Under Idaho law, when can a creditor charge a late fee on a credit card or other consumer credit account, and how does the late fee have to be disclosed?

Plain-English summary

Idaho's Director of Finance asked when the Idaho Credit Code permitted late charges on open-end accounts or interest-bearing consumer credit transactions and how those charges should be disclosed. The Attorney General gave different answers for state-law authorization and federal-law disclosure.

For an open-end account, the opinion concluded that a late charge was part of the finance charge and could be imposed under Idaho Code § 28-42-201. The statutory definition of "finance charge" generally excluded charges for actual unanticipated default. It then said that a charge on a continuing account, where purchases or debts could still be added after the charge, was not a charge for actual unanticipated late payment. The AG read that account description alongside the code's definition of open-end credit.

For other regulated consumer credit transactions, Idaho Code § 28-45-301 prohibited default charges unless the Credit Code authorized them. The AG identified specific authorization in § 28-42-301 for precomputed loans and loans secured by an interest in real property used or expected to be used as the debtor's residence. The opinion rejected the idea that parties could evade the prohibition by agreeing to an "other charge" under the more general § 28-42-201, or by labeling a late charge a "finance charge" under § 28-41-301(18). It relied on the specific default-charge restriction to control those general provisions.

For creditors subject to the Federal Consumer Credit Protection Act, the opinion said Idaho Code § 28-43-201 required compliance with federal disclosures. Federal Regulation Z excluded actual unanticipated late-payment charges from its finance-charge definition, so the AG concluded that late charges had to appear as "other charges" in both initial and periodic disclosures. The state-law classification of an open-end late charge did not control its federal disclosure label.

Currency note

This opinion was issued in 1987. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

The opinion's first question turned on several Idaho Credit Code provisions. Idaho Code § 28-42-201 let parties agree on the rate of finance charge. Idaho Code § 28-41-301(18) defined finance charge and treated charges on qualifying continuing accounts differently from charges for actual unanticipated default. Idaho Code § 28-41-301(25) described open-end credit. Read together, the AG said they allowed late charges on open-end accounts as finance charges.

For other regulated consumer credit, § 28-45-301 prohibited charges resulting from default unless specifically authorized. The AG used § 28-45-107's description of a missed agreed payment to explain why a late charge resulted from default. Idaho Code § 28-42-301 contained the exceptions for precomputed loans and residential real-property-secured loans. The opinion cited State v. Roderick, Guillard v. Department of Employment and Norton v. Dept. of Employment for rules requiring a specific statute to control a general one and requiring provisions to be read harmoniously.

On disclosure, § 28-43-201 incorporated federal duties for persons covered by the Federal Consumer Credit Protection Act. The opinion cited Regulation Z's finance-charge exclusion and its initial and periodic disclosure provisions. The AG distinguished that federal disclosure classification from Idaho's state-law classification of an open-end account's late charge.

Common questions

Could an Idaho creditor impose a late charge on an open-end account?

The AG said yes under the 1987 Credit Code. For an account that met the code's open-end definition, the late charge counted as a finance charge under state law.

Could the parties simply agree to a late fee on any consumer loan?

No. The opinion said the general permission to contract for other charges did not override the specific prohibition on unauthorized default charges in regulated consumer credit transactions.

Which other interest-bearing loans did the AG say could carry late charges?

The opinion identified precomputed loans and loans secured by an interest in real property used or expected to be used as the debtor's residence. It found no general permission for other regulated consumer credit transactions.

Could a creditor call a late fee a finance charge to make it lawful?

The AG said no. The parties could agree to that label only where a late charge was otherwise specifically authorized; the label did not create an exception to the default-charge restriction.

How did the opinion say federally covered creditors should disclose late charges?

As "other charges" in initial and periodic statements, rather than as part of the federal finance charge. The AG based that conclusion on Regulation Z, even though Idaho classified an open-end late charge as a finance charge for its own code.

Citations

Idaho statutes: Idaho Code §§ 28-41-301(18), 28-41-301(25), 28-42-201(1), 28-42-301, 28-43-201, 28-45-107, 28-45-301.

Idaho cases: State v. Roderick, 85 Idaho 80, 375 P.2d 1005 (1962); Guillard v. Department of Employment, 100 Idaho 647, 603 P.2d 981 (1979); Norton v. Dept. of Employment, 94 Idaho 924, 500 P.2d 825 (1972).

