Sec. 09.03.04.03. Insurance

A. Except as provided elsewhere in this regulation, if an insurance premium is financed as part of an installment sale agreement, whether for dual interest physical damage insurance or third-party liability insurance, or both, and the insurance is terminated for any reason by the insurer and the unearned premium returned to the holder of the installment sale agreement, the holder immediately shall remit the unearned premium to the buyer less only those amounts then due and payable under the contract.

B. Upon receipt by the holder of the installment sale contract of notice of cancellation of the dual interest coverage, if the holder orders single interest physical damage insurance, the premium for this coverage shall be considered due and payable on the date the coverage is effective. The cost of this single interest coverage may be deducted by the holder from the return premium received by the holder from the insurance company which terminated the dual interest coverage, but only if proper notice is given to the buyer that the unearned premium refund will be so applied and the buyer is given a reasonable opportunity to secure physical damage dual interest coverage from an insurance agent, broker, or company of his choice.

C. If single interest coverage is procured by the holder, and the buyer later independently procures dual interest coverage, the single interest coverage promptly shall be cancelled by the holder upon proper notice that dual interest coverage is effective. Except as provided below, the return premium refund resulting from cancellation shall be remitted promptly to the buyer less only those amounts then due and payable under the contract.

D. While the buyer in all cases shall have an absolute right to receive, and the holder to remit, net funds in cash, in which event the buyer shall remain obligated to the holder to repay the same as part of the indebtedness under the contract, the holder may make available to the buyer the following options:

(1) To receive these net funds, in whole or in part, in cash, in which event the buyer's indebtedness under the contract will not be reduced;

(2) To have these net funds, in whole or in part, applied to reduce pro rata the monthly installment payments due for the remaining term of the contract;

(3) To have these net funds, in whole or in part, applied to the last installment payable, but not yet due, in which event, if this application results in prepayment in full of the buyer's remaining indebtedness under the contract, the buyer shall be entitled to a rebate of the finance charge to the extent required by Commercial Law Article, §12-620, Annotated Code of Maryland;

(4) To have these net funds, in whole or in part, applied to the next installment payable, but not yet due, in which event, if this application results in prepayment in full of the buyer's remaining indebtedness under the contract, the buyer shall be entitled to a rebate of the finance charge to the extent required by Commercial Law Article, §12-620, Annotated Code of Maryland;

(5) To make another disposition of the funds as the parties may mutually agree upon in writing.

E. In any case, the holder may elect to remit the unearned premium to the buyer, less any amounts then due and payable, if remittance is made not later than 10 days after the holder's receipt of the unearned premium by check delivered by first class mail to the last known address of the buyer. If the holder makes this election, the holder is not required to offer the buyer any option as described in §D of this regulation, and the full amount of the buyer's indebtedness under the contract, including the amount so remitted, shall remain intact.

F. Notwithstanding contract conditions to the contrary, notification explaining the above options shall be presented to the buyer in writing not later than 10 days after the holder's receipt of the notice of cancellation, delivered to the buyer's last known address by certified mail, return receipt requested. If the buyer fails to respond to this notice within 15 days from the date of mailing or within 15 days from the date of the holder's receipt of the unearned premium, whichever is later, the holder promptly shall send to the buyer a check for the net amount due and the buyer's indebtedness under the contract, including the amount so remitted, will remain intact. If delivery of this notification or of the check cannot be accomplished by the postal authorities, the holder shall hold the funds for the benefit of the buyer and when the debt is reduced to the point at which the funds held for the benefit of the buyer offset the remaining indebtedness due, the buyer will be notified that the contract has been paid in full.

G. If, at any time, the buyer defaults in the performance of any requirement under the contract, nothing contained in this regulation shall prohibit the holder from electing to accelerate the entire indebtedness and repossess the collateral, pursuant to the rights granted to the holder by Commercial Law Article, §12-624, Annotated Code of Maryland, and, in this event, the holder has the right to credit against the unpaid balance due under the contract, the return premium funds held for the benefit of the buyer.