June 5, 2001
Re: Amalgamated Bank of New York-Automobile Loan.
Thank you for the additional information you sent concerning the above referenced matter. Your problem, as I understand it, relates to a new automobile purchase financed by the Amalgamated Bank of N.Y. (the "Bank").
In addition to the monthly payment demanded by the loan you paid an extra $100.00 per month, for approximately one year, in the belief that your additional payment would be applied directly to the outstanding principal of the loan. When you inquired about the outstanding balance on the loan, the Bank informed you that it was not possible to pay down the principal in this manner. The Bank applied the additional monies you forwarded to future monthly payments with the result that you were paid up for three months in advance.
You ask us to determine whether the position of the Bank is correct and that you are precluded from paying down the principal of the loan by making additional payments over and above the monthly cost of the loan.
The "Consumer Loan Note" which sets forth the rights and obligations of the parties and forwarded by you is silent about whether you can prepay a portion of the outstanding balance by forwarding additional monies. However, the following is stated under the section titled Prepayment of Whole Note, "Even though I need not pay more than the fixed installments, I have the right to prepay the whole outstanding amount of this note at any time, if I do, or if this loan is refinanced-that is replaced by a new note-you will refund the unearned FINANCE CHARGE, calculated by the Actuarial Method, a commonly used method of calculation."
The reference to "Actuarial Method", is a method of calculating interest and does not speak to the issue of prepayment as the Bank officer purportedly told you.
In the absence of a contractual right to prepay the loan in part, or a statute granting such right, no right of prepayment exists. I regret to advise you that the provisions of Banking Law Section 108.4(e) which appears to govern your loan, does not confer the right to prepay in part, but does permit prepayment in full without penalty.
I trust that you find the above advice helpful.