Federal authorities: Federal Consumer Credit Protection Act; 12 U.S.C. § 1605; Regulation Z, 12 C.F.R. §§ 226.4(c)(2), 226.6, 226.7.

Source

• Landing page: https://www.ag.idaho.gov/office-resources/opinions/
• Original PDF: https://ag.idaho.gov/content/uploads/2018/04/OP87-11.pdf

Original opinion text

STATE OF IDAHO
OFFICE OF THE ATTORNEY GENERAL
JIM JONES, ATTORNEY GENERAL
BOISE 83720
TELEPHONE (208) 334-2400

ATTORNEY GENERAL OPINION NO. 87-11

TO: Belton J. Patty
Director of Finance
Department of Finance
700 West State Street
STATEHOUSE MAIL

Per Request for Attorney General's Opinion

QUESTIONS PRESENTED:

1. Whether it is lawful for late charges to be imposed upon (a) open-end credit accounts, or (b) interest-bearing consumer credit transactions, under the Idaho Credit Code?

2. If such charges may be imposed, must they be disclosed as "finance charges" as that term is defined in the Idaho Credit Code?

CONCLUSIONS:

1. Late charges may be lawfully imposed on open-end credit accounts as part of the finance charge. Late charges can only be imposed on interest-bearing consumer credit transactions if the transaction is a precomputed loan or a loan secured by an interest in real property.

2. Because of inconsistencies in definitions, if the creditor is subject to the Federal Consumer Protection Act, late charges must be disclosed as "other charges" but not as part of the "finance charge."

puestion 1:
Late charges on Open-end Credit
Idaho Code § 28-42-201(1) sets forth the general principle that: With respect to a loan or credit sale, the rate of finance charge shall be that which is agreed upon between the parties to the transaction. The definition of "finance charge" is found in § 28-41-301(18): (18) "Finance charge": (a) Except as provided in paragraph (b) of this subsection, "finance charge" means the sum of any of the followinq types of c h a r q ~ payable directly or indirectly by the debtor and imposed directly or indirectly by the creditor as an incident to or as a condition of the extension of credit, as applicable:

1. Interest or any amount pavable under
   a point, discount, or other system of
   -
   charses, however denominated;
2. Time-priced differential, credit
   service, service, carrying, or other
   charge, however denominated;
3. Premium or other charge for any
   guarantee or insurance protecting the
   creditor against the debtor's default or
   other credit loss; and
4. Charges incurred for investigating
   the collateral or credit-worthiness of
   the debtor or for commissions or
   brokerage for obtaining the credit,
   irrespective of the person to whom the
   charges are paid or payable, unless the
   creditor had no notice of the charges
   when the credit was granted.
   (b) The term does not include:
5. Charges as a result of default or
   delinquency if made for actual
   unanticipated late payment, delinquency,
   default, or other like occurrence, unless
   the parties aqree that these charges are
   finance charges; a charge is not made for
   actual unanticipated late payment,
   delincnrency, default or other like
   - -
   occurrence if imposed on an aczmnt that--
   i s o r may be debited from time t o time
   -
   f o r purchases o r o t h e r debts and, under i t s terms, payment i n f u l l o r of a s p e c i f i e d amount i s r e w i r e d when b i l l e d , and i n t h e ordinary course of business
   --
   t h e debtor i s permitted t o continue t o
   have purchases o r o t h e r debts debited t o t h e account a f t e r imposition of t h e charqe; . . . (Emphasis added.) To paraphrase: (1) V i r t u a l l y any charge paid by a debtor i n connection with a c r e d i t t r a n s a c t i o n i s p a r t of t h e finance charge u n l e s s it i s s p e c i f i c a l l y excluded by t h e d e f i n i t i o n and ( 2 ) delinquency charges a r e n o t "finance charges" unless t h e p a r t i e s agree t h a t they a r e , or i f t h e charge i s imposed on t h e type of account described i n t h e l a t t e r p a r t of paragraph ( b ) . The account described i s an "open-end" account, which i s defined i n 5 28-41-301(25): ( 2 5 ) "Open-end c r e d i t " means an arranqement pursuant t o which: ( a ) A c r e d i t o r may permit a debtor, from time t o time, t o purchase on c r e d i t from the c r e d i t o r o r pursuant t o a c r e d i t card, o r t o o b t a i n loans from t h e c r e d i t o r o r pursuant t o a c r e d i t card; ( b ) The amounts financed and t h e finance and o t h e r a ~ p r o p r i a t e charges a r e debited t o an account; Ic) The finance charge, i f made, i s computed
   \ - ,
   on t h e account p e r i o d i c a l l y ; and ( d ) E i t h e r t h e debtor has t h e p r i v i l e g e of paying i n f u l l o r i n installments o r the c r e d i t o r p e r i o d i c a l l y imposes charqes computed on t h e account f o r delaying payment and permits t h e debtor t o continue t o purchase on c r e d i t . (Emphasis added.) This language c l o s e l y t r a c k s t h e s p e c i f i c language i n t h e l a t t e r p a r t of 3 28-41-301(18)(b), describing t h e type of account i n which delinquency charges may be included as finance charges. Both t h e d e f i n i t i o n s of "finance charge" and "open-end c r e d i t " r e f e r t o d e b i t i n g an account from time t o time f o r purchases, loans, o r o t h e r debts; both r e f e r t o t h e d e b t o r ' s option t o pay t h e e n t i r e amount, installments, o r specified amounts; and both contemplate t h a t t h e debtor w i l l continue t o use t h e c r e d i t even a f t e r l a t e charges have been imposed. Therefore, t h i s o f f i c e concludes t h a t l a t e charges on open-end c r e d i t t r a n s a c t i o n s are authorized by s t a t u t e . They a r e included in the "finance charge" and, as such, late charges can be imposed pursuant to Idaho Code § 28-42-201. Late Charges on Simple Interest Consumer Loans Idaho Code § 28-45-301 prohibits the parties to a consumer credit transaction from agreeing to the imposition of late charges in most instances: Except for reasonable expenses incurred in realizing on a security interest, the aqreement with respect to a regulated consumer credit transaction may not provide for any charges as a result of default by the debtor except those authorized by this act. A provision in violation of this section is unenforceable. (Emphasis added.) The term "default" is not found in the "Definitions" section of the Idaho Credit Code, 9 28-41-301. However, a default occurs whenever a debtor "fails to make a payment as required by agreement." Idaho Code § 28-45-107. The term "late charge" indicates that the debtor has failed to make a payment as required by agreement, i.e., not on time, but "late." Thus, a late charge is a charge resulting from default and is prohibited except where "authorized" by the Credit Code. Specific authorization of late charges is found in Idaho Code 9 28-42-301(1) and (2). These subsections allow such charges for precomputed loans and loans secured by a security interest in real property used or expected to be used as a residence by the debtor. As mentioned above, late charges may also be imposed on open-end credit transactions because 3 28-41-301(18) provides that such charges are "not made for . . . default." Instead, such charges are "finance charges" and thus do not fall under the prohibition of 3 28-45-301. A maxim of statutory construction, "expressio unius est exclusio alterius," states that where certain things are enumerated, things not enumerated are excluded. 