Ninth Circuit Holds That a Fixed Fee Is Not Precomputed Interest Under the Federal Refund Law


In a case of first impression, the Ninth Circuit has held that a fixed fee on a loan is not "interest" for purposes of a federal law requiring refunds of precomputed interest when a loan is prepaid. A creditor, therefore, is not obligated to refund a portion of a fixed fee in the event that a loan is repaid earlier than anticipated. A significant example would be points on a mortgage loan that is refinanced. Davis v. Pacific Capital Bank, N.A., Ninth Circuit No. 07-56236, December 24, 2008.

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