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

The Director of the Idaho Department of Finance asked the Attorney General two questions about late charges under the Idaho Credit Code: when they could be imposed, and whether they had to be disclosed as "finance charges."

Late charges on open-end credit (credit cards). Yes, allowed. Idaho Code § 28-42-201(1) said the rate of finance charge "shall be that which is agreed upon between the parties to the transaction." The Idaho Credit Code's definition of "finance charge" in § 28-41-301(18) generally captures any charge a debtor pays in connection with a credit transaction, but specifically excludes "[c]harges as a result of default or delinquency if made for actual unanticipated late payment, delinquency, default, or other like occurrence, unless the parties agree that these charges are finance charges." However, that exclusion has its own carveback: a charge is not "made for actual unanticipated late payment" if imposed on an open-end account that is debited from time to time for purchases or other debts, where ordinary-course-of-business operation continues after the charge. So on open-end credit, the late charge is part of the finance charge by operation of statute. The "agreed upon" rule in § 28-42-201(1) lets the parties set that finance charge rate.

Late charges on interest-bearing consumer credit transactions. Allowed only in two narrow situations: (1) precomputed loans (where the entire interest charge is computed up front and added to the principal at the start), and (2) loans secured by an interest in real property. Other interest-bearing consumer credit transactions did not permit late charges. The AG's reasoning is rooted in the structure of the Idaho Credit Code: late charges on a transaction where interest is computed on the actual outstanding balance produce double recovery (interest already runs during the late period), while precomputed and real-estate-secured loans have specific statutory exceptions.

Disclosure. The federal Truth in Lending Act and Regulation Z classify late-payment charges as "other charges" rather than "finance charges." Because Idaho's definition of "finance charge" diverges from the federal one (Idaho's includes late charges; the federal one does not), a creditor subject to the federal regime must disclose the late charge as an "other charge" for federal-disclosure purposes. The AG advised that for purposes of Truth in Lending compliance, late charges should be disclosed as "other charges," not as part of the "finance charge," even though the Idaho Credit Code's classification was different.

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

Idaho's Credit Code (Idaho Code title 28, chapters 41-49) established a comprehensive regime for consumer credit transactions, modeled in part on the Uniform Consumer Credit Code. The "finance charge" definition in Idaho Code § 28-41-301(18) was deliberately broad: it captures every type of charge payable directly or indirectly by the debtor and imposed by the creditor as an incident to or condition of the extension of credit, with a list of inclusions and a list of exclusions.

The exclusion for default-related charges (§ 28-41-301(18)(b)(1)) was the central provision for the AG's analysis. It excluded delinquency charges from the finance-charge definition, but only if the charge was made for "actual unanticipated late payment, delinquency, default, or other like occurrence." Then it specified an exception to that exclusion: charges on open-end accounts (those debited from time to time) where ordinary-course business continued after imposition were not made for "actual unanticipated late payment" and therefore remained finance charges.

The "open-end credit" definition in § 28-41-301(25) was the scaffolding. Open-end credit is an arrangement where the creditor permits the debtor to purchase or borrow from time to time, the amounts financed are debited to an account, the finance charge is computed periodically on the account, and the debtor either has the privilege of paying in full or in installments or the creditor periodically imposes charges for delaying payment.

The federal disclosure regime (Truth in Lending) drew the line differently. Federal Regulation Z classifies late-payment charges as "other charges," disclosed separately from the finance charge. So the same late charge could fall on different sides of the line depending on which classification applied: under Idaho law it was part of the finance charge on open-end accounts, but under federal law it was an "other charge."

Common questions

Can a credit card issuer charge a late fee on an Idaho cardholder?

Yes. Idaho Code § 28-42-201(1) lets the parties agree on the finance charge rate, and the Idaho Credit Code treats late charges on open-end accounts as part of the finance charge.

What about a closed-end consumer loan with simple interest?

Late charges are not permitted unless the loan is a precomputed loan or is secured by an interest in real property. Interest already runs during the late period on a simple-interest loan, so a late charge would be double recovery.

What if the creditor is subject to the federal Truth in Lending Act?

The late charge has to be disclosed as an "other charge," not as part of the finance charge. That is true even though under Idaho law the late charge is classified as part of the finance charge. Federal Regulation Z controls disclosure form for creditors subject to the federal regime.

What is a precomputed loan?

A loan where the entire amount of interest is calculated up front based on the original principal and term, and added to the principal at origination. The borrower repays the precomputed total in installments. Because the interest is fixed at origination, late charges do not produce double recovery in the same way as on a simple-interest loan.

Why does the open-end exception in § 28-41-301(18)(b)(1) exist?

The general carve-out treated unanticipated default charges as outside the finance charge. But on open-end accounts, late charges are anticipated and part of the regular cost of the credit. The drafters of the Idaho Credit Code included an open-end-specific carveback to keep those charges within the finance charge, where they conceptually belong.

Citations

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

Federal authority: Federal Consumer Protection Act (Truth in Lending Act); Federal Reserve Regulation Z.

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

Full opinion text is preserved in the linked PDF. The opinion analyzed two questions about late charges under the Idaho Credit Code: (1) whether late charges may be imposed on open-end credit accounts and on interest-bearing consumer credit transactions; and (2) whether such charges must be disclosed as "finance charges." The AG worked through the broad finance-charge definition in Idaho Code § 28-41-301(18), the default-charge exclusion in subparagraph (b)(1), and the open-end carveback that pulls late charges back into the finance-charge classification on open-end accounts. The AG concluded that late charges are allowed on open-end credit accounts as part of the finance charge; on interest-bearing consumer credit transactions only if the loan is precomputed or secured by real property; and must be disclosed as "other charges" (not as part of the finance charge) for creditors subject to the federal Consumer Protection Act.

DATED this 30th day of September, 1987.

JIM JONES
Attorney General
State of Idaho