Is a 10% Prepayment Premium Unconscionable?
Planned Pethood also asserted that, regardless of whether the prepayment premium qualified as liquidated damages, the amount of the prepayment premium (equaling about 10% of the principal) was unconscionable. In holding that the prepayment premium was not unconscionable, the court reasoned that prepayment premiums are generally permitted in Colorado, except in consumer loans and certain residential mortgages. The court discussed the possibility that a prepayment premium might be so large, or a lender’s behavior so egregious, as to render the enforcement of a prepayment premium unconscionable. A prepayment premium could be unenforceable, for example, if it were so unconscionable that no decent, fair-minded person would view the ensuing result without being possessed with a profound sense of injustice. Colorado courts have upheld prepayment premiums as large as 50%. In addition, the court discussed the following additional factors that helped it conclude that the prepayment premium was n
