Code Section Group

Financial Code - FIN


  ( Division 7 repealed and added by Stats. 1976, Ch. 964. )

CHAPTER 8. Insurance Premium Financing [18560 - 18643]

  ( Chapter 8 added by Stats. 1976, Ch. 964. )

ARTICLE 4. Limitation on Finance Charges [18625 - 18631]
  ( Article 4 added by Stats. 1976, Ch. 964. )


A premium finance agency shall not, except as otherwise provided by law, impose, take, receive, reserve or charge a finance charge which in the aggregate is greater than that which is permitted by this article.

(Repealed and added by Stats. 1976, Ch. 964.)


A premium finance agency may, in a premium finance agreement, contract for, charge, receive, and collect a finance charge which shall not exceed in the aggregate:

(a) Two percent per month on that part of the unpaid principal balance of any loan up to, including, but not in excess of, one thousand dollars ($1,000).

(b) One percent per month on any remainder of such unpaid principal balance in excess of one thousand dollars ($1,000).

As used in this article “consumer insurance premium finance loan” shall mean an insurance premium finance loan where the insurance policies which are security for the loan are for personal, family or household use.

(c) As an alternative to the charges authorized by subdivisions (a) and (b), a premium finance agency may contract for and receive charges at a rate not exceeding 1.6 percent per month on the unpaid principal balance.

(Amended by Stats. 1983, Ch. 356, Sec. 3.)


If the finance charge computed under Section 18626 is less than twenty-five dollars ($25), a minimum finance charge of twenty-five dollars ($25) may be imposed.

(Amended by Stats. 1979, Ch. 984.)


The finance charge may be computed from the effective date of the insurance coverage, provided that the company shall pay the premium due the insurer, either:

(a) Within 30 days from the effective date of the insurance coverage; or

(b) Within 30 days after the receipt by the company of a proper premium finance agreement; or

(c) Within 15 days after the company has mailed to the insured, notice of a revised finance agreement pursuant to Section 18606 whichever is later.

If the conditions of subdivision (a), (b), or (c) are not met the finance charge shall be computed from the date the proceeds of the loan are forwarded to the insurer. In the event the company receives a proper premium finance agreement later than 60 days from the effective date of the policy financed, a proportioned adjustment of the finance charge shall be made after such 60-day period.

(Added by Stats. 1976, Ch. 964.)


Notwithstanding the provisions of any premium finance agreement to the contrary, any insured may pay the obligation in full at any time before maturity of the final installment. If he does so, he shall receive a refund credit of the unearned finance charge computed in accordance with Section 18635 or 18637, except where the amount of the refund credit is less than one dollar ($1) no refund need be made, and except that where the earned finance charge amounts to less than the minimum finance charge permitted by Section 18627, the company may retain as an earned finance charge a sum equal to the minimum permitted by Section 18627 or the maximum prescribed by Section 18627, whichever is applicable.

(Amended by Stats. 1979, Ch. 270.)


In the event that the insurance policy or policies which are the subject of a premium finance agreement are canceled by the insured or by the insurer, for any cause, the insured shall be entitled to receive a refund credit of the unearned finance charge. This refund credit shall be calculated in the same manner as prescribed in Section 18629, and shall be paid to the insured within a reasonable time.

(Added by Stats. 1976, Ch. 964.)


(a) A premium finance agreement may provide for the payment of a default charge of one dollar ($1) to a maximum of 5 percent of the delinquent installment, in the event of a default for a period of not less than 10 days in the payment of any scheduled installment under the terms of a premium finance agreement. That charge may not be collected more than once for the same default and may be collected at the time of the default or at any time thereafter. If the default charge is deducted from any payment received after default occurs, and the deduction results in the default of a subsequent installment, no charge may be made for the resulting default.

(b) A premium finance agreement may provide for the payment of a dishonored check fee not to exceed fifteen dollars ($15) for actual expenses incurred in the processing of a dishonored check.

(Amended by Stats. 2000, Ch. 101, Sec. 1. Effective January 1, 2001.)

FINFinancial Code - FIN4.