Section 21-16-711 - Notice of default; authority to pay unpaid balance of principal to financial institutions; financial institutions to deliver note to authority(a) The authority shall establish and at all times maintain one (1) or more adequate reserve funds to provide for defaults on student loans financed pursuant to this article. All financial institutions offering loans to be financed pursuant to this article and the authority, on all loans made directly to students pursuant to this article, shall charge a loan reserve fee of not more than five percent (5%) of the total face amount of the loan. The authority may from time to time decrease this percentage in furtherance of this plan. In order for a loan to qualify for default coverage by the authority under this article, the financial institution shall deposit the loan reserve fee into reserve funds established by the authority under this section. The authority shall establish procedures for the collection and deposit of the loan reserve fee and for the payment of defaults on secured loans. The loan reserve fee is not a finance charge for purposes of any state or federal consumer credit law. (b) In the event of a default on any loan owned by the authority or security obligation of the authority, the authority shall take all lawful steps to collect on all loans acquired, administered or financed pursuant to this article and in accordance with commercially reasonable terms and subject to any applicable state or federal statutes, may contract with a private collection agent for loan collection. (c) In the event of a default on any loan not owned by the authority but administered or financed pursuant to this article, the authority shall as soon as practicable after receipt of demand by a financial institution containing a statement of the nature and the reason for the default, pay, from the loan reserve funds established pursuant to this article, to the financial institution one hundred percent (100%) of the unpaid balance of the principal on the note. Upon payment, the financial institution shall endorse, without recourse or warranty, and deliver to the authority the note, together with all of the rights of the financial institution under any guaranty or endorsement of the note and with respect to any security for the payment of the note.