AB834: Bill Text

LRB-4693/1

KSH:skg:jlb

1995 - 1996 LEGISLATURE

1995 Assembly BILL 834

January 30, 1996 - Introduced by Representatives Kaufert, Travis, Hoven, Freese, Wirch, Foti, Otte, Rutkowski, Green, Meyer, Baldus, Silbaugh, Vrakas, Hasenohrl and Vander Loop, cosponsored by Senators Darling, Wineke, Andrea, Burke, Breske, Drzewiecki, Petak, C. Potter, Jauch and Schultz. Referred to Committee on Financial Institutions.

AB834,1,12 An Act to repeal 422.201 (12), 422.203 (4) (b), 422.413 (2), 422.417 (1) (e), 424.208 (1) (b), 424.301 (1) (b) 4., 425.114 and 425.206 (1) (d); to consolidate, renumber and amend 424.208 (1) (intro.) and (a); to amend 421.203 (1), 421.301 (17), 422.201 (8), 422.201 (10) (e), 422.201 (10m) (g), 422.203 (4) (a), 422.203 (4) (c), 422.207 (1), 422.209 (1), 422.209 (2) (b) 1., 422.209 (2) (b) 2., 422.402 (1), 422.402 (1m), 422.411 (1), 422.412, 422.413 (1), 422.417 (1) (c), 422.417 (1) (d), 422.417 (2), 422.418 (2), 422.421 (6) (a) 1., 422.501 (3), 423.201, 425.103 (2) (a), 425.206 (1) (b), 425.206 (1) (c), 425.207 (2), 425.208 (1) (intro.) and 425.208 (1) (cm); and to create 421.202 (9) and 422.209 (1m) of the stat utes; relating to: permissible loan origination fees in certain consumer credit transactions and excluding agricultural transactions from the Wisconsin con sumer act.

Analysis by the Legislative Reference Bureau

Under current law, the Wisconsin consumer act (WCA) generally applies to all consumer transactions made in the state, unless a specific exclusion applies. Cur rent law contains a number of exclusions, including an exclusion for consumer credit transactions in which the amount financed exceeds $25,000 and other consumer transactions in which the cash price exceeds $25,000. The bill amends the WCA to also exclude any transaction that is for an agricultural purpose. A transaction is for an agricultural purpose if its purpose is related to the production, harvest, exhibi tion, marketing, transportation, processing or manufacture of agricultural products by certain persons who cultivate, plant, propagate or nurture those agricultural products.

Under current law, a loan origination fee on a consumer loan is generally treated as part of the finance charge and, as a result, the unearned portion of the loan origination fee must be rebated to the customer upon prepayment of a precomputed consumer credit transaction. This bill creates an exception from this provision to al low a merchant to retain a loan origination fee if certain conditions are met. In order to retain the fee, the fee must not exceed 2% of the amount financed in the precom puted consumer credit transaction and the fee must be for a loan that is secured pri marily by an interest in real property or in a mobile home. The bill restricts the ability of a merchant to retain a loan origination fee if a merchant makes a new loan to a customer which is used to prepay an old loan from the same merchant, the new loan is made within 6 months of the old loan and a new loan origination fee is charged on the new loan.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB834, s. 1 Section 1. 421.202 (9) of the statutes is created to read:

AB834,2,2 421.202 (9) Transactions that are primarily for an agricultural purpose.

AB834, s. 2 Section 2. 421.203 (1) of the statutes is amended to read:

AB834,2,8 421.203 (1) Consumer credit transactions, not governed by ch. 428, which are made, insured or guaranteed by the federal government or any agency thereof, or by any federal instrumentality chartered under the federal farm credit act of 1971 (P.L. 92-181; 85 stats. 583; 12 USC 2001 et seq.), or the department of veteran's affairs shall be subject to only those provisions set forth in sub. (2).

AB834, s. 3 Section 3. 421.301 (17) of the statutes is amended to read:

AB834,3,2 421.301 (17) "Customer" means a person other than an organization (s. 421.301 (28)) who seeks or acquires real or personal property, services, money or credit for personal, family, or household or agricultural purposes. A person other than a customer may agree to be governed by chs. 421 to 427 with respect to all aspects of a transaction and in such event such person shall be deemed a customer for all purposes of chs. 421 to 427 with respect to such transaction.

