Under what conditions are prepayment penalties allowed according to the Utah Consumer Credit Code?

Prepayment penalties in Utah are allowed under specific conditions, provided that the borrower is given an option to avoid these penalties. This flexibility is essential as it serves to protect the interests of consumers while still allowing lenders to mitigate risks associated with the early repayment of loans. The emphasis on ensuring that borrowers have an alternative means, such as the option of paying off the loan without incurring penalties, underscores the intention of the Utah Consumer Credit Code to promote fair lending practices and consumer protection.

In contrast to other options, which may suggest blanket permissions or restrictions, this correct choice acknowledges the need for a balanced approach in the lending framework. It aligns with consumer advocacy principles by ensuring borrowers have choices, which can ease their financial burdens in circumstances where they wish to capitalize on refinancing or pay off debts early.