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Consumer Credit Regulation: 11.3.2.3 Revolving Charge Accounts

Many RISAs regulate revolving charge accounts—open-end lines of credit issued by retailers such as department stores or home-heating fuel suppliers for purchase of their merchandise. Typically, bank-issued credit cards that can be used not just at one retailer are outside the scope of a state RISA. On the other hand, the Third Circuit interpreted Pennsylvania’s revolving charge account provision as encompassing bank-issued credit cards.61

Consumer Credit Regulation: 11.3.2.5 Rate Exportation and Federal Preemption

Federal law allows national banks, federal savings associations, and federally insured, state-chartered banks, savings associations and credit unions to export their home state interest limits to the state where a transaction occurs. Rate exportation, though, is much less of an issue for RISAs than for other state consumer credit legislation. The entity originating the credit in a retail installment sale is the seller, and the seller is almost never a financial institution.

Consumer Credit Regulation: 11.3.3 Licensure

In a number of states, RISAs or MVRISAs require that retail installment sellers be licensed.73 If a state has a separate MVRISA, it may require licensure for motor vehicle dealers extending credit, even if the RISA does not require licensure for sellers more generally.

Consumer Credit Regulation: 11.3.4.1 Limits on Finance Charges

All RISAs and MVRISAs permit sellers to impose an interest charge or a charge comparable to interest in connection with a retail installment agreement.79 Where a transaction is covered by the RISA or MVRISA statute, then that more specific interest rate cap applies, not that of the state’s general usury statute.80 Appendix C,

Consumer Credit Regulation: 14.3.3 Relationship Between Lender and the Original Obligor

Some courts find persuasive evidence that a transaction is actually a disguised loan where the lender collects payments from the borrower, rather than directly collecting the income stream supposedly purchased from the original obligor.28 The “salary buyers” of the early 20th century often structured transactions in this way: they would “purchase” a borrower’s next pay packet at a discount and have the borrower execute documents purporting to assign the right to collect the wages of the original obligor.29

Consumer Credit Regulation: 14.4 Military Pensions and Benefits

A few companies specialize in providing lump sums in exchange for military veterans’ promises to redirect their monthly pension or disability benefits directly to the lender for a number of years. Typically, prospective borrowers contact the lender in response to advertisements placed in military newspapers, magazines, or internet sites giving the appearance of military approval.

Consumer Credit Regulation: 11.3.5.1 Deferral Charges

Many RISAs authorize sellers or creditors to receive a deferral charge in the event that the parties agree, before or after default, to a deferral of all or part of one or more unpaid installments. Some statutes state simply that the creditor may charge a rate not exceeding the one previously disclosed to the consumer.98 A greater number of statutes provide specific methods to be used in the calculation.

Consumer Credit Regulation: 11.3.5.2 Late Fees

Most courts hold that, because they are contingent, late charges are not interest for purposes of state law.103 Instead, a number of RISAs separately limit the fee or charge that a creditor may impose for a late payment.

Consumer Credit Regulation: 11.3.5.3 Other Fees

Some RISAs restrict clauses making the consumer liable for the creditor’s attorney fees in a collection suit.110 However, one court held that it was not a violation of such a provision for the creditor to seek attorney fees in a collection action where the contract did not have a clause allowing fees.111

Consumer Credit Regulation: 11.3.5.4 Rebates of Unearned Interest

Consumers often pay off retail installment contracts early. A common reason for an early payoff is that the consumer trades in the item purchased and buys a new one. An installment contract also will involve unearned interest when the consumer defaults, and the creditor accelerates the credit obligation so that the full amount is due early.

Consumer Credit Regulation: 11.3.6 Security Interests and Repossession

A common feature of state RISAs is a limitation on the types of security interests that may be taken in connection with the sale. Some prohibit creditors from taking security interests in real property in connection with retail installment sales.122 Many limit security interests to the items purchased in the transaction.123 A number of RISAs restrict self-help repossessions or provide post-repossession protections.

Consumer Credit Regulation: 11.3.7 RISA Disclosure Requirements

Many state RISAs and MVRISAs require disclosure of particular costs and charges related to the credit transaction as well as other costs and terms.125 These disclosure requirements are important not only in themselves, but also because they may operate as definitions of terms that are used in applying the statute’s substantive limits. For example, if the RISA limits finance charges in relation to the “cash price,” the meaning of that term may be derived from a disclosure requirement.126

Consumer Credit Regulation: 11.3.8.1 Single Document Rule Requirement

Certain RISAs, MVRISAs, or other consumer credit statutes require that the entire agreement be contained in a single document.140 Some of these even have state prescribed forms for credit application and contracts for the sale of vehicles.141 Other statutes do not use words like “single document” but may achieve a similar result as the single document rule142

Consumer Credit Regulation: 11.3.9 Contract Completion and Delivery Requirements

Many state installment sales statutes require that the contract be “completed as to all essential provisions” before the buyer signs and that an exact signed copy of the contract, containing certain specified terms, be delivered to the buyer.161 These statutes may give the consumer a remedy against an installment seller who withholds the contract, planning to discard it if financing falls through.162 For example, a federal court found a violation of the Michigan MVRISA where a seller did not giv

Consumer Credit Regulation: 11.3.10.2 Remedies in UCCC States

Even states that have adopted the Uniform Consumer Credit Code differ among themselves with respect to remedy. For example, some UCCC states provide for a remedy in the event that only specified, enumerated provisions are violated, while others are more general in their application.

Consumer Credit Regulation: 11.4.1 Background

The design of most cities and suburbs, a lack of public transportation in both rural and urban areas, and numerous other factors make life without a car difficult if not impossible for many. A survey by the U.S. Census Bureau found that approximately 85% of adults commute to work using a personal vehicle.189 For the foreseeable future many Americans will need a car to be productive, engaged members of society.