§3506.1. Time for accrual of interest; penalties

A. Notwithstanding the provisions of R.S. 9:3506 or any other law to the contrary, interest on the principal obligation of a promissory note, evidencing a closed-end loan secured by a mortgage on immovable property, including any improvements thereon, shall not commence to accrue prior to the date upon which the loan proceeds have been made available for disbursement. In such case, when funds are to be disbursed to or for the account of a vendor, borrower, or purchaser, the lending institution shall make the loan proceeds available to the notary public or licensed title company for disbursement at the time of execution of the act of sale or act of mortgage.

B. The provisions of Subsection A of this Section shall not apply (a) if the loan proceeds are paid or made available, as the case may be, in cash or by check, cashier's check, share draft, traveler's check, or money order issued by, or drawn on, a financial institution, the accounts of which are insured by an agency or instrumentality of the United States, and which has an office in this state from which payment shall be obtained, or (b) if the notary public or licensed title company fails to comply with the lending institution's written closing instructions. The provisions of Subsection A of this Section also shall not apply to open-end lines of credit, including without limitation, revolving loan accounts, subject to the Louisiana Consumer Credit Law.

C. The provisions of Subsection A of this Section shall not apply to any transaction in which a right of rescission applies pursuant to the provisions of Regulation Z, specifically 12 CFR Section 226.15 and 12 CFR Section 226.23, issued pursuant to the Truth in Lending Act, 15 U.S.C. 1601 et seq.

D. If a lending institution fails to comply with the provisions of Subsection A of this Section, the offending lending institution shall, upon written demand of the borrower, vendor, or purchaser, pay a penalty of one thousand dollars to the borrower, vendor, or purchaser. If a lending institution fails to comply with the provisions of this Subsection within thirty days after receipt of the written demand, the lending institution shall be liable for reasonable attorney fees for the prosecution of the borrower's, vendor's, or purchaser's claim, either amicably or in a judicial proceeding. In the event that a lending institution is liable for the payment of any penalties or attorney fees due to the failure of the notary public or licensed title company to comply with the lending institution's written closing instructions, the notary public or licensed title company shall be liable for any penalties or attorney fees which may be owed to the vendor, borrower, or purchaser.

Acts 1986, No. 972, §1; Acts 1987, No. 806, §1; Acts 1995, No. 674, §1; Acts 1995, No. 1184, §2.