CHAPTER 283

FORMERLY

HOUSE BILL NO. 562

AN ACT TO AMEND SUBCHAPTERS II AND III OF CHAPTER 9 OF TITLE 5 OF THE DELAWARE CODE RELATING TO BANK REVOLVING AND CLOSED END CREDIT.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Section I. Preamble. It is the Intent of the General Assembly to codify the law of

this State relating to the fees and charges assessed by banks with respect to revolving credit plans and closed end credit as it has existed since the enactment of Subchapters II and III of Chapter 9, Title 5 of the Delaware Code. To this end, the General Assembly does hereby act.

Section 2. Amend Subsection 941(8), Title 5, Delaware Code, by deleting the phrase

"Interest and additional charges", and inserting In lieu thereof "periodic interest, Interest charges and other charges permitted by this subchapter".

Section 3. Amend Subsection 942, Title 5, Delaware Code, by deleting the phrase "the

Interest and other charges", and inserting In lieu thereof the phrase "periodic interest, interest charges and other charges".

Section 4. Amend Section 943, Title 5, Delaware Code, by adding the word "Periodic" in front of the word "Interest" in the heading.

Section 5. Amend Section 943, Title 5, Delaware Code, by adding the word 'periodic" in front of the word "Interest" wherever It appears in such Section.

Section 6. Amend Section 945, Title 5, Delaware Code, by inserting In lieu of the word "Additional" the word "Interest" in the heading.

Section 7. Amend Section 945, Title 5, Delaware Code, by inserting after the word

"collect" the phrase as interest, In such manner or form as the plan may provideZ.

Section 8. Amend Section 945, Title 5, Delaware Code, by deleting the "and" at the end of subsection (2); changing the period at the end of subsection (3) to a semicolon; and adding new subsections (4)-(9) to read as follows:

(4) Reasonable fees for services rendered or for reimbursement of expenses
Incurred in good faith by the bank or Its agents In connection with the plan, or other reasonable fees incident to the application for and the opening, administration, and
termination of a plan including, without limitation, commitment, application and
processing fees, official fees and taxes, costs Incurred by reason of examination of title, inspection, appraisal, recording, mortgage satisfaction or other formal acts necessary or appropriate to the security for the plan, and filing fees;

(1) Returned payment charges;

(1) Documentary evidence charges;

(1) Stop payment fees;

(1) OverlImIt charges; and

(1) Automated teller machine charges or similar electronic or Interchange fees or charges.

Section 9. Amend Section 950, Title 5, Delaware Code, by inserting the phrase "as

interest" after the word "Impose".

Section 10. Amend Section 951, Title 5, Delaware Code, by deleting the phrase "In

connection with a collection proceeding".

Section II, Amend Subsection 952(d), Title 5, Delaware Code, by deleting such

subsection In its entirety and inserting In lieu thereof the following:

"(c1) for purposes of this section, the following shall not be deemed an amendment which has the effect of increasing the Interest to be paid by the borrower:

(1) a decrease In the required amount of periodic installment payments;

(ii) a change in the schedule or formula used under a variable rate plan under Section 944 of this title provided that the initial Interest rate resulting from such change Is not an increase; and

(III) a change from a daily periodic rate to a periodic rate other than daily or from a periodic rate other than daily to a daily periodic rate under Section 943 of this Chapter."

Section 12. Amend Section 962, Title 5, Delaware Code, by deleting the phrase the

Interest and other charges" and inserting in lieu thereof the phrase any periodic
Interest, interest charges, and other charges permitted by this subchapter".

Section 13. Amend Section 963, Title 5, Delaware Code, by adding the word "Periodic" in front of the word "Interest" In the heading.

Section 14. Amend Section 963, Title 5, Delaware Code, by adding the word "periodic" in front of the word "interest" in the first two locations In the first sentence where the term "Interest" is used.

Section 15. Amend Section 965, Title 5, Delaware Code, by inserting In lieu of the word "Additional" the word "Interest" In the heading.

Section 16. Amend Section 965, Title 5, Delaware Code, by inserting before the word

"Interest" the word 'periodic" and inserting after the word "collect", where such term first appears In the Introductory clause, the phrase "as interest".

Section 17. Amend Section 966, Title 5, Delaware Code by inserting the phrase", as

Interest," after the phrase "charge and collect" and after the phrase such borrower".

Section 18. Amend Section 968, Title 5, Delaware Code by inserting after the word

"Impose" the phrase "as Interest".

Section 19. Amend Subsection 970(a), Title 5, Delaware Code by inserting after the

phrase "charge and collect" the phrase "as interest".

Section 20. Amend Section 971, Title 5, Delaware Code, by deleting the phrase "in

connection with a collection proceeding".

Section 21. Amend Subchapter II, Title 5, Chapter 9 Delaware Code, by adding a new

Section 955 to read as follows:

"Section 955. Materiality of Terms.

All terms, conditions and other provisions of and relating to a plan as contained In this Subchapter or In the agreement governing the plan (other than those which are Interest under this subchapter), including, without limitation, provisions relating to the method of determining the outstanding unpaid indebtedness on which Interest Is applied, time periods within which Interest charges may be avoided, reasons for default and the right to cure any default, rights to accelerate, account cancellation, choice of law, change In terms requirements, rights to charge and collect attorney's fees, court and collection costs, and the compounding of periodic Interest or Interest charges, shall be and hereby are deemed to be material to the determination of Interest applicable to a plan under Delaware law, under the most favored lender doctrine, and under Section 85 of the National Bank Act (12 U.S.C. §85) or Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (12 U.S.C. §1831d)."

Section 22, Amend Subchapter II, Chapter 9, Title 5, Delaware Code, by adding a new

Section 956 to read as follows:

"Section 956. Governing Law,

A revolving credit plan between a bank and an individual borrower shall be governed by the laws of this State."

Section 23. Amend Subchapter III, Chapter 9, Title 5, Delaware Code, by adding a new Section 975 to read as follows:

"Section 975. Materiality of Terms.

All terms, conditions and other provisions of and relating to any extension of closed end credit as contained In this Subchapter or in the agreement governing, or the bond, note or other evidence of the loan (other than those which are interest under this subchapter), including, without limitation, provisions relating to the method of calculating interest, reasons for default and the right to cure any default, rights to accelerate, choice of law, rights to charge and collect attorney's fees, court and collection costs, repayment schedule, balloon payments, loan term, and the refunding of unearned interest or insurance charges, shall be and hereby are deemed to be material to the determination of interest under Delaware law, under the most favored lender doctrine, and under Section 85 (12 U.S.C. §85) of the National Bank Act or Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (12 U.S.C. §1831d)."

Section 24. Amend Subchapter III, Title 5, Delaware Code, by adding a new Section 976 which reads:

"Section 976. Governing Law.

The agreement governing, or the bond, note or other evidence of a loan between a bank and an individual borrower shall be governed by the laws of this State."

Approved June 28, 1988.