AB834, s. 4 Section 4. 422.201 (8) of the statutes is amended to read:

AB834,3,10 422.201 (8) That portion of the finance charge consisting of an amount equal to a discount of 5% or less of the stated price which is offered to induce payment in full within a stated period of time in connection with a sale for agricultural purposes or a sale of particular goods and services for which credit is not otherwise available from the merchant shall not be included in the finance charge for the purpose of de termining the maximum rate of finance charge under sub. (2), (3) or (4) with respect to a customer who does not pay in full within such time.

AB834, s. 5 Section 5. 422.201 (10) (e) of the statutes is amended to read:

AB834,3,19 422.201 (10) (e) If the availability of the discount is disclosed to all prospective buyers, that portion of the finance charge consisting of an amount equal to a discount of 5% or less of the stated price which is offered by a merchant either in connection with a sale for agricultural purposes, or to induce immediate payment in full rather than by use of a credit card shall not be included in the finance charge for the purpose of determining the maximum rate of finance charge under this subsection with re spect to a customer who either elects to use a credit card or to have such agricultural transaction posted to the customer's open-end account.

AB834, s. 6 Section 6. 422.201 (10m) (g) of the statutes is amended to read:

AB834,4,2 422.201 (10m) (g) If its availability is disclosed to all prospective buyers, a dis count of 5% or less of the stated price offered by a merchant in connection with a sale for agricultural purposes or to induce immediate payment in full other than by use of a credit card may not be included in the finance charge for the purpose of determin ing the maximum rate of finance charge under this subsection for a customer who elects to use a credit card or to have the agricultural transaction posted to the custom er's open-end account.

AB834, s. 7 Section 7. 422.201 (12) of the statutes is repealed.

AB834, s. 8 Section 8. 422.203 (4) (a) of the statutes is amended to read:

AB834,4,12 422.203 (4) (a) With respect to a consumer credit transaction other than one primarily for an agricultural purpose, interest after the final scheduled maturity date may not exceed the greater of either 12% per year or the annual rate of finance charge assessed on that transaction if the transaction is entered into on or after April 6, 1980 and prior to November 1, 1981, and may not exceed the maximum rate per mitted by s. 138.05 (1) (a), if the transaction is entered into prior to April 6, 1980, but if such interest is charged no delinquency charge may be taken on the final scheduled instalment.

AB834, s. 9 Section 9. 422.203 (4) (b) of the statutes is repealed.

AB834, s. 10 Section 10. 422.203 (4) (c) of the statutes is amended to read:

AB834,4,20 422.203 (4) (c) With respect to a consumer credit transaction other than one primarily for an agricultural purpose, interest after the final scheduled maturity date shall not exceed the greater of either 12% per year or the annual rate of finance charge assessed on that transaction if the transaction is entered into on or after No vember 1, 1981, but if interest is charged no delinquency charge may be taken on the final scheduled instalment.

AB834, s. 11 Section 11. 422.207 (1) of the statutes is amended to read:

AB834,5,8 422.207 (1) With respect to a consumer credit transaction the parties may, to the extent not prohibited by chs. 421 to 427, agree that the customer will perform cer tain duties with respect to preserving or insuring collateral if such duties are reason able in relation to the risk of loss of or damage to the collateral. If the customer fails to so perform the creditor may, if authorized by the agreement, pay for the perfor mance of such duties on behalf of the customer. The amount paid may be added to the unpaid balance of the customer's obligation, if, in the absence of performance, the merchant has made all expenditures on behalf of the customer in good faith and in a commercially reasonable manner and except in the case of a transaction for an agri cultural purpose where the collateral is perishable and threatens to decline speedily in value, the merchant has given the customer written notice of the nonperformance and reasonable opportunity after such notice to so perform.

AB834, s. 12 Section 12. 422.209 (1) of the statutes is amended to read:

AB834,5,15 422.209 (1) Upon Except as provided in sub. (1m), upon prepayment in full of the unpaid balance of a precomputed consumer credit transaction, refinancing or consolidation, an amount not less than the unearned portion of the finance charge calculated according to this section shall be rebated to the customer. If the total of all rebates, refunds and credits to be paid to the customer under chs. 421 to 427 is less than $1, no rebate need be made.

