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This opinion was issued during the second quarter of 1998.
Lenders are prohibited from charging interest in consumer credit transactions until the expiration of a three day right-of-rescission period, at which time the funds should become available to the borrower pursuant to Mass. Gen. Laws chapter 140D, section 10(a). The legislature has set out a clear standard prohibiting the charging of interest on funds that are not yet available to a borrower. Accordingly, it is the position of the Division of Banks that loan programs in which the customer is given more than one check, but may deposit them only as phases on home improvement are completed, would not be permissible in Massachusetts. In such programs, interest would accrue on the entire amount of the loan from the day the checks were advanced although portions of the loan proceeds would not be disbursed until the completion of a phase of a project. Furthermore, the Division cautions that such programs could constitute unfair and deceptive business practices pursuant to Mass. Gen. Laws chapter 93A.