Indiana Code 28-5-1-8. Limitation of total obligation of single borrower; exceptions; loans to officers, agents, and employees; violation; offense; credit exposure from derivative transactions
(b) The term “obligations” as used in this section means the direct liability of the maker or acceptor of paper discounted with or sold to any such company, and the liability of the indorser, drawer, or guarantor who obtains a loan from, or discounts paper with or sells paper under the person’s guaranty to any such company, and, in the case of obligations of a copartnership or association, includes only those obligations of the several members thereof directly related to the copartnership or association, and, in the case of obligations of a corporation, includes all obligations of all subsidiaries thereof in which such corporation owns or controls a majority interest.
Attorney's Note
Under the Indiana Code, punishments for crimes depend on the classification. In the case of this section:| Class | Prison | Fine |
|---|---|---|
| Level 4 felony | between 2 and 12 years | up to $10,000 |
Terms Used In Indiana Code 28-5-1-8
- company: shall mean and include any corporation to which this chapter is applicable. See Indiana Code 28-5-1-3
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- department: means the department of financial institutions of the state of Indiana. See Indiana Code 28-5-1-3
- Guarantor: A party who agrees to be responsible for the payment of another party's debts should that party default. Source: OCC
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- Property: includes personal and real property. See Indiana Code 1-1-4-5
- United States: includes the District of Columbia and the commonwealths, possessions, states in free association with the United States, and the territories. See Indiana Code 1-1-4-5
(1) Obligations arising out of the discount of commercial or business paper actually owned by the person, firm, limited liability company, or corporation negotiating such paper.
(2) Obligations of the United States or any instrumentality thereof or of this state, or of any municipal corporation or taxing district thereof, or obligations fully insured by the federal housing administrator as to principal; however, the department may, under such rules and regulations as it may prescribe, limit the total amount that may be invested by any industrial loan and investment company in any one (1) obligation or in any class of obligations described in subdivisions (1) and (2).
(3) Obligations arising out of the agreement to repurchase, or the guaranty or endorsement of, retail installment sales contracts by a retail seller or subsequent assignee. However, this subdivision does not apply in any case where such company purchasing such paper does not become the absolute owner, or in any case where installment payments are collected by a prior owner of the paper, or by a retail seller of the goods represented thereby.
(4) Obligations arising out of the agreement to repurchase, or the guaranty or indorsement of, title-retaining real estate installment sales contracts by a seller, or subsequent assignees; however, this subdivision does not apply in any case where such company purchasing such contracts does not become the absolute owner, or in any case where installment payments are collected by a prior owner of the contracts or by a seller of such contracts.
(5) Obligations of the borrower arising out of loans in which the borrower has no personal liability but which are secured by bailment leases or the rentals due and to become due thereunder; and the rights of the lessor in said leases and the property being leased thereunder, and which loans are to be repaid out of said rentals due and to become due under said leases; or obligations arising out of the guaranty, endorsement, or assignment of bailment leases or the rentals due and to become due thereunder by the lessor. However, this subdivision does not apply in any such case where such company does not have the right or does not actually collect the rentals due or to become due thereunder.
(d) Obligations to an industrial loan and investment company of any subsidiary or subsidiaries of the company engaged in business for the purpose provided in section 6(a)(15) of this chapter shall at no time exceed in the case of one (1) subsidiary ten percent (10%) of the capital and surplus of the company or, in the case of more than one (1) subsidiary, in the aggregate twenty percent (20%) of the capital and surplus of the company unless in either case the department shall approve a larger percentage.
(e) Obligations to an industrial loan and investment company of any subsidiary or subsidiaries of the company engaged in business for the purpose provided in section 6(a)(14) of this chapter shall at no time exceed in the aggregate thirty percent (30%) of the amount of the capital and surplus of the company or such larger sum as the department may approve.
(f) Except as otherwise provided in this subsection and in section 9 of this chapter, no loan shall be made, directly or indirectly, by any industrial loan and investment company, to any active executive officer, agent, or employee thereof. The board of directors or executive committee of any industrial loan and investment company may, by resolution, duly entered in the records of the proceedings of the board or committee, authorize loans to or extend lines of credit to:
(1) any active executive officer, agent, or employee of such industrial loan and investment company in any amount not exceeding, at any one (1) time outstanding:
(A) ten thousand dollars ($10,000); plus
(B) ten thousand dollars ($10,000) which may be used for the sole purpose of educating the children of such active executive officer, agent, or employee as hereinafter provided; or
(2) directors not holding any office in such industrial loan and investment company, and not acting as an agent or employee thereof.
The board or committee may likewise authorize loans to or extend lines of credit to firms, limited liability companies, or corporations in which active executive officers, agents or employees or directors may be partners, members, or stockholders, but the total amount of the obligations of all such active executive officers, agents, or employees, and directors, or other firms, limited liability companies, or corporations in which such active executive officers, agents, employees, and directors are partners, members, or stockholders, shall not at any time exceed fifteen percent (15%) of the total resources of the industrial loan and investment company at the time any such loan or extension of credit is made. Loans and lines of credit permitted by this subsection shall be made only on authorization by a majority of all of the directors or members of the executive committee of such industrial loan and investment company, and by the affirmative vote of all directors or members of the executive committee present at the meeting, and such authorization may be general and need not be given for each loan or line of credit extended. However, such general authorization shall be voted upon at least annually. When a line of credit has been extended pursuant to this subsection to any such active executive officer, agent, or employee or to any such director, or to any firm, corporation, limited liability company, or partnership in which an active executive officer, agent, employee, or director may be a partner, member, or stockholder, any notes or other instruments evidencing an indebtedness to the industrial loan and investment company, and any renewals or extensions thereof, need not be authorized as otherwise required by this subsection if such loan, or any renewal or any extension thereof, is within the terms of the authorization of the line of credit theretofore extended by the directors or executive committee to such active executive officer, agent, or employee, or to such director, or to any firm, corporation, limited liability company, or partnership in which any active executive officer, agent, employee, or director may be a partner, member or stockholder. The department, under such general rules and regulations as it may prescribe, which shall apply to all industrial loan and investment companies alike, may require full collateral security for all loans of the types permitted by this subsection and, for the purpose of providing that such security may be adequate, may specify the types thereof that may be pledged. Subject to section 9 of this chapter, the limitations of this subsection shall not apply to a loan by an industrial loan and investment company to an active executive officer, agent, or employee thereof made upon the security of real estate whereupon such active executive officer, agent, or employee maintains the person’s actual residence. The term “actual residence” includes a two (2) family dwelling unit if one (1) of such units is occupied by the active executive officer, agent, or employee of the industrial loan and investment company.
(g) An officer or director of any industrial loan and investment company who knowingly violates subsection (f) commits a Level 4 felony.
(h) For purposes of any lending limits set forth in this section with respect to an industrial loan and investment company, the total loans and extensions of credit by an industrial loan and investment company includes any credit exposure to a person arising from a derivative transaction (as defined in 12 U.S.C. § 84(b)(3)) between the industrial loan and investment company and the person.
Formerly: Acts 1935, c.181, s.8; Acts 1937, c.105, s.4; Acts 1949, c.229, s.1; Acts 1955, c.20, s.3; Acts 1969, c.129, s.2; Acts 1971, P.L.399, SEC.3; Acts 1973, P.L.284, SEC.3. As amended by Acts 1977, P.L.293, SEC.2; Acts 1979, P.L.265, SEC.2; P.L.8-1993, SEC.448; P.L.213-2007, SEC.59; P.L.217-2007, SEC.57; P.L.158-2013, SEC.300; P.L.186-2015, SEC.35.