Printable Format16a-4-108. (UCCC) Refund or credit required; amount. (1) Upon prepayment in full of a consumer credit sale or consumer loan by the proceeds of consumer credit insurance, the consumer or such consumer's estate is entitled to a refund of any portion of a separate charge for insurance which by reason or prepayment is retained by the creditor or returned by the insurer unless the charge was computed from time to time on the basis of the balances of the consumer's account.
(2) This article does not require a creditor to grant a refund or credit to the consumer if all refunds and credits due under this article amount to less than $5, and except as provided in subsection (1) does not require the creditor to account to the consumer for any portion of a separate charge for insurance because:
(a) The insurance is terminated by performance of the insurer's obligation;
(b) the creditor pays or accounts for premiums to the insurer in amounts and at times determined by the agreement between them; or
(c) the creditor receives directly or indirectly under any policy of insurance a gain or advantage not prohibited by law.
(3) Except as provided in subsection (2), the creditor shall promptly make or cause to be made an appropriate refund or credit to the consumer for any separate charge made to such consumer for insurance if:
(a) The insurance is not provided or is provided for a shorter term than that for which the charge to the consumer for insurance was computed; or
(b) the insurance terminates prior to the end of the term for which it was written because of prepayment in full or otherwise.
(4) A refund or credit required by subsection (3) is appropriate as to amount if it is computed according to a method prescribed or approved by the commissioner of insurance or a formula filed by the insurer with the commissioner of insurance at least 30 days before the consumer's right to a refund or credit becomes determinable, unless the method or formula is employed after the commissioner of insurance notifies the insurer that it was not approved.
History: L. 1973, ch. 85, § 68; L. 2024, ch. 6, § 87; January 1, 2025.
KANSAS COMMENT, 2000
1. Subsection (1) concerns a premium for consumer credit insurance, or any part of it, that is not treated by the insurer as earned, even though the insurer has paid benefits for which the premium charge was made. If the premium was the subject of a separate charge to the debtor, a refund must be made. Making the refund is not practicable, however, and is not required, if the charge has been computed on the debtor's outstanding balances. Subsection (2)(a) recognizes that the insurer may, upon performance of its obligation, properly treat the premium as earned.
2. Subsection (2)(c) permits a creditor to derive from consumer credit insurance gains and advantages such as dividends and refunds resulting from favorable mortality or morbidity experience with respect to insured debtors, and is predicated on the following conclusions: (1) Although the gains and advantages may be large to the creditor, they are relatively insignificant to each insured debtor and the calculating, clerical, and mailing costs of returning them to insured debtors would be unreasonably disproportionate to the amounts involved, and (2) the requirement of this article that premiums for consumer credit insurance be reasonable in relation to benefits (K.S.A. 16a-4-203), if properly enforced by the insurance commissioner, will preclude the possibility of the use of consumer credit insurance as a device by creditors for concealing hidden charges from debtors.
3. Subsection (3) requires the creditor (subject to the exceptions provided by subsection (2)) to make a refund, or cause a refund to be made, if the insurance is not provided as contemplated or if it terminates prior to its expected term because of prepayment or other reasons. As a result of apparent deficiencies in the efforts of creditors (particularly assignees), the administrator has issued an administrative interpretation to facilitate the refunds required by subsection (3). See Administrative Interpretation No. 1002.
4. Subsection (4) commits to the insurance commissioner the responsibility for approval of methods and formulas for computing refunds or credits that are required by the circumstances stated in subsection (3).