Prepayment Premiums/Penalties
Last Review
Last Update
Statutes
There are no Arizona laws or statutes having general applicability that regulate or limit either premiums or penalties on loan prepayment. (A.R.S. § 6-561 applies only to credit unions)
Cases
Arizona case law shows that in general, state court decisions have enforced prepayment premiums as written under their particular facts and circumstances. See Camelot Limited v. Union Mutual Life Ins. Co., 154 Ariz. 330, 742 P.2d 831 (Ct. App. 1987) and Crown Life Ins. Co. v. Howard, 170 Ariz. 130, 822 P.2d 483 (1991). However, bankruptcy courts have not enforced these provisions as leniently under Bankruptcy Code § 506(b). See, e.g., In re Planvest Equity Income Partners, 94 B.R. 644 (Bankr. D. Ariz. 1988) (finding the premium penalty unreasonable given the circumstances).
Comments
Depending whether this issue is faced in either state, federal or bankruptcy court, this area of law will likely develop differently in Arizona. One should expect a heavy analysis given to the facts and circumstances of the prepayment premium or penalty provision to determine its enforceability.
Contributors
John G. Sinodis
The statutory information was edited and reviewed with the support of MultiState
Become a Content Contributor
The State Law Compendium is made possible through the cooperation, dedication and ongoing efforts of attorney’s who provide and update its statues, cases and comments.
Attorneys who would like to volunteer to develop or update compendium content are welcome to contact us to learn more.