AI-generated summary, not yet reviewed by Better Utah staff. Please consult the bill text.

Utah's Consumer Credit Code currently allows certain closed-end home loans secured by a subordinate lien on a house (a type of loan that isn't a borrower's main mortgage) to include a prepayment penalty if the lender offers the borrower a choice between a loan with no penalty and a loan with a penalty but a lower interest rate. This bill would eliminate that exception entirely, banning prepayment penalties on all closed-end consumer loans, and it adds formal legal definitions distinguishing a "prepayment penalty" (a fee for paying off debt early, which would be banned) from a "prepaid finance charge" (an upfront charge built into the loan, which lenders could still charge). It also changes how upfront finance charges are treated when a loan is paid off early: instead of the current rule that automatically refunds any portion of such a charge above 5% of the loan amount on a prorated basis, the bill would make the entire upfront charge nonrefundable unless the loan contract specifically states otherwise. Finally, the bill clarifies that fees paid to third parties (such as closing costs) do not have to be refunded to a borrower who pays off a loan early unless the lender itself receives a refund of that fee, and it makes minor wording changes to how courts calculate what a borrower owes if a lender accelerates and sues on a defaulted loan.