2A Sutherland, Statutory Construction, § 47.33. The legislature's enumeration of three specific exceptions to the prohibition of late charges implies a legislative intent to exclude all other exceptions. It has been argued that authorization to impose late charges can be found in Idaho Code § 28-42-201(1): With respect to a loan or credit sale, the rate of finance charge shall be that which is agreed upon between the parties to the transaction. In addition to the finance charge permitted herein, a creditor may cgntract for and receive any other charge unless expressly prohibited or limited by this act. (Emphasis added.) In our opinion, this section does not authorize late charges. A section generally allowing the debtor and creditor to agree to "any other charge," ti 28-42-201, cannot prevail over a section specifically prohibiting those parties from agreeing on late charges. § 28-45-301. This follows from the general rule of statutory construction that "where there is a general statute, and a specific or special statute, dealing with the same subject, the provisions of the special or specific statute will control those of the general statute." State v. Roderick, 85 Idaho 80, 84, 375 P.2d 1005 (1962); see also Guillard v . Department of Employment, 100 Idaho 647, 603 P.2d 981 (1979). Section 28-45-301 only allows late charges where "authorized by this act." If late charges are authorized every time the creditor and debtor agree to such "other charges," then the statute's general prohibition of late charges in the context of regulated consumer credit transactions becomes meaningless. To interpret the section in that manner would destroy it altogether, and it is an elementary rule of statutory construction that "a statute should be construed to give effect to all its provisions, so that no part thereof will be inoperative or superfluous, void or insignificant, and so that one section will not destroy another." Norton v. Dept. of Employment, 94 Idaho 924, 928, 500 P.2d 925 (1972). Thus, the section should be rezd as alli-.horizFn(j late charges only in the three situations specifically authorized by statute. This interpretation preserves all sections intact. It might also be argued that late charges ar? authorized by Idaho Code § 28-41-301(18). That section provides that the term "finance chakgew does nbt include: Charges as a result of default or delinquency if made for actual unanticipated late payment, delinquency, default, or other like occurrence, unless the parties aqree that these charqes are finance charges . . . . (Emphasis added.) For the same reasons stated above, this section cannot be read to authorize late charges merely by agreeing to label them as "finance charges." As stated by the leading treatise on the interpretation of legislation, "[sltatutes for the same subject, although in apparent conflict, are construed to be in harmony if reasonably possible." 2A Sutherland, Statutory Construction, 5 51.02. To harmonize the sections, 5 28-41-301(18) should be read as authorizing the parties to label late charges as finance charges only in those instances where late charges are already specifically authorized. Thus, for precomputed loans and loans
   .
   .. - - secured by interests in real property, the ..parties coul? agree-.to .
   .
   t h e imposition of l a t e charges a s p a r t of t h e "finance charge." Late charges would be p r o h i b i t e d i n a l l other instances whether imposed under t h e rubric of "finance charge" o r "any other charge." Ouestion 2: Your second question asks whether l a t e charges must be d i s c l o s e d a s "finance charges" a s t h e term i s defined i n the Idaho C r e d i t Code. The Idaho Credit Code contains only one provision regarding d i s c l o s u r e : A person upon whom t h e Federal Consumer Credit Protection Act, including regulations promulgated pursuant t h e r e t o , imposes d u t i e s o r o b l i g a t i o n s , s h a l l make o r give t o t h e debtor t h e d i s c l o s u r e s , information, and notices required of him by t h a t a c t and i n a l l respects comply with t h a t a c t . Idaho Code § 28-43-201. Thus, t h e disclosure provisions of the f e d e r a l law a r e c o n t r o l l i n g . The f e d e r a l d e f i n i t i o n of "finance charge" i s found i n both t h e s t a t u t e s and t h e administrative regulations of the Federal Reserve Board. The s t a t u t e , 12 U.S.C. 3 1605, sheds no l i g h t on t h i s question, but what i s commonly c a l l e d "Regulation Z" d i f f e r s from t h e Idahc s t a t u t o r y d e f i n i t i o n . 12 C.F.R. 3 226.4(c)2 excludes from t h e finance charge " [ c l h a r g e s f o r actual unanticipated l a t e payment, f o r exceeding a c r e d i t l i m i t o r f o r delinquency, d e f a u l t or s i m i l a r occurrence." For t h i s reason, " l a t e charges" are not required t o be d i s c l o s e d a s a p a r t of t h e "finance charge" a s defined b y ' t h e Idaho Credit Code. They must be disclosed i n both t h e i n i t i a l d i s c l o s u r e statement and i n t h e periodic statements as "other charges." 12 C.F.R. 3 226.6, 7 . AUTHORITIES CONSIDERED:

6. Idaho S t a t e S t a t u t e s :
   Idaho Code !
   j 28-41-301(18), (25)
   Idaho Code § 28-42-201(1)
   Idaho Code § 28-42-301
   Idaho Code § 28-43-201
   Idaho Code § 28-45-107
   Idaho Code "8-45-301

7. Idaho Cases:

State v. Roderick, 85 Idaho 80, 375 P.2d 1005 (1962). Guillard v. Department of Employment, 100 Idaho 647, 603 P.2d 981 (1979). Norton v. Dept. of Employment, 94 Idaho 924, 500 P.2d 825 (1972).

3. Federal Statutes:

12 U.S.C. § 1605

4. Other Authorities:

2A Sutherland, Statutory Construction, §§ 47.33, 51.02

DATED this 23rd day of September, 1987.

JIM JONES
Attorney General

Analysis by:
Fred C. Goodenough
Deputy Attorney General
Department of Finance

Steve Strack
Legal Intern