, accordingly, a licensee thereunder may charge, contract for, receive, or collect on a secondary mortgage loan an interest rate not exceeding 18% per year, and on a secondary mortgage loan executed after December 15, 1985, an interest rate not exceeding 15% per year, computed by the actuarial method.

Frank J. Kelley

Attorney General


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