AB834, s. 13 Section 13. 422.209 (1m) of the statutes is created to read:

AB834,5,18 422.209 (1m) (a) In the event of prepayment under sub. (1), a merchant may retain a loan origination fee that meets all of the following conditions:

AB834,5,20 1. The loan origination fee does not exceed 2% of the amount financed in the precomputed consumer credit transaction, refinancing or consolidation.

AB834,5,22 2. The loan origination fee is for a consumer loan that is secured primarily by an interest in real property or in a mobile home, as defined in s. 218.10 (2).

AB834,6,2 (b) Notwithstanding par. (a), a merchant may not retain any portion of a loan origination fee charged on a loan that is prepaid from the proceeds of a new loan made by the same creditor to the extent that a new loan origination fee is charged on the portion of the amount financed used to prepay the prior loan, if the new loan is en tered into within 6 months of the prior loan.

AB834, s. 14 Section 14. 422.209 (2) (b) 1. of the statutes is amended to read:

AB834,6,13 422.209 (2) (b) 1. The portion of the finance charge which is allocable to all un expired payment periods as scheduled or deferred. A payment period is unexpired if prepayment is made within 15 days after the payment's due date. The unearned finance charge is the finance charge which, assuming all payments are made as scheduled or deferred, would be earned for each unexpired payment period by apply ing to unpaid balances of principal, according to the actuarial method, the annual percentage rate disclosed to the customer under subch. III or, in the case of a transac tion for an agricultural purpose, the annual percentage rate based on the finance charge. The creditor may decrease the annual interest rate to the next multiple of 0.25%.

AB834, s. 15 Section 15. 422.209 (2) (b) 2. of the statutes is amended to read:

AB834,6,19 422.209 (2) (b) 2. The finance charge less the amount determined by applying the annual percentage rate disclosed to the customer under subch. III or, in the case of a transaction for an agricultural purpose, the annual percentage rate based on the finance charge, according to the actuarial method, to the unpaid balances for the ac tual time those balances were unpaid up to the date of prepayment.

AB834, s. 16 Section 16. 422.402 (1) of the statutes is amended to read:

AB834,7,6 422.402 (1) Except as provided in sub. (1m), with respect to a consumer credit transaction other than a transaction which is a) pursuant to an open-end credit plan, or b) not precomputed and on which the annual percentage rate disclosed under subch. III is less than 16.5% for a consumer credit sale in which the seller retains a security interest in real estate which is the subject of the sale or any consumer loan, either of which is entered into on or after April 6, 1980 and prior to November 1, 1981, or 12% for any other consumer credit transaction or c) a transaction primarily for an agricultural purpose, no merchant shall enter into an agreement which requires a schedule of payments under which any one payment is not equal or substantially equal to all other payments, or under which the intervals between any consecutive payments differ substantially except as permitted in sub. (2) or (3).

AB834, s. 17 Section 17. 422.402 (1m) of the statutes is amended to read:

AB834,7,17 422.402 (1m) With respect to a consumer credit transaction other than a trans action which is a) pursuant to an open-end credit plan, or b) not precomputed and on which the annual percentage rate disclosed under subch. III is not more than 18% for a consumer credit sale in which the seller retains a security interest in real estate which is the subject of the sale or any consumer loan, either of which is entered into on or after November 1, 1981 and before November 1, 1984, or c) a transaction pri marily for an agricultural purpose, no merchant shall enter into an agreement which requires a schedule of payments under which any one payment is not equal or sub stantially equal to all other payments, or under which the intervals between any con secutive payments differ substantially except as permitted in sub. (2) or (3).

AB834, s. 18 Section 18. 422.411 (1) of the statutes is amended to read:

AB834,7,23 422.411 (1) Except as provided in subs. (2) and (2m), with respect to a consumer credit transaction no term of a writing may provide for the payment by the customer of attorney fees. Notwithstanding subs. (2) and (2m), a consumer credit transaction may not provide for the payment by the customer of attorney fees if the transaction is for an agricultural purpose.

AB834, s. 19 Section 19. 422.412 of the statutes is amended to read: