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Home Improvement Financing Volume II
 

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    Home Improvement Financing Volume II Home Improvement Financing Volume II Document Transcript

    • A Model State Law In three volumes FINANCIAL PROTECTION Home Improvement Financing Volume II Summaries of State Laws (Alabama - Michigan)
    • IMPRO .INANCING HOME IMPROVEMENT .INANCING Volume II STA STA SUMMARIES O. STATE STATUTES Alabama - Michigan by Margot Saunders, Attorney Elizabeth Renuart, Attorney National Consumer Law Center Sharon Hermanson, Project Officer AARP Public Policy Institute October 2000 The Public Policy Institute, formed in 1985, is part of Public Affairs at AARP. One of the missions of the Institute is to foster research and analysis on public policy issues of importance to older Americans. This publication represents part of that effort. The views expressed therein are for information, debate, and discussion, and do not necessarily represent formal policies of AARP. © 2000, AARP. Reprinting with permission only. Stock Number: D17165 AARP, 601 E Street, NW, Washington, DC 20049 http://research.aarp.org
    • Contents Volume II Impro Home Impr ov ement .inancing Summaries of State Statutes (Alabama - Michigan) ALABAMA ............................................................................................................................................ 4 Consumer Finance (the “Mini-Code”) ............................................................................................ 4 Interest Surcharge on Loans; Alternative Maximum Interest Rate ................................................. 4 ALASKA ............................................................................................................................................... 5 Retail Installment Sales Act ...........................................................................................................5 Interest-Usury ................................................................................................................................ 5 Consumer Paper ........................................................................................................................... 6 Alaska Small Loans Act ................................................................................................................. 6 ARIZONA .............................................................................................................................................8 Retail Installment Sales Transactions ...........................................................................................8 Consumer Paper ........................................................................................................................... 8 Consumer Lender Loans ..............................................................................................................8 Interest - Usury, Small Loans ........................................................................................................ 9 ARKANSAS ....................................................................................................................................... 11 Industrial Loan Institutions ........................................................................................................... 11 Consumer Loans and Credit Sales ............................................................................................. 11 CALIFORNIA ..................................................................................................................................... 13 Professions and Vocations, Contractors ..................................................................................... 13 Unruh Act (Retail Installment Sales Law) .................................................................................... 14 Finance Lenders Law .................................................................................................................. 16 Industrial Loan Companies - Loans and Purchased Obligations ................................................ 18 COLORADO ..................................................................................................................................... 20 Colorado Uniform Consumer Credit Code .................................................................................. 20 CONNECTICUT ................................................................................................................................ 26 Small Loan Lenders Act .............................................................................................................. 26 Usury ........................................................................................................................................... 26 Retail Installment Sales Act ......................................................................................................... 27 DELAWARE ...................................................................................................................................... 28 Retail Installment Sales Law ....................................................................................................... 28 Licensed Lenders ........................................................................................................................ 29 Interest-Usury .............................................................................................................................. 30 DISTRICT OF COLUMBIA ................................................................................................................ 32 Interest and Usury ....................................................................................................................... 32 Consumer Credit Protection Act ................................................................................................. 32 FLORIDA ........................................................................................................................................... 34 Home Improvement Sales and Finance Act; Home Improvement Sales and Finance ................ 34 GEORGIA .......................................................................................................................................... 37 Retail Installment and Home Solicitation Sales Act ..................................................................... 37 Industrial Loans ........................................................................................................................... 38 Interest-Usury .............................................................................................................................. 39 GUAM ................................................................................................................................................ 41 Uniform Consumer Credit Code .................................................................................................. 41 2 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • HAWAII ............................................................................................................................................... 43 Credit Sales Act .......................................................................................................................... 43 Interest-Usury .............................................................................................................................. 45 Financial Services Loan Companies ........................................................................................... 45 IDAHO ............................................................................................................................................... 47 Idaho Credit Code ....................................................................................................................... 47 ILLINOIS ............................................................................................................................................ 50 Illinois Interest Act ........................................................................................................................ 50 Retail Installment Sales Act ......................................................................................................... 50 Consumer Installment Loan Act .................................................................................................. 52 INDIANA ............................................................................................................................................. 54 Indiana Consumer Credit Code ................................................................................................... 54 IOWA ................................................................................................................................................. 58 Iowa Consumer Credit Code ....................................................................................................... 58 Iowa Regulated Loan Act (Iowa Small Loan Law) ....................................................................... 62 Iowa Industrial Loan Law ............................................................................................................. 62 Money and Interest ...................................................................................................................... 63 KANSAS ............................................................................................................................................ 66 Kansas Uniform Consumer Credit Code .................................................................................... 66 Interest-Usury .............................................................................................................................. 70 KENTUCKY ....................................................................................................................................... 72 Installment Sales Contracts ........................................................................................................ 72 Industrial Loan Corporations........................................................................................................ 73 Interest-Usury .............................................................................................................................. 74 Consumer Credit Contracts ........................................................................................................ 74 LOUISIANA ........................................................................................................................................ 75 Interest and Usury ....................................................................................................................... 75 Louisiana Consumer Credit Law ................................................................................................. 75 MAINE ................................................................................................................................................ 77 Maine Consumer Credit Code ..................................................................................................... 77 Door to Door Home Repair Transient Sellers Act ........................................................................ 78 MARYLAND ....................................................................................................................................... 80 Home Improvement Law ............................................................................................................. 80 Retail Installment Sales ............................................................................................................... 81 Consumer Loans—Credit Provisions ......................................................................................... 83 Preservation of a Consumer’s Claims and Defenses in Consumer Credit Transactions ........... 84 Secondary Mortgage Loan Law ................................................................................................... 85 Credit Grantor Closed-End Credit Provisions ............................................................................. 86 MASSACHUSETTS ........................................................................................................................... 89 Licensing of Certain Mortgage Lenders and Brokers .................................................................. 89 Retail Installment Sales and Services ......................................................................................... 89 Rates of Interest and Loans ........................................................................................................ 90 MICHIGAN ......................................................................................................................................... 92 Home Improvement Finance Act ................................................................................................. 92 Credit Reform Act ....................................................................................................................... 94 Secondary Mortgage Loan Act .................................................................................................... 96 Volume II - Home Improvement .inancing: Summaries of State Statutes 3
    • ALABAMA Consumer Finance (the “Mini-Code”) ALABAMA Citation: Ala. Code §§5-19-1 to 5-19-3 Applicability: Only the provisions of the act regulating maximum and minimum finance charges apply to transactions involving an interest in real property (§5-19-31). A creditor covered by the act is a person who regularly extends or arranges for extension of credit. Regularly is defined as more than 5 times in preceding calendar year for transactions secured by a residential structure of one to four units (§5-19-1). Interest Rate and Fee Caps: The maximum interest rates are: 1) if the amount financed is less than $2,000, 15 percent per year on first $750; 2) 10 percent per year on amount greater than $750 and less than $2,000; and 3) no limit if the amount financed is greater than $2,000 (§5-19-3). Loan Terms: If the amount financed is less than $2,000, debtors may pay, in advance, the unpaid balance and accrued finance charges without penalty (§5-19-3). Prohibited Loan Terms: If the amount financed is less than $2,000, the finance charge may not be payable in advance, with exception of certain prepaid finance charges, and may not be compounded (§5-19-3). Applicability of State UDAP: Yes, except banks. Ala. Code §8-19-1. Private right of action with actual damages, $100 minimum damages, attorney fees available. Treble damages discretionary based on frequency, seriousness and intent of violations Interest Surcharge on Loans; Alternative Maximum Interest Rate Citation: Ala. Code §§8-8-12 and 8-8-14 Applicability: Legal licensed lending institutions, vendors making credit sales, any financial institution operating in Alabama or any individual (§8-8-14) Interest Rate and Fee Caps: Covered lenders may, if provided in contract, charge a 6 percent surcharge on the portion of the amount financed that is not in excess of $2,000, in addition to the allowed finance charge. As an alternative to any other allowed interest rate, covered lenders may charge a maximum rate not exceeding 2 percent above the prime rate, which shall be the average of the prime rate offered by the 3 largest banks in New York City 3 days before the transaction (§8-8-14). Civil Penalties/Enforcement: The penalty for charging excess interest is the forfeiture of all interest (§8-8-12). Applicability of State UDAP: Yes, except banks. Ala. Code §8-19-1. Private right of action with actual damages, $100 minimum damages, attorney fees available; treble damages discretionary based on frequency, seriousness, and intent of violations 4 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • ALASKA A L A S K A A L A S K A A L A S K A Retail Installment Sales Act A L A S K A A L A S K A Citation: Alaska Stat. §§45.10.010 to 45.10.230 Applicability: The act applies to purchasers of good or services from retail sellers. “Goods” explicitly include goods which are to be so affixed to real property or to become a part of it, whether or not severable from it (at the end of sale or subsequently). “Services” explicitly include repairs, alterations, or improvements upon or in connection with real property (does not include the services of a professional person licensed by the state) (§45.10.220). Interest Rate and Fee Caps: Premiums included for insurance may not exceed the amount actually charged the seller (if more than $1) (§45.10.130). The interest rate is limited to the amount agreed upon in the contract (§45.10.120). Reasonable delinquency, collection, or dishonored check charges; attorney fees; court costs; and disbursements may be charged to the buyer if agreed upon in the contract. No attorney fees may be recovered, unless the contract is referred for collection to an attorney who is not a salaried employee of the holder (§45.10.080). Loan Terms: The buyer may prepay at any time (§45.10.070). Disclosures: The seller must provide the buyer with a copy of the accepted contract. Until the seller does so, the buyer is only obligated to pay cash sale price (§45.10.150). The written contract must disclose all fees and charges, the rate of the service charge, and amount and number of installments (§45.10.060). Prohibited Acts: Waivers of any provision of the act or of buyers’ remedies, if entered into before or at the time of contract (§45.10.150). Signing a contract with essential terms left blank (§45.10.060) Criminal Penalties: Willful and intentional violations are a misdemeanor (§45.10.210). Violations of orders or injunctions issued under the act are punishable by a $1,000 fine and/or 6 months imprisonment (§45.10.200). Civil Penalties/Enforcement: Except for bona fide errors, a seller who violates this chapter may not collect the service charges, officials fees, or delinquency or collection charges (§45.10.190). The Attorney General has the right to restrain and prevent violations (§§45.10.170 and 45.10.180). Applicability of State UDAP: Yes. Alaska Stat. §45.50.471. Private right of action is available for actual damages; $200 minimum damages; treble damages discretionary for willful violations; necessary equitable relief; attorney fees “may” be awarded to the prevailing party Special Assignee Provisions: Waivers of right to raise claims or defense against the seller or assignment are invalid (§45.10.140). Interest-Usury Citation: Alaska Stat. §§ 45.45.010 to 45.45.070 Applicability: The act applies only to transactions not subject to the Alaska Retail Installment Sales Act (RISA) or Alaska Small Loan Act (§45.45.010). Volume II - Home Improvement .inancing: Summaries of State Statutes 5
    • Exemptions: Loans greater than $25,000 are exempt (§45.45.010). ALASKA Interest Rate and Fee Caps: 10.5 percent per year or no more than 5 percent above the annual rate charged member banks for advances by the 12th Federal Reserve District (§45.10.010) Civil Penalties/Enforcement: The penalty for receiving or collecting usurious interest is: 1) double the amount of interest (§45.45.030), and 2) the forfeiture of the entire interest on the debt (§45.45.040). Private Right of Action: Available for double amount of interest paid (§45.45.030) Applicability of State UDAP: Yes. Alaska Stat. §45.50.471. Private right of action is available for actual damages; $200 minimum damages; treble damages discretionary for willful violations; necessary equitable relief; attorney fees “may” be awarded to the prevailing party. Consumer Paper Citation: Alaska Stat. §45.50.541 Applicability: Consumer credit sales of goods or services Loan Terms: The note, instrument, or other evidence of a consumer credit sale must have the words “consumer paper” printed on its face. The note is not a negotiable instrument. Applicability of State UDAP: Yes. Alaska Stat. §45.50.471. Private right of action is available for actual damages; $200 minimum damages; treble damages discretionary for willful violations; necessary equitable relief; attorney fees “may” be awarded to prevailing party Special Assignee Provisions: The assignee of rights of the seller is subject to all of the claims of the buyer arising out of the sale. No waiver of this right is allowed. The assignee’s liability may not exceed the amount owed to the assignee under the contract at the time buyer asserts the claim or defense. Alaska Small Loans Act Citation: Alaska Stat. §§06.20.010 to 06.20.920 Applicability: Loans of $25,000 or less (§06.20.010) Exemptions: Banks, saving banks, trust companies, building and loan associations or credit unions, or pawnbrokers who make loans for less than $500 are exempt (§06.20.330). Licensing Requirements: Alaska Stat. §§06.20.010 to 06.20.190 Interest Rate and Fee Caps: Interest: 3 percent per month on the portion of the principal not exceeding $850; 2 percent per month on the portion of the principal between $850 and $10,000; as agreed by the contract on the portion of principal 6 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • ALASKA ALASKA ALASKA between $10,000 and $25,000 (§06.20230). The following other charges are ALASKA ALASKA permitted: filing or recording fees actually paid, or filing insurance premiums if they do not exceed said fees; consumer credit or property insurance premiums if actually paid; and court costs. If the loan is for less than $10,000 and secured by real estate, or for more than $10,000, then any reasonable costs of appraisals, surveys, and title insurance may be charged. Late payment fees of not more than 10 percent of the payment due or $25, whichever is less, maybe charged. Bad check fee may not exceed $25. Reasonable attorney fees, actual expenses, and costs incurred for collection, if referred to an attorney who is not a salaried employee and the balance owed exceeds $5,000, may be charged. Actual repossession expenses and costs may be charged (§06.20.260). Interest may not be paid, deducted, or received in advance. No compounding of interest is allowed unless the loan partly consolidates a previous loan (§06.20.250). Loan Terms: Payment in advance must be permitted (§06.20.270). Maximum loan terms: if principal is $1,000 or less, 24.5 months; if principal is between $1,000 and $2,500, 48.5 months; if principal is between $2,500 and $5,000, 60.5 months; if principal is between $5,000 and $25,000, as agreed by contract (§06.20.250) Prohibited Loan Terms: No balloon payments are allowed unless the borrower demonstrates sufficient seasonal income to justify an irregular payment schedule (§06.20.250). Disclosures: The Department of Commerce and Economic Development is authorized to require that rates of charge be stated fully and clearly in a manner considered necessary to prevent any misunderstanding by prospective borrowers (§06.20.200). A copy of the statutory sections limiting charges plus clear and distinct statements of amount of loan, nature of security, and agreed rate of charge must be disclosed (§06.20.270). Prohibited Acts: The following acts are prohibited: transacting business or making loan away from licensed premises; home solicitation (§06.20.220); splitting loans made at same time in order to obtain higher rate of interest (§06.20240); and the enforcement of any out of state loan for $25,000 or less with a greater rate of interest than allowed by this statute, unless the loan is legal under the state of origin’s similar small loan law is prohibited (§06.20.310). Civil Penalties/Enforcement: If an usurious interest is charged, other than due to a bona fide error, all interest, consideration, or charges are void and a like amount must be credited to the debtor against the loan principal, or refunded to the borrower to the extent that it exceeds the principal (§06.20.260). The revocation or suspension of a license by the Department of Commerce and Economic Development (which may also adopt general regulations). Applicability of State UDAP: Yes. Alaska Stat. §45.50.471. Private right of action is available for actual damages; $200 minimum damages; treble damages discretionary for willful violations; necessary equitable relief; attorney fees “may” be awarded to the prevailing party Volume II - Home Improvement .inancing: Summaries of State Statutes 7
    • ARIZONA Retail Installment Sales Transactions ARIZONA Citation: Ariz. Rev. Stat. Ann. §§44-6001 to 44-6006 Applicability: The act applies to retail sellers and any person entitled to the rights of a retail seller and a retail installment contract (§44-6001). Interest Rate and Fee Caps: Interest as agreed to in the contract. A late payment fee may not exceed $5 on installment of less than $25 or $10 on an installment of more than $25. A bounced check fee may not exceed $10 or the actual charge made by bank to seller, whichever is greater (§44-6002). Civil Penalties/Enforcement: A seller or holder who violates the act is barred from receiving any finance charge, official fees, and delinquency charges for as long as the violation continues (§44-6006). Applicability of State UDAP: Yes. Ariz. Rev. Stat. Ann. §44-1521. No private right of action is specified; it is implied by the courts. Consumer Paper Citation: Ariz. Rev. Stat. Ann. §§44-144 and 44-145 Applicability of State UDAP: Yes. Ariz. Rev. Stat. Ann. §44-1521. No private right of action is specified; it is implied by the courts. Special Assignee Provisions: The rights of a holder or assignee of any instrument, other than a check or draft, which evidences the obligation of a natural person as buyer, lessee, or borrower in connection with the purchase or lease of consumer goods or services, are subject to all defenses and set offs of the debtor arising from the transaction, if notice of such defense or setoff is given within 90 days after receipt of the goods or services by the debtor, notwithstanding any agreement to the contrary. The debtors’ rights hereunder may be asserted only as to the amounts then owed. A notice must be given, in writing, to the seller or lessor by certified mail within 90 days after the receipt of the goods or services. Consumer Lender Loans Citation: Ariz. Rev. Stat. Ann. §§6-601 to 6-638 Applicability: The act applies to direct closed-end loans in an amount of $10,000 or less (§6-601). Exemptions: Exemptions include: banks; saving banks; trust companies; savings and loans; profit sharing and personal trusts; credit unions; insurance companies; consumer loan companies; pawnbrokers; and individuals not regularly engaged in the business of making consumer lender loans (§6-602) Licensing Requirements: Ariz. Rev. Stat. Ann. §§6-603 to 6-6012 Interest Rate and Fee Caps: Interest rate: 36 percent per year if loan for $1,000 or less; if loan is for more than $1,000 either 36 percent per year on first $500 and 24 percent on that part of the principal in excess of $500, or the single blended interest 8 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • ARIZONA ARIZONA ARIZONA rate resulting from combining those two rates. Prepaid finance charges (points) are ARIZONA ARIZONA prohibited (except on: charge of 4 percent on loans of $5,000 or more secured by consumer’s principal residence) (§6-632). Delinquency charges are limited to 5 percent of any installment not paid within 7 days. A loan origination fee of no more than $75 is allowed for loans of $1,500 or more (no fee is allowed for refinancing within 1 year). Finance charges and fees are not specifically allowed by the statute (§6- 635). Loan Terms: The consumer must be allowed to prepay the loan. A rebate is required when the loan is prepaid in full (§6-634). Prohibited Loan Terms: The term of the loan is not to exceed: 24.5 months (loan is $1,000 or less); 36.5 months (loan is for $1,000-$2,500); 48.5 months (loan is for $2,500-$4,000); 60.5 months (loan is for $4,000-$6,000); and no limit (loan is greater than $6,000). Balloon payments are prohibited (§6-637). Disclosures: Federal Truth in Lending Act (TILA) disclosures are required. The lender must post disclosures in the office; the agreement must include a notice that federal TILA disclosures are available in Spanish. Each office desk must have a notice posted that discloses that loan documents may be taken away and reviewed (§6-631). Prohibited Acts: Payment of referral fees, commissions, or bonuses to any merchant, dealer, consumer or other person other than as permitted by federal Real Estate Settlement Procedures Act (RESPA) are prohibited (§6-611). Civil Penalties/Enforcement: If the loan is for $5,000 or less, the loan is voidable and principal, interest, or fees are not collectable; if the loan is for more than $5,000, no finance charge is collectible (except for a bona fide error, if excess finance charge or fees contracted for or received). Any consumer lender loan made by an unlicensed lender is void (§6-613). Applicability of State UDAP: Yes. Ariz. Rev. Stat. Ann. §44-1521. No private right of action is specified; it is implied by the courts. Interest - Usury, Small Loans Citation: Ariz. Rev. Stat. Ann. §§44-1202 to 44-1208 and 13-2208 Interest Rate and Fee Caps: On closed-end loans of more than $5,000: interest not to exceed the maximum rate set by contract; a late charge not to exceed 5 percent of installment or $10, whichever is less; court costs, expenses, and reasonable attorney fees may be charged for collection only if the loan is referred to an attorney, not a salaried employee of lender or holder; only lawful fees actually paid for filing, assessors, escrow, acknowledgment of the instrument, title reports, and title insurance are allowed. No other fees for any other service or expense are allowed (§44-1205). Prohibited Acts: For loans other than consumer lender loans secured by real estate, property insurance in excess of replacement cost of improvements may not be required (§44-1208). Criminal Penalties: Usury is a class 6 felony (§13-2208). Volume II - Home Improvement .inancing: Summaries of State Statutes 9
    • Civil Penalties/Enforcement: If interest is charged in excess of the maximum ARIZONA permitted by law, all interest is forfeited (§44-1202). Private Right of Action: If interest is in excess of maximum permitted by law charged, and interest payment by debtor exceeds the principal amount, then the debtor may bring action to recover the excess (§44-1204). Applicability of State UDAP: Yes. Ariz. Rev. Stat. Ann. §44-1521. No private right of action specified; it is implied by the courts. 10 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • ARKANSAS ARKANSAS ARKANSAS ARKANSAS Industrial Loan Institutions ARKANSAS ARKANSAS Citation: Ark. Code Ann. §§23-36-101 to 23-36-117 Applicability: The act applies to any Arkansas corporation engaged in the business of lending money to be repaid in weekly, monthly, or other periodical installments or principal sums (§23-36-101) Exemptions: Building and loan associations; commercial banks or saving banks; trust companies; credit unions; pawnbrokers; agriculture or livestock pools; rural credit unions; farmers cooperatives (§23.36-101) Licensing Requirements: Ark. Code Ann. §§23-36-104 to 23-36-107 Interest Rate and Fee Caps: Interest as agreed to in the contract (§23-36-108); a non- cumulative late fee of 5 cents per $1 or fraction thereof of the late payment (§23-36- 112) Civil Penalties/Enforcement: Supervision and regulation by the Bank Commissioner (§23-36-105) Applicability of State UDAP: Yes (§4-88-101). Elderly or disabled persons are given the right to recover actual damages, reasonable attorney fees and restitution, as well as punitive damages, if appropriate. Consumer Loans and Credit Sales Citation: Ark. Const. Art. XIX, §13; Ark. Code Ann. §§4-57-101 to 4-57-108 Applicability: Consumer loans and credit sales are credit extended for money, property, or services primarily extended for personal, family, or household purposes (Ark. Const. Art. XIX, §13). Interest Rate and Fee Caps: Consumer loans and credit sales: 17 percent per year; general loans: 5 percent above the Federal Reserve Discount Rate at the time of the contract (Ark. Const. Art. XIX, §13) Prohibited Loan Terms: In no case where a payment falls short of paying the interest due, shall the balance of the interest be added to the principal (§4-57-101). Disclosures: Upon a written request at time of extending credit or making sale, the seller must separately furnish a statement of the principal and interest charged (§4- 57-103). Criminal Penalties: Failure to make required disclosure or misrepresenting amount of principal and interest is a misdemeanor (§4-57-103). Civil Penalties/Enforcement: Consumer loans and credit sales having usurious interest void as to principal and interest. Other loans having usurious interest void as to unpaid interest and borrower may recover twice the amount of usurious interest paid (Ark. Const. Art. XIX, §13). Applicability of State UDAP: Yes (§4-88-101). Elderly or disabled persons are given Volume II - Home Improvement .inancing: Summaries of State Statutes 11
    • ARKANSAS the right to recover actual damages, reasonable attorney fees and restitution, as well as punitive damages, if appropriate. Other: Any person who prevails in alleging in court that a consumer loan or credit sale is willfully usurious shall be awarded reasonable attorneys’ fees (§4-57-108). 12 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • CALI.ORNIA CALI.ORNIA CALI.ORNIA CALI.ORNIA CALI.ORNIA CALI.ORNIA Professions and Vocations, Contractors Citation: Cal. Bus. & Prof. Code §§7159.1, 7159.2, 7163 to 7166 Exemptions: The disclosure notice required by §7159.1 does not apply to home improvement contracts with a value of $5,000 or less, or which are subject to the California Retail Installment Sales Act (RISA) (§7159.1). Loan Terms: The contract and any contract changes must be in writing and state the: name, address, and license number of the contractor; start and finish dates; location of the work to be done; and notice of the possibility of mechanics’ liens. The buyer must be furnished with a copy of the contract signed by the contractor prior to the start of work (§7164). Prohibited Loan Terms: No home improvement contract with a value of $5,000 or less shall provide for a security interest in real property, except for a mechanics’ lien or other interest, which arises by operation of law (§7159.2). Disclosures: Any home improvement contract offered door-to-door that is secured by a lien on real property must be accompanied by a separate notice (written in the same language as the contract) warning the buyer that the home could be sold without permission and without court action if any payments are missed. This notice must be signed and dated by the buyer, and a copy must be provided to the buyer (§7159.1). In close proximity to the signature lines, each contract must include a notice in at least 10-point bold type stating that the owner has the right to require the contractor to obtain a performance and payment bond; the bond may be at owner’s expense (§7164). Prohibited Acts: No contract is enforceable in which obtaining a loan is a condition of the contract or if the contractor provides or arranges for financing, unless the lender agrees to make the loan, the buyer accepts, and the buyer does not rescind pursuant to their rights under federal TILA or Regulation Z. Contractors are not to: 1) deliver property or commence work, 2) represent that the contract is enforceable, or 3) represent that the buyer is obligated in any way, until these requirements are met. A waiver of these provisions is unenforceable, except for emergency repairs in which the buyer signs a dated written waiver. Waivers on printed forms are void (§7163). Civil Penalties/Enforcement: A security interest created by any contract that fails to include the disclosure required by §7159.1 is void and unenforceable (§7159.1). A security interest in real estate created by a contract with a value of $5,000 or less is void and unenforceable (§7159.2). Applicability of State UDAP: Yes. Cal. Civ. Code §1750 (West). Actual damages, injunction; punitive damages; restitution; attorney fees to prevailing consumers, to the defendant if the action is brought in bad faith Other: When the proceeds of a loan secured by a mortgage are used to fund goods or services pursuant to a home improvement contract for more than $5,000, the lender shall only pay the proceeds: 1) by an instrument payable to the borrower, or jointly to the borrower and contractor, or 2) at the election of the borrower, through a third-party escrow agent (§7159.2). Volume II - Home Improvement .inancing: Summaries of State Statutes 13
    • Unruh Act (Retail Installment Sales Law) CALI.ORNIA Citation: Cal. Civ. Code §§1801 to 1812.20 Applicability: The act is applicable to the sales of goods or services for primarily personal, family, or household uses, by a person in the business of selling goods or services, for a deferred payment price payable in installments. Goods include items which, at the time of sale or subsequent thereto, are to be so affixed to realty as to become a part thereof, whether or not severable therefrom. Services include improvements in connection with real property (§§1802.1, 1802.2, 1802.3, 1802.5). Exemptions: Exemptions include: 1) construction and sale of entire residence, including a mobile home; sale of a lot or parcel of real property; sales of aircraft; sales of vessels worth more than $25,000 (§1801.4); 2) loans made by supervised financial organizations to a buyer for the purchase of goods or services, even if the seller of such goods or services arranges the loan or participates in the preparation of the loan documents, unless the supervised financial organization and the seller are either related by common ownership and the relationship was a material factor in the loan transaction, or share in the profits or losses of the sale or loan or both (§1801.6). If the seller or holder corrects any unintentional violation within 30 days of the execution of the contract, with the buyer’s written permission in the case of errors in the seller’s favor, then the seller or holder is not subject to penalties (§1812.8). Interest Rate and Fee Caps: The interest rate is as disclosed by the contract. Annual fees are prohibited (§1805.1). Simple interest rate is required if the contract’s original term exceeds 62 months (§1805.7). Finance charges shall include all charges for investigating or making the contract or for the extension of credit. Any bad check fee may not exceed $15 (§1805.4). The holder may, if the contract so provides and an installment is at least 10 days past due, collect a late charge not to exceed $10, or if an installment is at least 15 days past due, collect a charge not to exceed $15. Actual and reasonable costs of collection occasioned by removal of goods from California without the holder’s permission, or by the failure of the buyer to notify the holder of a change of address or by failure of the buyer to communicate with the holder for 45 days after any payment default (§1803.6). In a home improvement contract, a finance charge may be assessed from the approximate date of commencement of the work as set forth in the contract (§1805.6). An extension or deferral charge is not to exceed 1 percent per month on the amount deferred and may be charged if the contract includes a precomputed finance charge; fee, not to exceed the lesser of $25 or 10 percent of the then unpaid balance of the contract may be charged, if the contract includes a simple interest finance charge (§1807.1). Loan Terms: The contract shall: 1) be in writing; 2) be in a single document; and 3) contain the entire agreement of the parties (§§1803.1 and 1803.2). The contract shall include, in at least 12-point bold type, the words: 1) “Security Agreement” at the top if a security interest in goods or realty is taken, or 2) “Retail Installment Contract” if no security interest is taken (§1803.2). If it is explicitly understood between the buyer and the seller that the buyer will pay for the goods from the proceeds of a loan from a third party, and if the buyer makes a reasonable effort but is unable to obtain the loan on reasonable terms, then the buyer may rescind the contract within 3 business days (§1803.9). If any scheduled payment is more than 2 times as large as the average of earlier payments, the buyer must be given the right to a new payment schedule with payments not substantially greater than the average of the preceding installments (§1807.3). The buyer may prepay at any time before maturity without penalty, and receive a refund of unearned interest (§1806.3). 14 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • CALI.ORNIA CALI.ORNIA CALI.ORNIA CALI.ORNIA CALI.ORNIA Prohibited Loan Terms: Prohibited terms include: 1) any waiver of provisions of the act (§1801.1); 2) acceleration clauses in the absence of the buyer’s default; 3) agreement by buyer not to assert a claim or defense arising out of the sale against a seller or assignee; 4) establishment of a power of attorney to confess judgment or an assignment of wages; 5) relief by the buyer to the seller from liability for any remedies that the buyer may have against the seller; 6) agreement by the buyer to the payment of any charge for rescinding or avoiding the contract; 7) provision to the seller of the right to bring action outside the county where the contract was signed, where the buyer resides or resided at time of contract, or where the goods have become affixed to realty seller or holder or person acting on their behalf given power to enter buyer’s premises or commit any breach of the peace during repossession; 8) establishment of a power of attorney appointing the seller or holder, or a person acting on their behalf, buyer’s agent for purposes of repossession (§1804.1). No contract for the sale of goods shall take a lien on goods already fully paid for or not sold by the seller. No contract for goods shall provide for a security interest in real property, unless the goods sold are to be attached to the real property (§1804.3). Disclosures: Any disclosures may be made in the form required or permitted by Federal Regulation Z. Regardless of Regulation Z application to the transaction, those disclosures must be made (§§1801.5 & 1803.3). In addition, the contract must disclose the method of calculating any rebate of unearned interest due upon prepayment or amount of any minimum finance charge (§1803.3). In any contract which takes a security interest in real property, a notice (in 14-point bold type just above the buyer’s signature line in the same language as the rest of the contract), giving a warning to the buyer that the home could be sold without permission and without any court action if any payment required by the contract is missed. In at least 10-point bold type, 1 of 3 notices (which differ slightly depending on method of calculating any rebate of unearned finance charge) must be provided, advising the buyer to read the contract. The notice should be completed before signing; the buyer has a right to a completed copy; and the buyer has the right to pay off the loan in advance (§1803.2). A notice of any balloon payment and of the right to a new payment schedule if buyer defaults on any balloon payment must be disclosed (§1807.3). The holder must send a notice within 10 days after repossession stating the intention to sell the goods at a public sale or retain them in satisfaction of the debt, and explain the buyer’s right to redeem and the amount required to redeem (§1812.2). Prohibited Acts: Prohibitions include: 1) obtaining the buyer’s signature to a contract not filled in (§1803.4); 2) offering a rebate, discount, or commission on the condition that the buyer helps in referral sales (§1803.10); and 3) requiring a purchaser to obtain financing from any particular source (§1812.20). Criminal Penalties: Any willful violation of the act is a misdemeanor (§1812.6). Civil Penalties/Enforcement: A security interest in realty created in any contract which fails to include the warning notice to the buyer that the house may be sold without permission or court action if any payments missed is void and unenforceable (§1803.2). Until a signed copy of the contract is delivered to the buyer, the buyer is only obligated to pay the cash sales price (§1803.7). A buyer’s waiver of the act’s provisions is void and unenforceable (§1801.1). Any prohibited provision included in a contract shall be void, but it shall not otherwise affect the validity of the contract (§1804.4). Any person who violates the act and any person who acquires a contract with knowledge of such noncompliance is barred from the recovery of any finance charge or delinquency, collection, extension, deferral, or refinance charges imposed in Volume II - Home Improvement .inancing: Summaries of State Statutes 15
    • connection with the contract; the buyer may recover any such charges paid (§1812.7). CALI.ORNIA The buyer is entitled to 3 times such charges paid in any case of willful violations of provisions relating to finance charges for consolidated contracts (§1812.9). Private Right of Action: Yes (§1812.10). Applicability of State UDAP: Yes. Cal. Civ. Code §1750 (West). Actual damages, injunction; punitive damages; restitution; attorney fees to prevailing consumers, to the defendant if the action is brought in bad faith Special Assignee Provisions: The buyer’s written acknowledgment of the delivery of a copy of the contract shall be a reputable presumption of delivery and of the contract being completely filled in, in any action by or against an assignee without knowledge to the contrary. If the holder sends the buyer copies of such documents and asks the buyer to respond if the buyer did not receive copies at the time of the contract, and the buyer fails to respond within 30 days, then it shall be conclusively presumed that the delivery occurred as required (§1803.7). Until the buyer has a notice of assignment, the payment made to the last known holder shall be binding upon all subsequent holders or assignees (§1806.1). No contract may contain a provision in which the buyer agrees not to assert a claim or defense against an assignee (§1804.1). No rights of action or defense, arising out of a sale in which the buyer has against the seller, shall be cut off by assignment; the assignee’s liability may not exceed the amount of the debt owed to the assignee at the time of the assignment (§1804.2). Other: The buyer may redeem goods for 10 days after the holder gives the required post-repossession notice stating holder’s intention to sell the goods at a public sale or retain them in satisfaction of the debt, or at any time before public sale if the buyer also pays holder any bona fide reasonable expenses for repairing the goods or preparing them for sale (§1812.2). If the proceeds of sale are insufficient to cover the expenses of the sale and remaining balance due under the contract, the holder may not recover the deficiency from the buyer (§1812.4). Finance Lenders Law Citation: Cal. Fin. Code §§22000 to 22751 Applicability: The statute applies to: 1) consumer loans, secured by real or personal property, or unsecured, which are intended primarily for personal, family, or household purposes and which are made by a finance lender (any person engaged in the business of making consumer loans) (§22009 and 22203); and 2) loans less than $5,000 for any purpose (§22204). Certain protections do not apply to bona fide loans of $5,000 or more, others do not apply to bona fide loans of $10,000 or more. Interest rate limitations apply to all loans (§22250). Exemptions: Exemptions include: 1) banks, trust companies, savings and loan associations, industrial loan companies, credit unions, small business investment companies, California business and industrial development corporations, and pawnbrokers; 2) colleges and universities making student loans; 3) check cashers (§22050); 4) agricultural cooperatives (§22051); and 5) credit card companies (§22052). There are no penalties when violations are shown by a preponderance of the evidence to be unintentional, bona fide errors are committed notwithstanding the maintenance of procedures reasonably adapted to avoid such errors, and corrected by the holder within 60 days of discovery (§22751). 16 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • CALI.ORNIA CALI.ORNIA CALI.ORNIA CALI.ORNIA CALI.ORNIA Licensing Requirements: Cal. Fin. Code §§2100 to 22167 Interest Rate and Fee Caps: For loans of $2,500 or less, the interest rate for the portion of unpaid balance: 1) not more than $225 cannot exceed 2.5 percent per month; 2) greater than $225 but not more than $900 cannot exceed 2 percent per month; 3) greater than $900 but not more than $1,650 cannot exceed 1.5 percent per month; 4) greater than $1,650 cannot exceed 1 percent per month (§22303). Alternative rates for loans of $2,500 or less: 1.6 percent per month or 5/6 percent per month above the monthly rate for advances to member banks prevailing in the previous quarter at the Federal Reserve Bank of San Francisco (§22304). An administrative fee may be charged: 1) loans of $2,500 or less, 5 percent of the total payments due or $50, whichever is less; 2) loans in excess of $2,500, an amount not to exceed $75. Only 1 fee per borrower per loan or per 12 month period is allowed (§22305). Charges may not be paid in advance or compounded (§22309). The actual cost of appraisal and a reasonable escrow fee for loans secured by real property may be charged (§§22317 and 22318). A bad check fee may not exceed $15 (§22320). A delinquency fee may not exceed $10 for a default of at least 10 days; may not exceed $15 for a default of at least 15 days (§22320.5). Loan Terms: Balloon payments are prohibited (§22307). Maximum loan terms: principal less than $500 (24.5 months); principal at least $500 but less than $1,500 (36.5 months); principal at least $1,500 but less than $3,000 (48.5 months); and principal at least $3,000 but less than $5,000 (60.5 months) (§22334). Prepayment of any amount is allowed at any time (§22337). If the loan is prepaid in full, a rebate of unearned interest is required. If 3 or more installments are prepaid in full at any 1 time, recomputing of payment amounts is required (§22400). Prohibited Loan Terms: Prohibited terms include: 1) confession of judgment or any power of attorney (§22331), and 2) taking of real property as security for any loan of less than $5,000 (§§22203 and 22330). Disclosures: A schedule of charges must be displayed in each place of business (§22325). At the time a loan is made, a statement including the amount of the loan; date; maturity; schedule of payments; type of security; name and address of lender and borrower; and total amount of finance charges or the annual percentage rate must be disclosed (§22337). Prohibited Acts: Prohibited acts include: 1) false, deceptive, or misleading advertisements (§22161); 2) charging or receiving any interest or charge unless a loan is made, except that actual preparation expenses for a loan of $5,000 or more, which is not consummated because of a borrower’s incomplete application or failure to disclose outstanding liens, may be collected (§22301); 3) requiring the borrower to purchase anything or enter into a collateral sales agreement in connection with any loan (§22311); 4) charging more interest, discount, or consideration than the lender is permitted to charge, if not licensed under this act (§22326); 5) splitting any loan to obtain a higher rate of charge than otherwise permitted by law (§22327); 6) taking a note that does not accurately disclose the amount, term, finance charge, and annual percentage rate (§22332); 7) taking a note with the blanks left to be filled in (§22333); 8) refinancing a retail installment contract unless: the buyer has been paying for not less than 90 days; the contract is for 180 days or more; the loan provides sufficient funds to pay off retail installment contract; no security interest is taken in real property if the loan is for less than $5,000, or if the loan is for more than $5,000, includes a warning to homeowner in 14-point type that the home could be sold without permission and without court action if payments are missed; and 9) balloon payments Volume II - Home Improvement .inancing: Summaries of State Statutes 17
    • if the loan is for less than $10,000 (A notice and the absolute right to a new repayment CALI.ORNIA schedule is required if a balloon payment is included) (§22341). Civil Penalties/Enforcement: The Commissioner of Corporations enforces and may make general rules and regulations (§§22150 and 22701 to 22712). Unconscionable loans is a violation of the act (§22302). A security interest in real estate taken in a refinancing that fails to provide the required notice to the homeowner that the home may be sold without permission and without court action if payment missed is void and unenforceable (§22341). The Attorney General, at the Commissioner’s request, may seek injunctions to restrain violations of law, as well as restitution or actual damages, on behalf of the borrower. A civil penalty of up to $2,500 per violation is permitted (§22713). If the lender willfully violates the act or if a greater rate of interest than allowed by law is willfully contracted for or received, the contract is void and no interest, charges, or principal may be collected. If excess interest is charged or received but violation is not willful, all interest and charges on the loan are forfeited (§22751). Applicability of State UDAP: Yes. Cal. Civ. Code §1750 (West). Actual damages, injunction; punitive damages; restitution; attorney fees to prevailing consumers, to the defendant if the action is brought in bad faith Special Assignee Provisions: The assignee of a retail installment contract continues to be subject to all equities and defenses of the borrower against the seller, despite refinancing or any agreement to the contrary (§22341). Industrial Loan Companies - Loans and Purchased Obligations Citation: Cal. Fin. Code §§18190 to 18274, 18435 to 18457 Applicability: The act applies to loans made by industrial loan companies (§18190). Industrial loan companies may make loans and acquire obligations whose proceeds are used for home improvements, provided the loans are secured by real estate having a market value of at least 100 percent of the principal of the outstanding loans thereon (§18266.1). Exemptions: Interest rate limitations do not apply to bona fide loans of $5,000 or more; many other limitations do not apply to bona fide loans of $10,000 or more (§§18191 and 18191.5). Licensing Requirements: Cal. Fin. Code §§18100 to 18166. Interest Rate and Fee Caps: No charges are permitted unless a loan is made, except actual expenses incurred may be charged as an application fee for loans in excess of $5,000 (§18211). Interest rate may not exceed 2 percent per month on the part of the principal $1,000 or less; 1 percent per month on principle over $1,000; or, in the alternative, 1.6 percent per month on the entire balance (§18212). Or, as a further alternative rate, 5/6 percent per month above the monthly rate for advances to member banks prevailing in the previous quarter at the Federal Reserve Bank of San Francisco (§18212.1). For loans of not more than $2,500, an administrative fee may not exceed $50 or 5 percent of the principal amount, whichever is less. Only 1 administrative fee in any 1 year from any 1 borrower is allowed (§18212.2). Pre-computation is not allowed (§18213). The 1) actual cost of appraisal for loans in excess of $5,000 secured by real estate (§18216), and 2) a reasonable escrow fee (if loan secured by 18 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • CALI.ORNIA CALI.ORNIA CALI.ORNIA CALI.ORNIA CALI.ORNIA real estate) (§18217), and 3) court costs and reasonable attorney fees in a collection action, or bona fide expenses paid for non-judicial collection not exceeding 10 percent of outstanding principal (§18218) may be charged. Bad check fees cannot exceed $15 (§18218.5). Loan Terms: The loan term shall be for 120.5 months or less (§18205). Loans insured by the Farmer’s Home Administration (FHA), Veterans’ Administration (VA), another federal agency, or a state agency may be for longer terms (§18209). Notes secured primarily by real property must not have balloon payments and may be for a term up to 30 years and 30 days; first mortgages may be made for up to 40 years and 30 days if such loans do not exceed 5 percent of the industrial loan company’s outstanding obligations. Loans for less than $20,000 shall be secured solely by real property or solely by personal property but not both. Loans secured solely by personal property shall not have a term exceeding 120.5 months (§18210). The borrower may prepay at any time (§18222). Prohibited Loan Terms: Confession of judgment or power of attorney is prohibited (§18440). Disclosures: A schedule of maximum charges must be displayed prominently at each place of business (§18230). At the time the loan is made, a written statement disclosing the amount, date, maturity, schedule of payments, type of security, name and address of lender and borrower, and agreed rate of charge must be disclosed (§18231). Prohibited Acts: Prohibited acts include: 1) splitting any loans or splitting loans between husband and wife and thereby receiving charges in excess of those permitted by the act (§§18219, 18220, and 18221), 2) taking a note that does not accurately disclose the actual amount, term, or agreed rate of charge, or which has blanks left to be filled in (§18235), and 3) requiring the borrower to purchase anything or enter into a collateral sales agreement in connection with any loan (§18441). Criminal Penalties: Willful violations are punishable by a fine of not more than $10,000, year’s imprisonment, or both (§18435). Any director, officer, or employee who asks for or receives a kickback from borrower for procuring a loan is guilty of a felony (§18445). Civil Penalties/Enforcement: Industrial loan companies must request and receive approval from the Commissioner of Financial Institutions to enter the home improvement financing business (§§18266.2 and 18266.3). If the lender charges in excess of the amount allowed by the act (except for unintentional and bona fide computational errors), then the contract is void and no principal, interest, or charges may be collected (§18439). Private Right of Action: Individual actions only (§7-3-29) Applicability of State UDAP: Yes. Cal. Civ. Code §1750 (West). Actual damages; injunction; punitive damages; restitution; attorney fees to prevailing consumers, to the defendant if the action is brought in bad faith Volume II - Home Improvement .inancing: Summaries of State Statutes 19
    • COLORADO COL ORADO Colorado Uniform Consumer Credit Code Citation: Colo. Rev. Stat. §§5-1-101 to 5-13-105 Applicability: The act applies to consumer credit transactions, including consumer credit sales and consumer loans (§5-1-301). Exemptions: Exemptions include: extensions of credit to governmental agencies or instrumentalities; certain sales of insurance; transactions with regulated public utilities or common carrier tariffs; disclosure of rates in connection with securities transactions with regulated broker-dealers; licensed pawnbrokers; loans by an agency, instrumentality or political subdivision of the state; commercial credit plans (unless if stated that code provisions apply) (§5-1-202). Consumer credit sales do not include, except as required by the federal Consumer Credit Protection Act, a sale of a mobile home or of an interest in land if the credit service charge does not exceed 12 percent per year, or, for the sale of an interest in land, the sale is secured by a purchase- money first mortgage. Consumer Credit Sales do not include sales for a business, investment, commercial, or primarily agricultural purpose (§5-2-104). For consumer loans (except loans with disclosure provisions, debtor’s remedies, and powers, and functions of the administrator), a consumer loan does not include a loan secured by a mobile home or a loan primarily secured by an interest in land if, at the time of the loan, the value of the collateral is substantial in relation to the amount of the loan, and the rate of the finance charge does not exceed 12 percent per year, or the loan is secured by a purchase-money first mortgage (or refinancing thereof) (§5-3-105). There is no liability for self-discovery of error before a notice or action if the creditor notifies the person of the error and corrects it, and there is no liability for bona fide errors notwithstanding the maintenance of reasonable procedures (§5-5-202). There is no liability for acts done in good faith in conformity with administrative rules (§5-5-202). Licensing Requirements: Colo. Rev. Stat. §5-3-503 Supervised loans (loans with an interest rate in excess of 12 percent). Interest Rate and Fee Caps: For a consumer credit sale (other than pursuant to a revolving charge account), a credit service charge may not exceed the greater of: 1) the total of 25 percent per year on the part of the unpaid balance that is $630 or less, 20 percent per year on the part of the unpaid balance that is more than $630 but not more than $2,100, and 15 percent per year on the part of the unpaid balance that is more than $2,100, or 2) 21 percent per year on the unpaid balance (§5-2-201). However, notwithstanding that limit, a seller may contract for and receive a minimum credit service charge of not more than: 1) $5 when the amount financed does not exceed $75, 2) $7.50 when the amount financed exceeds $75 but is less than $500, or 3) $15 when the amount financed is $500 or more. For revolving charge accounts on monthly billing cycle, the seller may charge not more than 1 3/4 percent of the average daily balance (or prorated amount for non-monthly billing cycle), and $.50 charge of the unpaid balance on the billing date (or prorated amount for non-monthly billing cycle) (§5-2-207). For a consumer loan other than a supervised loan (a loan whose interest rate exceeds 12 percent per year), the creditor may not receive a loan finance charge of more than 12 percent per year on unpaid balances (§5-3-201). For a supervised loan (interest rate exceeds 12 percent), a loan finance charge may not exceed the greater of: 1) the total of 25 percent per year on the part of the unpaid balance that is $630 or less, 20 percent per year on the part of the unpaid balance that is more than $630 but not more than $2,100, and 15 percent per year on the part of the unpaid balance that is more than $2,100, or 2) 21 percent per year on the unpaid balance (§5-3-508). For a loan not considered a ‘consumer loan’ because it is secured by a mobile home or primarily by an interest in land, the loan finance charge 20 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • COL ORADO COL ORADO COL ORADO COL ORADO COL ORADO may not exceed 45 percent (§5-3-605). If there is no agreement as to the rate or provision of law for a different rate, then the rate is 8 percent (§§5-12-101, 5-12-102). Parties to any bond, bill, promissory note or other writing may stipulate a rate not exceeding 45 percent per year (§5-12-103). In addition to permitted service/finance charges, the creditor may also charge: official fees and taxes; insurance charges; registration; certificate of title or license fees; charges for other benefits conferred upon the consumer (if reasonable in relation to the benefits, not of credit type, and authorized by the administrator); annual credit card charges; and, for a debt secured by an interest in land, reasonable closing costs (§§5-2-202, 5-3-202). Deferral charges are permitted for both consumer credit sales and loans (§§5-2-204, 5-3-202). The seller/creditor and the buyer/borrower may agree to refinance the unpaid balance of a consumer credit sale or loan, and the seller may contract for and receive a credit service charge on the amount refinanced, which may not exceed the rate for consumer credit sales (§§5-2-205, 5-3-205). For a precomputed consumer credit sale, or the refinancing, or consolidation thereof, the parties may contract for a delinquency charge for payments not paid within 10 days of due, provided that the charge may not exceed the greater of 5 percent of the unpaid installment (to a maximum of $10) or the deferral charge that would be permitted to defer the unpaid amount for the delinquent period (§§5-2-203). Parties may agree at the time of the precomputed consumer credit sale, refinancing or consolidation that if an installment is not paid within 10 days of when due, the seller may unilaterally grant a deferral and impose a deferral charge (§§5-2-203). For a precomputed consumer loan, refinancing or consolidation, the parties may contract for a delinquency charge on any installment not paid in full within 10 days of when due that does not exceed the greater of: 1) 5 percent of the unpaid amount of the installment (not to exceed $10), or 2) the permitted deferral charge (§5-3-203). For a consumer loan that is not precomputed, the parties may contract for a delinquency charge not to exceed $15 (§§5-3-203). If agreed to by the parties, a creditor may charge an additional fee (not to exceed $20) for dishonored checks, credit sales (§§5-2-204), and consumer loans (§5-3-202). For either a consumer credit sale or loan, the creditor may add advances to perform covenants of the consumer, after giving prior notice and a reasonable opportunity for the consumer to perform, and may charge a finance charge, not exceeding the rate disclosed to the consumer (§§5-2-208, 5-3-208). The agreement may provide for payment by the buyer/borrower of reasonable attorney fees of not more than 15 percent of the unpaid debt, or such additional amount as may be directed by a court, consumer credit sales (§§5-2-413), consumer loans (§5-3-404), and supervised loans; no exception for court direction (§5-3-514). Loan Terms: For a consumer credit sale, the seller may take a security interest in the property sold, and in goods upon which services are performed, in which goods sold are installed, or to which annexed, or in land to which goods are affixed or which is maintained, repaired, or improved as a result of the sale, so long as the amount financed is $1,000 or more (if security interest is in land), or $300 or more (if security interest in goods) (§5-2-407). If the loan is a supervised loan in which the principal is $2,100 or less, the creditor must schedule the repayment in substantially equal installments at equal periodic intervals, except to the extent that the schedule of payments is adjusted to the seasonal or irregular income of the debtor, and over a period of not more than 1) 37 months, if principal is more than $630, or 2) not more than 25 months, if $630 or less (§5-3-511). Cross collateralization is permitted (§5-2- 408). The buyer (consumer credit sale) or borrower (consumer loan) may prepay in full or in part if the payment is not less than $5 (§§5-2-209, 5-3-209). Rebate is paid upon prepayment and computed as provided for by the Code (§§5-2-210, 5-3-210). Consolidation is permitted of both consumer credit sales and loans (§§5-2-206, 5-3- 206). For home solicitation sales, the buyer has a 3-day right to cancel (§5-2-502). Volume II - Home Improvement .inancing: Summaries of State Statutes 21
    • COL ORADO Prohibited Loan Terms: The creditor may not take an interest in land as security for a supervised loan in which the principal is $2,000 or less (§5-3-510). No assignment of earnings is allowed; no default charges beyond reasonable expenses may be incurred; and no confession of judgment is permitted (consumer credit sales) (§§5-2-410, 5-2- 412, §§5-2-414 to 5-2-415); (consumer loans) (§§5-3-403, 5-3-405, 5-3-407). Disclosures: For consumer credit sales or consumer loans, required disclosures must: be made in writing (a copy must be delivered to the buyer), and be made clearly and conspicuously (§§5-2-302, 5-3-302). Required disclosures must be made before credit is extended, except for sales made by telephone or mail, but may be made in the sale, refinancing, or consolidation agreement, lease or other evidence of indebtedness to be signed by the buyer if it is set forth conspicuously, and the disclosures need to be made to only one buyer (§§5-2-302, 5-3-302). The seller must give the buyer (or creditor must give borrower) a statement of the rate of the credit service charge in terms of an annual percentage rate, as defined (§§5-2-304, 5-3-304). For consumer credit sales not made pursuant to a revolving charge account, the seller must give to the buyer: a brief description of the goods, services or interest in land; the cash price and any applicable taxes if not individually itemized in the cash price; the amount of the down payment and a statement of the portion paid in money and the portion paid by an allowance for property traded in, if there is a security interest in the property traded in that the seller agrees to discharge the seller must also state the amount which the seller agrees to pay to discharge the security interest and this amount may be deducted from the trade-in allowance; the difference between the cash price and the down payment; the amount paid or payable for registration, certificate of title or license fees, if not individually itemized in the cash price, along with a description or identification of the fees; the amount of official fees and taxes, if not itemized, and a description; a brief description of insurance to be provided or paid for by the seller, including the type and amount of coverage and charges; the amount of other additional charges (with a brief description); the amount financed; the amount of the credit service charge and the amount of the unpaid balance, except in the case of a sale of a dwelling; the rate of the credit service charge (except in the case of a credit service charge that does not exceed $5 when the amount financed does not exceed $75, or $7.50 when the amount financed exceeds $75); the number of payments, the amount of each payment, the due date of first payment and the due date of subsequent payments or interval between payments; any default, delinquency or similar charges payable in the event of late payments; and the description of any security interest in connection with the extension of credit, with a clear identification of the secured property (§5-2-306) (consumer loan disclosures (§5-3-306)). Before making a consumer credit sale pursuant to a revolving charge account, the seller must disclose: the conditions under which a credit service charge may be made, including the time period, if any, within which any credit may be repaid without charge; the method of determining the balance; the method of determining the amount of credit service charge; the corresponding nominal annual percentage rate (if more than 1, the amount of a balance to which each corresponding nominal annual percentage rate applies); conditions under and the method by which additional charges may be made; conditions under which the seller may retain or acquire a security interest in the property to secure balances resulting from a sale under a revolving charge account (§5-2-310). Furthermore, if there is an outstanding balance owed at the end of the billing cycle or if a credit service charge is made with respect to the billing cycle, the seller must disclose to the buyer, within a reasonable time after the end of the cycle: the outstanding balance at the beginning of the cycle; the cash price and date of each sale during the cycle and unless previously furnished, a brief description of the goods or services sold; the amount credited to the account during the cycle; the amount of the credit service charge and additional charges, itemized and explained; the periodic 22 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • COL ORADO COL ORADO COL ORADO COL ORADO COL ORADO percentage used; the balance on which the service charge was computed; if the credit service charge for the cycle exceeds $.50 (or prorated amount, if non-monthly cycle), the charge must be expressed as an annual percentage rate. If the credit service charge does not exceed $.50 (or prorated amount for a non-monthly billing cycle), the corresponding nominal annual percentage rate applies (§5-2-310) (revolving loan account disclosures (§5-3-309)). If the seller refinances the balance owed, the seller must disclose to the buyer the amount of the unpaid balance before refinancing (including accrued charge); the amount and a brief itemization of rebates to which the buyer would have been entitled if the debt had been prepaid pursuant to the provisions on rebate upon prepayment (except that no minimum credit service charge shall be allowed); the amount of additional charges; the amount financed resulting from the refinancing; the credit service charge amount; the unpaid balance; the number of payments, the amount of each payment, due date of first payment and due date of subsequent payments (or interval between); the credit service charge rate (except in the case of a credit service charge that does not exceed 1) $5 when the amount financed does not exceed $75, or 2) $7.50 when the amount financed exceeds $75) (§5-2-307). If the parties agree to consolidate an existing unpaid balance with a subsequent consumer credit sale, the seller must make similar disclosures (§5-2- 308). If a consumer loan is consolidated, a creditor must give the information required for consumer loans (§5-3-307). If the seller makes a deferral, the seller must disclose: the amount deferred; any additional charges; the aggregate amount deferred; the time to which payment is deferred; and the amount and annual percentage rate of the deferral charge, and when it is payable (§5-2-309) (consumer loan deferrals (§5-3- 308)). If the seller makes a change in the terms of a revolving charge account or increases the required minimum periodic payment, the seller must give 1 month’s written notice (exception for changes agreed to by the buyer, or the increase in credit service charge, periodic rate or other charge is a 1) result of the buyer’s delinquency or default, 2) reduction, or 3) suspension of future credit privileges or termination of an account, or involves no significant cost to buyer, among other circumstances) (§5-2- 416) (revolving loans (§5-3-408)). In a home solicitation sale, unless the buyer requests provision of goods or services without delay in an emergency, the seller must provide in writing to be signed by buyer disclosures that designate 1) the date of the transaction, 2) the date on which the buyer actually signs, and 3) a statement of the buyer’s rights (by either complying with any notice of cancellation or a similar requirement of any trade regulation of the FTC which applies to home solicitation sales or meets the statutorily prescribed notice of the buyer’s right to cancel) (§2-5- 203). A notice of right to cure is prescribed (§5-5-111). No one (other than a spouse) is liable as a cosigner or guarantor unless the creditor receives a written notice that contains a completed identification of the debt and reasonably informs him or her of the obligation for it (§5-5-109). Prohibited Acts: Discrimination is prohibited (§5-1-109). False and misleading advertising and certain practices specified are prohibited (consumer credit sales (§5-2- 313)), (consumer loans (§5-3-312)); no evidence of indebtedness shall be signed that contains blank spaces to be filled in after execution (except for serial numbers or other identifying marks not available at time of execution) (§5-2-302). The seller may not use multiple agreements for a single credit sale or loan for purpose of obtaining a higher credit service charge than would otherwise be allowed (consumer credit sales (§5-2-402)), (consumer loans (§5-3-409)). No surcharge is allowed on any holder who elects to use a credit or charge card in lieu of payment by cash or check (§5-3-110). No referral sales are allowed (§5-2-411). Limitations exist on garnishment (§5-5-105). Extortionate extensions of credit, those where it is understood that delay in making or failure to make repayment could result in the use of violence or other criminal means to cause harm, are unenforceable. An extension of credit made at a rate of more than Volume II - Home Improvement .inancing: Summaries of State Statutes 23
    • COL ORADO 45 percent per annum by a creditor with a reputation for the use or threat of use of violence or other criminal means to cause harm is prima facie evidence of an unenforceable extension of credit (§5-5-107). The creditor may not accelerate or repossess until 20 days after the notice of right to cure, if default consists only of failure to make a payment (this provision does not apply to consumer credit transactions that are payable in four or fewer installments) (§5-5-112). Criminal Penalties: Criminal penalties include: willfully charging in excess of those permitted (misdemeanor); making of supervised loans without a license (misdemeanor); and, engaging in the business of making consumer credit sales, consumer leases, or consumer loans, or of taking assignments of rights against debtors without complying with certain administrative provisions (misdemeanor) (§5-5- 301). Civil Penalties/Enforcement: The limit on civil penalties is $5,000 (§5-6-113). Responsibility for enforcement lies with the administrator, an assistant attorney general designated by the state Attorney General, or any district attorney designated by such assistant (§5-6-103). The administrator may investigate, issue cease and desist orders, bring injunctive actions, seek temporary relief, and file civil actions seeking a civil penalty (§§5-6-106 to 5-6-113). If a trier of fact finds an agreement or clause to have been unconscionable when made, or that an agreement was induced by unconscionable conduct, then the court may refuse to enforce the agreement or may limit the application of any unconscionable clause (specific factors indicating unconscionability listed) (§5-5-108). Private Right of Action: For limitations on the schedule of payments or loan term for supervised loans, or authority to make supervised loans, the debtor has the right to recover from violator or assignee a penalty determined by the court not more than 3 times the amount of the credit service charge or loan charge (§5-5-202). For other violations, the debtor has the right to refund, which may be made by reducing the debtor’s obligation, and if the person liable to debtor refuses to make a refund within a reasonable time after demand, the debtor may recover a penalty determined by a court to be not more than the greater of either: 1) the amount of the credit service/loan finance charge, or 2) 10 times the amount of the excess charge (§5-5-202). However, there is no liability for bona fide errors made notwithstanding the maintenance of reasonable procedures (§5-5-202). The court may award attorney fees to the debtor (§5-5-202). If the creditor repeatedly fails to provide a debtor with a statement of an annual percentage rate or credit service or loan finance charge, and has received written notice from the administrator of such failure, any such subsequent failure shall relieve the debtor from any obligation to pay any credit service charge or loan finance charge (§5-5-202). If the creditor fails to comply with disclosure provisions (other than for advertising) required for credit sales or consumer loans, the creditor is liable for twice the amount of the credit service/loan finance charge (not less than $100 nor more than $1,000) (§5-5-202). The violation of antidiscrimination provision allows for action (not less than $100 nor more than $1,000, together with attorney fees) (§5-5- 206). Applicability of State UDAP: Yes. Colo. Rev. Stat. §6-1-101. Damages, treble damages; minimum damages of $250; attorney fees; and costs for a successful action Special Assignee Provisions: The assignee of consumer credit sale is subject to all claims and defenses of the buyer notwithstanding holder in due course status, but is liable only to the extent of amount owed to the assignee (§5-2-403). The buyer/ borrower is authorized to pay the original seller until the buyer/borrower receives 24 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • COL ORADO COL ORADO COL ORADO COL ORADO COL ORADO notification of assignment of the rights to payment that reasonably identifies the rights assigned (consumer credit sales (§5-2-412)), (consumer loans (§5-3-406)). Other: For consumer credit sales, there is no liability for deficiency unless the seller has complied with the Uniform Commercial Code (UCC) (§5-5-103). If the seller repossesses or voluntarily accepts surrender of the goods that 1) were the subject of the sale, and 2) the seller has a security interest, then the buyer is not personally liable to the seller for the unpaid balance of the debt arising from the sale of a commercial unit of goods of which the cash sale price was $2,100 or less. In such case, the buyer is not personally liable to the seller for the unpaid balance of the debt arising from the sale, and the seller’s duty to dispose of the collateral is governed by the UCC (§5-5-103). For a consumer credit sale (except a sale: 1) primarily for agricultural purposes; 2) of an interest in residential land and secured by a first deed of trust or similar lien, or 3) pursuant to a revolving charge account), the buyer has the right to refinance balloon payments (payments that are more than twice as large as the average of all the other payments) (§5-2-405) (consumer loans (§5-3-402)). The creditor must deliver or mail to the consumer a written receipt for each payment (§5-5- 110). Upon written request, the creditor must provide, without charge (twice during each year), a written statement of the dates and amounts of payments made within the past 12 months and the total amount unpaid (§5-2-405). Within 30 days of fulfillment of all obligations, creditor shall upon request deliver or mail written evidence acknowledging payment in full (§5-2-405). In the case of a consumer credit sale or consumer loan for which a security interest is retained or acquired in any property which is used as the debtor’s dwelling, the debtor has a 3-day right to cancel, which the creditor must disclose to the debtor (purchase money mortgages and refinancing thereof, and advances under a preexisting open-ended credit plan where a security interest has already been retained or acquired are exempted) (§5-5-204). For home solicitation sales, the buyer must, upon demand, tender goods delivered pursuant to the sale, but need not tender at any place other than the residence. The buyer may keep the goods if the seller fails to demand possession within a reasonable time (40 days) after cancellation (§5-2-505). Within 10 days of receiving a notice of cancellation, the seller must tender any payments made, any note or other evidence of indebtedness, and any goods traded in (§5-2-504). Volume II - Home Improvement .inancing: Summaries of State Statutes 25
    • CONNECTICUT CONNECTICUT Small Loan Lenders Act Citation: Conn. Gen. Stat. §§36a-555 to 573 Applicability: §36a-555 applies to persons engaging in the business of making loans in the value of $5,000 or less, or $10,000 or less for open-ended loans. Exemptions: §36a-555 exempts banks, credit unions, and savings and loans. Licensing Requirements: §36a-555 to 562 Interest Rate and Fee Caps: §36a-563 allows the licensee to collect charges up to 17 percent on loans up to $1,800, and 11 percent on loans over $1,800. §36a-565 allows the licensee to charge up to 19 8/10 percent for an open-ended loan. §§36a-563 and §§36a-565 also delineate what additional charges may be made, and under what circumstances. Loan Terms: §36a-567 allows prepayment of loans by the borrower. §36a-568 allows a licensee to take security in chattel or personal property other than household goods, and in real estate where the cash advance is more than $1,800. Prohibited Acts: Any violation of the act is prohibited. Civil Penalties/Enforcement: Under §36a-573, a loan for which a greater rate of interest has been charged than is allowed cannot be enforced. Private Right of Action: Implied above Applicability of State UDAP: Yes. Conn. Gen. Stat. §§42-110a, et seq. A plaintiff may be entitled to actual damages, punitive damages, and attorney fees. Usury Citation: Conn. Gen. Stat. §§37-1 to 37-9 Applicability: The act establishes allowable interest rates. Exemptions: §37-9 sets forth exceptions, including loans made by banks, credit unions, and savings and loans (as well as other exceptions which do not apply to home financing). Interest Rate and Fee Caps: §37-1 sets the interest rate “in the absence of an agreement to the contrary” at 8 percent. §37-4 sets interest rates limits for contracts at 12 percent. Prohibited Acts: Any violation of usury statutes is prohibited. Criminal Penalties: A usury violation a misdemeanor (§37-7). Civil Penalties/Enforcement: None specified. §37-2 prohibits a borrower who brings an action to recover more than 6 percent, for the “detention of money” by the lender. Private Right of Action: Implied above 26 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • CONNECTICUT CONNECTICUT CONNECTICUT CONNECTICUT CONNECTICUT Applicability of State UDAP: Yes. Conn. Gen. Stat. §§42-110a, et seq. A plaintiff may be entitled to actual damages, punitive damages, and attorney fees. Retail Installment Sales Act Citation: §§36a-770 to 788 Applicability: §36a-770 (7) applies to any agreement to repay in installments an amount loaned or advanced to a retail buyer for the purchase of goods and by virtue of which a security interest in the goods is taken. Loan Terms: §36a-771 contains general contract requirements, including: 1) the requirement that the contract be in writing, with no blanks left, 2) that the contract set forth separately the information required in §36a-675 to 685 (that is, the Truth in Lending Act (TILA)), and 3) the standard “Notice to Buyer” provision. §§36a-781, 782 and 783 contain the standard receipt for payment, cancellation of contract upon payment in full, and rebate/refund provisions for prepayment. Disclosures: See TILA disclosures as required under §36a-774. Civil Penalties/Enforcement: Under §36a-788, enforcement is through the Commissioner of Banking. §36a-786 bars the recovery of charges where there is a willful violation. §36a-787 further contains a penalty provision of not less than $25 or more than $500 per violation. Private Right of Action: None specified Other: §36a-785 rules the governing and limitations on foreclosures and repossessions. Volume II - Home Improvement .inancing: Summaries of State Statutes 27
    • DELAWARE DELAWARE Retail Installment Sales Law Citation: Del. Code Ann. tit. 6, §§4301 to 4351 Applicability: The statute applies to the sales of goods or services by a person, who is in the business of selling goods or services, for a time sale price payable in installments. Goods include things which, at the time of sale or subsequent thereto, are to be so affixed to realty as to become a part thereof, whether or not severable therefrom. Services include improvements in connection with real property (tit. 6, §4301). Exemptions: Sales of $75 or less where no security interest is retained by the seller are exempt (tit. 6, §4302). If the seller or holder corrects any violation within 10 days of noticing a failure or being notified thereof by the buyer, then the seller or holder is not subject to penalties. However, this safe harbor does not apply to anyone who willfully violates provisions relating to service charges for consolidated sales (tit. 6, §§4349, 4350). Interest Rate and Fee Caps: The interest rate is established as agreed to by the contract (tit. 6, §4315). The finance charge shall include any charges for investigating or making contract, or for the extension of credit (tit. 6, §4317). The holder may, if the contract so provides and an installment is 10 days past due, collect a late charge of $5 or 5 percent of the delinquent installment, whichever is less (a minimum charge of $1 is allowed) (tit. 6, §4308). Actual and reasonable costs of collection occasioned by the removal of goods from Delaware without the holder’s permission, or by the failure of the buyer to notify the holder of any change of address or by the failure of the buyer to communicate with the holder for 45 days after any payment default (tit. 6, §4308). Actual court costs and reasonable attorneys’ fees may be charged if the contract is referred for collection to an attorney (tit. 6, §4344). Loan Terms: The contract shall be in writing and shall contain the entire agreement of the parties (tit. 6, §§4303, 4304). The contract shall include, in at least 10-point bold type, the words “Conditional Sale Contract” or “Lien Contract” either at the top or directly above the buyer’s signature line (if a security interest in goods or realty is taken); or, the words “Retail Installment Contract” (if no security interest is taken) (tit. 6, §4304). If any scheduled payment is more than 2 times as large as the average of earlier payments, the buyer must be given the right to a new payment schedule with payments not substantially greater than the average of the preceding installments (tit. 6, §4326). The buyer may prepay at any time before maturity without a penalty and receive a refund of unearned interest (tit. 6, §4322). Prohibited Loan Terms: Acceleration clauses in the absence of buyer’s default are prohibited. The buyer is prohibited from entering into an agreement not to assert a claim or defense arising out of the sale against a seller or assignee. A waiver of provisions of the act or of any right of action against the seller or holder of the contract or any other person acting on his behalf, for any illegal acts committed during collection or repossession, is not allowed. The seller or holder or person acting on their behalf is prohibited from ascertaining the power to enter the buyer’s premises or commit any breach of the peace during repossession. A power of attorney appointing seller or holder, or person acting on their behalf, buyer’s agent for purposes of repossession is prohibited (tit. 6, §§4302, 4311). No contract for the sale of goods shall take a lien on goods already fully paid for or not sold by the seller (tit. 6, §4313). Disclosures: Disclosure requirements include, in at least 8-point bold type, a notice advising: 1) the buyer to read the contract (which should be filled-in) before signing it; 2) that the buyer has right to a completed copy of the contract; and, 3) that the buyer 28 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • DELAWARE DELAWARE DELAWARE DELAWARE DELAWARE has the right to pay off the loan in advance (tit. 6, §4304). The contract must disclose the itemized amount financed; amounts of insurance and official fees, if any; finance charges; total and breakdown of payments; and sale price at the time (tit. 6, §4305). Any certificate of completion or satisfaction must include at the top, in 10-point bold type, a notice stating that the buyer should not to sign the certificate until all services are satisfactorily performed or the goods are received and found satisfactory (tit. 6, §4312). Compliance with federal Truth in Lending Act (TILA) satisfies the disclosure requirements (tit. 6, §4351). Prohibited Acts: Prohibited acts include: 1) obtaining buyer’s signature to a contract not filled in (tit. 6, §4306); and 2) assigning wages for a period of 60 days from the date of default (tit. 6, §4345). Criminal Penalties: Willful violations of the act are a misdemeanor (tit. 6, §4347). Civil Penalties/Enforcement: Until a signed copy of the contract is delivered to the buyer, the buyer is obligated only to pay the cash sales price (tit. 6, §4309). A buyer’s waiver of the act’s provisions is void (tit. 6, §4302). Any person who violates the act or any person who acquires a contract with knowledge of such noncompliance is barred from the recovery of any time price differential or finance charge or delinquency, collection, extension, deferral, or refinance charges imposed in connection with the contract; the buyer may recover any such charges paid (tit. 6, §4348). The buyer is entitled to 3 times such charges paid in case of willful violations of provisions relating to finance charges for consolidated contracts (tit. 6, §4350). Private Right of Action: Yes (tit. 6, §4348). Reasonable attorney fees and costs for prevailing party in any action brought hereunder, regardless of who institutes the action (tit. 6, §4344) Applicability of State UDAP: Yes. Del. Code Ann. tit. 6, §§2511, 2531. Injunction; attorney fees “may” be awarded to the successful party in exceptional cases; treble damages (but only where the actual damages are awarded under common law or other Delaware statute) Special Assignee Provisions: A buyer’s written acknowledgment of the delivery of a copy of the contract shall be a conclusive presumption of delivery and of contract being completely filled in (in any action by or against an assignee without knowledge to the contrary) (tit. 6, §4309). Until the buyer has a notice of assignment, any payment made to the last known holder shall be binding upon all subsequent holders or assignees (tit. 6, §4320). No contract may contain a provision in which the buyer agrees not to assert a claim or defense against an assignee. No rights of action or defense arising out of a sale in which the buyer has against the seller shall be cut off by assignment, unless the assignee gives the buyer written notice of assignment and buyer fails to notify assignee within 15 days of facts giving rise to claim or defense, or unless assignee relies in good faith upon a certificate of completion or satisfaction signed by the buyer (tit. 6, §§4311, 4312). Licensed Lenders Citation: Del. Code Ann. tit. 5, §§2201 to 2243 Applicability: The act applies to persons who engage in the business of lending money (tit. 5, §2202). Volume II - Home Improvement .inancing: Summaries of State Statutes 29
    • DELAWARE Exemptions: Exemptions include: any banking institution, federal credit union or insurance company; any lender making less than 5 loans within any 12-month period; any person lending money as authorized by any other applicable law of Delaware or the United States; any other person or class of loan that the State Banking Commissioner decides to exclude; and any participating merchant (tit. 5, §2202). Licensing Requirements: Del. Code Ann. tit. 5, §§2202 to 2213 Interest Rate and Fee Caps: The interest rate is as agreed by contract (tit. 5, §2229). Reasonable fees may be charged for services rendered or for the reimbursement of expenses incurred in good faith in connection with the loan. The State Banking Commissioner is directed to issue a schedule of the maximum amounts that may be charged to a loan applicant for costs, fees, services, points, premiums, and other reasonable expenses (tit. 5, §2231). Any delinquency charge is limited to 5 percent of the installment not paid (tit. 5, §2231). No prepayment penalty is allowed, except for residential mortgage loans (tit. 5, §2234). If the contract so provides, reasonable attorney fees may be charged (all actual court, alternative dispute resolution and other collection costs) if the lender refers the account for collection to a third party or an attorney not a salaried employee of the lender (tit. 5, §2236). Any other law of this State that limits the rate or amount of interest or charges shall not apply to extensions of credit under this act (tit. 5, §2237). Loan Terms: The buyer may prepay a loan in full at any time and receive a rebate of unearned interest (tit. 5, §2234). Prohibited Loan Terms: Prohibited loan terms include: assignment of wages; confession of judgment or any power of attorney; and, acceleration clauses based on the holder deeming these clauses insecure (tit. 5, §2242). Prohibited Acts: Prohibited acts include: taking an assignment of wages (tit. 5, §2242), and advertising that is false, deceptive, or misleading (tit. 5, §2243). Criminal Penalties: Criminal penalties include: failing to give the borrower, on request, a correct copy of the contract punishable by a fine of at least $20, but not more than $100 or one months imprisonment (tit. 5, §2239); and taking an assignment of wages or including a prohibited loan term punishable by a fine of at least $100 but not more than $500 or 6 months imprisonment (tit. 5, §2242). Applicability of State UDAP: Yes. Del. Code Ann. tit. 6, §§2511, 2531. Injunction; attorney fees “may” be awarded the successful party in exceptional cases; treble damages, but only where actual damages are awarded under common law or another Delaware statute Interest-Usury Citation: Del. Code Ann. tit. 6, §§2301 to 2305 Applicability: Lenders (tit. 6, §2301); loans made by unlicensed lenders specifically covered in the act (tit. 5, §2202) Interest Rate and Fee Caps: Interest allowed is at any rate agreed upon in writing that is not in excess of 5 percent over the Federal Reserve discount rate, including any 30 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • DELAWARE DELAWARE DELAWARE DELAWARE DELAWARE surcharge thereon. This limitation does not apply to loans which are for more than $100,000, and are not secured by a mortgage against the borrower’s principal residence (tit. 6, §2301). Civil Penalties/Enforcement: If a greater rate of interest than allowed by law has been contracted for, the borrower is not required to pay the excess interest over the lawful rate and may retain and deduct the excess from the amount of any debt. If the borrower has paid off the loan, the borrower may recover 3 times the amount of the excess interest or $500, whichever is greater (tit. 6, §2304). Private Right of Action: Recover excess interest when the whole debt has already been paid off (tit. 6, §2304) Applicability of State UDAP: Yes. Del. Code Ann. tit. 6, §§2511, 2531. Injunction; attorney fees “may” be awarded the successful party in exceptional cases; treble damages (only where actual damages awarded under common law or another Delaware statute) Volume II - Home Improvement .inancing: Summaries of State Statutes 31
    • DISTRICT O. DISTRICT O. COLUMBIA COLUMBIA Interest and Usury Citation: D.C. Code Ann. §§28-3301 to 3314 Applicability: This act establishes interest rates. Exemptions: §3301 exempts certain loans over $1,000 from the limitations described herein (exceptions do not pertain to consumer transactions, and would not, in any event, apply to loans secured by residential property). Interest Rate and Fee Caps: §28-3301 establishes a 24 percent interest rate limit for an instrument in writing, and specifically applies that limit to first or subsequent mortgages of residential real property. §3308 applies the same 24 percent rate as a ceiling for retail installment finance charges. Under §28-3302, if no interest rate is specified by an express contract, the rate is 6 percent. Loan Terms: §28-3301 further contains certain requirements for loans secured by mortgages or interests in residential property dealing with prepayment, advance payment of taxes, and Truth in Lending Act (TILA) requirements. Disclosures: §28-3310 provides that a lender (who received periodic payments on more than five loans per year) shall furnish the borrower, upon request, with a written statement of the payments made, application of payments. This section also limits delinquent charges. Prohibited Acts: §28-3312 prohibits “unlawful practices,” including misrepresentations and the failure to state material facts. Criminal Penalties: §28-3313 makes a violation of the act a misdemeanor. Civil Penalties/Enforcement: See “Private Right of Action” below. Private Right of Action: §28-3304 allows a person to recover any usury paid in an action brought within 1 year after the date of payment. §28-3305 limits the creditor’s judgment to only principal. §28-3314 also allows a debtor to collect reasonable attorney fees, and actual and punitive damages. Applicability of State UDAP: §28-3901 et seq. encompass lending practices; the consumer may recover actual damages, attorney fees, punitive damages, and/or treble damages (depending on the circumstances) Consumer Credit Protection Act Citation: D.C. Code Ann. §§28-3801 to 3816 Applicability: Under §28-3801, the chapter “applies to actions to enforce rights arising from a consumer credit sale or direct installment loan.” Exemptions: Consumer credit sales in which the amount financed exceeds $25,000 are exempt (§28-3802). Loan Terms: §28-3804 prohibits the assignment of earnings; §28-3305 establishes rules for cross-collateralization of debts. 32 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • DISTRICT O. COLUMBIA DISTRICT O. COLUMBIA DISTRICT O. COLUMBIA DISTRICT O. COLUMBIA DISTRICT O. COLUMBIA Prohibited Loan Terms: §28-3810 prohibits referral sales rebates. Disclosures: §28-3811 requires disclosure of a standard home solicitation notice and cancellation provisions. Prohibited Acts: Violations of the act are prohibited. Civil Penalties/Enforcement: §28-3812 limits the creditor’s ability to enforce the act following default, without first giving the consumer notice and the right to cure. §28- 3812 also prohibits the creditor from pursuing deficiencies, if the value of the collateral is less than $2,000. Private Right of Action: §28-3813 states consumer remedies and specifies damages that may be collected, and allows attorney fees to be collected. Special Assignee Provisions: §28-3808 makes an assignee subject to all claims or defenses of the consumer (may not exceed the amount owed to the assignee at the time of the assignment). Volume II - Home Improvement .inancing: Summaries of State Statutes 33
    • LO DA . LO R I DA Home Improvement Sales and Finance Act; Home Improvement .LORIDA Sales and Finance Citation: Fla. Stat. §§520.60 to 520.998; Fla. Admin. Code Ann. Ch. 3D-80 Applicability: The act applies to any repair, replacement, remodeling, alteration, conversion, modernization, or improvement of any land or building which is to be used as a single family residence, when such construction is done pursuant to a home improvement contract and a security interest in the real property is retained; contracts where all or part of the contract price is to be paid in installments over more than 90 days (§520.61). Exemptions: Exemptions include: 1) construction of a new home or work done in compliance with a guarantee of completion of a new building project; 2) sales of goods by a seller who neither arranges to perform nor performs directly, or indirectly, any labor in connection with the goods’ installation or application; and 3) sellers who enter into fewer than 2 home improvements contracts with a value of $500 or more in any 1 calendar year (§520.61). Licensing Requirements: Fla. Stat. §§520.63 to 520.69; Fla. Admin. Code Ch. 3D-80 Interest Rate and Fee Caps: If a contract is payable in substantially equal monthly installments, beginning one month from the date the finance charge accrues: 12 percent per year, with a minimum finance charge of $25 allowed. If a contract is payable in irregular or unequal installments in either amount or period, or if payments do not begin for more than 1 month after the date the finance charge accrues, a rate which will provide the same yield as if the contract were payable in equal installments, beginning within 1 month. Debt consolidation interest rates are: 10 percent simple interest or the rate for simple interest in ch. 687 [18 percent]. Fees allowed include: reasonable fees and costs actually paid for construction permits and for title search, title insurance, and attorney fees relating to any mortgage or lien granted (§520.78); simple interest (§520.785); delinquency charge for each installment overdue 10 days or more allowed (but charge may not exceed 5 percent of the payment due or $5) and may be charged only once; court costs actually incurred and attorney fees not exceeding 20 percent of the amount due and payable under the contract (if the contract is referred to an attorney who is not a salaried employee of the seller or holder for collection) (§520.85). The holder may agree in writing to extend or defer all or part of any scheduled payment, but may charge no more than 1.5 percent per month simple interest on the amount of the installment or installments or part thereof deferred during the period of the deferral, plus any added insurance premiums (§520.86). Loan Terms: Either party may cancel the contract prior to midnight of the third business day following the execution of the contract by giving written notice mailed by either certified or registered mail (§520.72). Every home improvement contract must be in writing and signed by the parties and include the (1) name, address, and license number of the home improvement finance seller; (2) names of the seller’s employees who solicited or negotiated the contract; (3) start and finish dates for the work; and (4) description of the work and the materials to be used (§520.73). The contract must state whether the home improvement finance seller carries workers’ compensation and public liability insurance, and where they are applicable to the work to be performed under the contract or whether the seller qualifies as a self-insurer (§520.73). 34 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • .LORIDA .LORIDA .LORIDA .LORIDA .LORIDA The contract must state: 1) the premium paid for any group credit life or other insurance, 2) which party is responsible for procuring insurance, and 3) that any unearned premiums must be credited to the buyer. If the seller is to procure the insurance, a copy of the policy must be provided the buyer within 30 days (§520.76). The buyer may prepay the loan at any time and shall receive a refund of any unearned interest less an acquisition cost of $25 (§520.84). Prohibited Loan Terms: Prohibited terms include: any provision authorizing a seller to select a home improvement finance seller on behalf of a homeowner (§520.70); the agreement by the buyer not to assert any claim or defense arising out of the sale against the home improvement finance seller or their assignee, or waiver from any right of action against the seller or a holder or other persons acting on their behalf for any illegal act committed in the collection of payments; an acceleration clause in the absence of buyer’s default in performance; any clause relieving the home improvement finance seller from liability for any claims the homeowner may have against the home improvement contractor; any clause authorizing the seller or holder or any person acting on their behalf to enter upon the premises unlawfully; a liquidated damages clause which exceeds 10 percent of the cash price in the event the buyer fails or refuses to accept delivery of the goods or performance of the services; requirement that the execution of a note or series of notes which, when separately negotiated, be cut off to third party rights of action or defenses against the home improvement finance seller; and any power of attorney, confession of judgment or assignment of wages (§520.74). Disclosures: The written contract must disclose the amount financed; the finance charge; total of payments; total sales price; amount provided for debt consolidation; interest charge on the amount advanced for debt consolidation; amounts included for insurance; and, official fees, survey or permit charges actually incurred. Compliance with federal Truth in Lending Act (TILA) disclosure requirements satisfy this requirement of the act (§520.73). A notice to the homeowner must be printed in 10- point boldfaced type above the signature line and must state: 1) that the buyer should not sign the contract in blank, 2) that the buyer is entitled to a copy of the contract at the time of signing, and 3) that the contract may contain a mortgage or otherwise create a lien on the property that could be foreclosed on if payments are not made (§520.73). Prohibited Acts: Prohibited acts include: 1) using a form contract that fails to disclose a named home improvement finance seller; 2) accepting or paying any compensation on or for a transaction other than from or for the home improvement finance seller involved in the transaction (§520.70); 3) leaving any blank spaces in the contract to be filled in after the owner signs (§520.73); 4) waiving any provision (act by agreement or statement by a buyer) of the act intended for the protection of the buyer (§520.75); 5) failing, without justification, to perform the contract or to materially deviate from the plans without the owner’s consent; 6) failing of a home improvement finance seller’s employee to remit funds to seller; 7) making any substantial misrepresentation in the procurement of a contract; 8) fraud in executing or making material alterations to any contract, note, or mortgage involving fraud; 9) preparing or accepting any note or mortgage with the knowledge that it recites a greater monetary obligation than the consideration for the home improvement work; 10) false, deceptive, or misleading advertising; 11) willfully or deliberately disregarding the building code or the safety, labor, or workmen’s compensation insurance laws; 11) conducting business in a name other than the one in which the home improvement finance seller is licensed; 12) knowingly or without due care violating the act or an order of the Florida Department of Banking and Finance; 13) willfully failing to perform any written agreement with the Volume II - Home Improvement .inancing: Summaries of State Statutes 35
    • homeowner; and 14) willfully failing to disclose anything required to be disclosed to the .LORIDA homeowner (§520.90). Criminal Penalties: Anyone who accepts or receives a completion certificate with knowledge that the work has not been finished, and utters, offers, or uses the certificate in connection with the assignment or negotiation of that contract, or in using that contract as security for any credit or loan, shall be guilty of a first degree misdemeanor (§520.91). Any person who willfully or intentionally violates the act or regulations is guilty of a first degree misdemeanor (§520.98). Civil Penalties/Enforcement: Any costs and charges not authorized by the act are unenforceable and must be offset against any principal still owed or remitted to the owner (§520.79 and Rule 3D-80.002). Enforcement actions, investigations, regulation, and licensing are conducted by the Florida Department of Banking and Finance. Civil fines of $1,000 per violation are allowed (§§520.993 to 520.998). Private Right of Action: Yes. For willful violations the homeowner may recover by way of action or setoff or counterclaim an amount equal to the finance charge and any fees charged to the owner by reason of delinquency, plus attorney fees and costs (§520.98). Applicability of State UDAP: Yes. Fla. State. §501.201. Injunction; declaratory relief; actual damages for consumer, provided retailer did not act in good faith and with knowledge; attorney fees and costs may be awarded to the prevailing party. Special Assignee Provisions: Clauses in which the buyer 1) agrees not to assert any claim or defense arising out of the sale against the home improvement finance seller or their assignee, or 2) waives any right of action against the seller or a holder or other persons acting on their behalf for any illegal act committed in the collection of payments, are prohibited (§520.73). Unless a notice of assignment has been given, payment by the owner to the last known holder shall be binding upon any subsequent holder or assignee (§520.87). No holder shall sell, transfer, or assign a home improvement contract to any person who is not an authorized sales finance company; notice of the assignment must be given to the homeowner immediately. No note or other evidence of indebtedness may be negotiated or otherwise transferred without simultaneous delivery of the related contract. No right of action or defense arising out of the transaction which the buyer has against the home improvement seller shall be cut off by the assignment of the contract to a third party, whether or not the party acquired the contract in good faith and for value (§520.88). Other: Every note or mortgage must bear a notation on the side of the note in at least 10-point boldface type that the note or mortgage is subject to the terms of a home improvement contract of even date (§520.80). A certificate of completion must be prepared and executed by the home improvement finance seller (§520.81). Upon written request, twice per year the holder of a contract must provide the buyer with a written statement of all payments made and any amount still owing. The statement must be provided within 10 days (§520.82). Upon payment in full, the seller must release all encumbrances and return to the buyer any original instruments evidencing the indebtedness (§520.83). 36 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • GEORGIA GEORGIA GEORGIA GEORGIA GEORGIA GEORGIA Retail Installment and Home Solicitation Sales Act Citation: Ga. Code Ann. §§10-1-1 to 10-1-16 Applicability: The act applies to the sales of goods or services by a person who regularly sells goods or services, primarily for personal, family, or household purposes, which are paid for in installments. Goods include items which, at the time of sale or subsequent thereto, are to be used in the modernization, rehabilitation, repair, alteration, improvement, or construction of real property so as to become a part thereof, whether or not severable therefrom. Services include those services furnished in connection with the modernization, rehabilitation, repair, alteration, improvement, or construction of real property. Retail sellers include those persons who regularly grant credit to retail buyers for the purpose of buying goods or services from others (§10-1- 2). Exemptions: None of the provisions of the Georgia loan or interest statutes shall affect or apply to any retail installment or home solicitation sale (§10-1-11). If the seller or holder corrects any violation within 10 days of the buyer’s execution of the contract, then the seller or holder is not subject to any penalties. If the seller or holder shows, by clear and convincing evidence, that any violation was not intentional and resulted from a bona fide clerical or typographical error, then the seller or holder is not subject to any penalties (§10-1-15). Interest Rate and Fee Caps: Notwithstanding any other law, the interest rate on a retail installment contract shall not exceed 13 percent per year. A minimum time charge, not in excess of $12, may be charged on any contract for $50 or more; $7.50 on a contract for more than $25, but less than $50; and $5 on a contract for $25 or less. If a retail time transaction involves the repair, modernization, alteration, improvement, construction, or rehabilitation of real property, the cash sale price may include reasonable fees and costs actually paid for construction permits (§10-1-3). The holder may, if the contract so provides, collect: a delinquency charge not to exceed $10 if an installment is 10 days past due; and a bad check charge not to exceed $20 or 5 percent of the face amount of the check, whichever is greater. If the buyer has failed to make good on the check within 10 days of receiving notice from the seller that a check has been dishonored, then a delinquency fee may not be charged in addition to the bad check fee. Reasonable attorney fees and court costs, if the contract is sent for collection to an attorney who is not a salaried employee of the seller, may be charged (§10-1-7). Loan Terms: The contract shall be in writing, signed by the parties, and completed prior to the buyer’s signing the contract. The buyer may prepay at any time before maturity of the loan and receive a refund of unearned interest, less an acquisition cost of $20 (§10-1-3). The buyer shall have the right to cancel any home solicitation sale, until midnight on the third day after the date of the transaction. The seller shall have the right to 1) $25 or 5 percent of the gross sales price, whichever is less, as liquidated damages for such cancellation; and 2) the actual cost of picking up the merchandise, or $5, whichever is less (§10-1-6). Disclosures: Required disclosures include a notice: 1) advising the buyer to read the contract (which should be filled-in) before signing it; 2) that the buyer has the right to a completed copy; and 3) that the buyer has the right to pay off the loan in advance (§10-1-3). Prohibited Acts: Requiring a buyer to sign a contract containing blank spaces is prohibited (§10-1-3). Volume II - Home Improvement .inancing: Summaries of State Statutes 37
    • Criminal Penalties: Any willful violation is a misdemeanor punishable by a fine not to GEORGIA exceed $500 for the first defense, and punishable as a misdemeanor thereafter (§10-1- 15). Civil Penalties/Enforcement: The buyer’s proper written acknowledgment of the delivery of a copy of the contract shall be presumptive proof of delivery and of the contract being completely filled in (§10-1-3). Any buyer’s waiver of the act’s provisions is void (§10-1-13). Any person who violates interest rate limitations of act is barred from the recovery of any finance, delinquency, or collection charge (§10-1-15). Private Right of Action: For any willful violation of the act, the buyer may recover a minimum of $100 or 2 times the time price differential and any delinquency charge, plus attorney fees and court costs charged in connection with such a transaction (§10-1-15). Applicability of State UDAP: Yes. Ga. Code Ann. §10-1-390. Injunction; general damages; exemplary and treble damages for intentional violations; costs and attorney fees to successful consumers Special Assignee Provisions: An assignment shall not bar any right of action arising against the seller, and nor bar any defense against an assignee arising from violation of interest rate limitations (§10-1-9). Until the buyer has a notice of assignment, the payment made to the last known holder shall be binding upon all subsequent holders or assignees (§10-1-9). Industrial Loans Citation: Ga. Code Ann. §§7-3-1 to 7-3-29 Applicability: The act applies to persons who make loans for $3,000 or less (§7-3-4). Exemptions: Exemptions include: banks; trust companies; real estate loan or mortgage companies; federal savings and loan associations; Georgia building and loan associations; credit unions; pawnbrokers; student loans; persons making loans and charging 8 percent per year or less simple interest (§7-3-6). If the seller or holder corrects any violation within 15 days after discovering an error, and prior to the institution of any action or the receipt of a written notice of the violation, then the seller or holder is not subject to civil penalties to the borrower. If a seller or holder shows, by a preponderance of evidence, that any violation was not intentional, and resulted from a bona fide clerical or typographical error (notwithstanding the maintenance of procedures reasonably adopted to avoid any such error), then the seller or holder is not subject to penalties. A licensee acting in conformity with any rule or regulation issued by the Commissioner of Insurance or the Georgia appellate courts shall be presumed to have acted in accordance with the law and not be liable for any such act or practice (§7-3-29). Licensing Requirements: Ga. Code Ann. §§7-3-8 to 7-3-12 Interest Rate and Fee Caps: The interest rate may not exceed 10 percent per year. Interest may be discounted in advance on loans repayable in 18 months or less, and must be added on for longer-term loans. A loan fee of 8 percent of the first $600 of principal and 4 percent of the remainder is permitted, except on refinancing within 6 months, provided such charges do not exceed the criminal usury limits of §7-4-18. 38 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • GEORGIA GEORGIA GEORGIA GEORGIA GEORGIA Delinquency charges are limited to 5 percent of any installment not paid within 5 days. A maintenance charge of $2 per month per loan outstanding is permitted (§7-3- 14). Commissions paid to third parties by borrowers shall not exceed the interest charge limitations of the act (§7-3-5). The actual cost of recording any security instrument; actual insurance premium costs; court costs and attorney fees authorized by law incurred in collection; and actual and reasonable expenses of repossessing, storing and selling collateral are permitted fees (§7-3-15). Loan Terms: The loan term shall be for 36.5 months or less (§7-3-14). The buyer may prepay at any time and receive a refund of any unearned interest (§7-3-17). Disclosures: At the time that a loan is made, a statement must be provided (in English) disclosing the: amount; date; schedule of payments; type of security; name and address of the lender and the borrower; and the total amount of cash advanced, interest, and fees (§7-3-18). Prohibited Acts: Prohibited acts include: false, deceptive, or misleading advertising (§7-3-13); and, loan splitting, thereby receiving charges in excess of those permitted by the act (§7-3-15). Criminal Penalties: Knowing and willful violations of the act are a misdemeanor (§7-3- 29). Civil Penalties/Enforcement: The state Commissioner of Insurance shall administer and enforce the act (§7-3-7). Violations of any cease and desist order issued by the Commissioner when a determination is made that action constitutes a public nuisance (§7-3-23). Any contract made by a lender who should be, but is not, licensed under this chapter is void. Violations by a licensed lender punishable by penalty of twice all interest and loan fees charged, or $100, whichever is greater. Contracts made knowingly and willfully in violation of act are void (§7-3-29). Private Right of Action: Individual actions only (§7-3-29) Applicability of State UDAP: Yes. Ga. Code Ann. §10-1-390. Injunction; general damages; exemplary and treble damages for intentional violations; costs and attorney fees to successful consumers Interest-Usury Citation: Ga. Code Ann. §§7-4-1 to 7-4-21 Exemptions: Retail installment sales and loans made by Georgia industrial banks are exempt (§7-4-2). Any commissions paid to third parties by borrowers shall not render a loan usurious (§7-4-8). Interest Rate and Fee Caps: Interest rates: loans of $3,000 or less 16 percent per year simple interest; loans of more than $3,000 but less than $250,000 (any agreed rate of simple interest and charges); loans of $250,000 or more (any agreed rate of interest and charges). However, any agreed upon interest rate is still subject to the criminal usury limit of 5 percent per month (§7-4-2; see §7-4-18). Prepayment penalties are forbidden, unless stipulated in the contract (§7-4-2). Volume II - Home Improvement .inancing: Summaries of State Statutes 39
    • Criminal Penalties: Charging interest greater than 5 percent per month, either directly GEORGIA or indirectly, is a misdemeanor (§7-4-18). Civil Penalties/Enforcement: Usurious interest is forfeited and may be set off against any principal owed to the creditor (§7-4-10). Private Right of Action: Yes. Claims of violations on loans secured by real estate may be asserted only in individual suits and not in class actions (§7-4-21). Applicability of State UDAP: Yes. Ga. Code Ann. §10-1-390. Injunction; general damages; exemplary and treble damages for intentional violations; costs and attorney fees to successful consumers. Other: The act establishes a criminal interest rate cap at 5 percent per month (§7-4- 18). 40 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • GUAM GUAM GUAM GUAM GUAM GUAM Uniform Consumer Credit Code Citation: Title 14 Guam Code Ann. Applicability: The purpose of §1102 is to: simplify, clarify, and modernize the law governing retail installment sales, consumer credit, small loans, and usury; further consumer understanding of the terms of credit transactions, and to promote competition among suppliers of consumer credit; protect consumer buyers against unfair practices; permit the development of sound consumer credit practices; and make the law uniform among various jurisdictions. §2 addresses credit sales, and §3 addresses loans. Exemptions: Under §2401, the credit sales provision does not apply to sales or leases in which the amount financed is more than $25,000, or to interests in land. Under §3401, the loan provisions do not apply to loans of greater than $25,000. Licensing Requirements: §§3503-3507 contain licensing requirements for “regulated lenders.” Credit Sales: §2201 allows loan finance charges on credit sales: 36 percent up to $300; 21 percent between $300 and $1,000; and 15 percent for over $1,000 or 24 percent. The act then provides the usual UCCC list of additional charges and costs: §2202 allows additional charges such as official fees and charges for insurance and other benefits of value to the consumer; §2203 provides for delinquency charges; §2204 provides for deferral charges; §2205-2207 provide for credit service charges. Consumer Loans: §3201 addresses loan finance charges on consumer loans up to 10 percent, other than regulated loans or loans pursuant to a revolving loan account. §3202 sets forth requirements for additional charges. §3203 sets forth requirements for delinquency charges. §3204 sets forth requirements for deferral charges. Sections 3205 and 3206 set forth requirements for loan finance charges. Regulated Loans: §3508 provides for loan finance charges: 36 percent for amounts up to $300; 18 percent for $300-$500; 12 percent for $500-$1,500, or 24 percent. Loan Terms: §§2209 to 2210 and 3208 to 3209 address the consumer’s right to repay in advance, and rebate entitlement. Under §§2405 and 3402, if the agreement contains a balloon payment, then the buyer shall have the right to refinance at the time of the balloon on terms “no less favorable to the buyer than the terms of the original sale.” §§2413 and 3404 allow for the provision of attorney fees, but not in excess of 15 percent of the unpaid debt. Prohibited Loan Terms: §2402 prohibits the use of multiple agreements to obtain higher interest rates. §2410 prohibits assignment of earnings. §2411 prohibits referral sales. Criminal Penalties: §5301 makes a violation of the act a misdemeanor. Civil Penalties/Enforcement: §5, Remedies and Penalties, sets forth the standard UCCC remedies and penalty provisions. §5103 restricts deficiency judgments if the balance owed is under $1,000. Under §5201, a buyer is not obligated to pay a charge in excess of that allowed under the act; if the buyer is entitled to a refund. If the seller refuses to provide the refund, then the court may award the buyer no greater than 10 times the amount of the excess, or the amount of the credit service charge or loan finance charge. If the creditor violated the provisions governing regulated loans, then Volume II - Home Improvement .inancing: Summaries of State Statutes 41
    • GUAM the buyer is not responsible to pay either principal or interest. The creditor is not considered responsible if the error was unintentional. If the court finds the creditor liable, it may award attorney fees. Private Right of Action: Implied in the above (Civil Penalties/Enforcement) Special Assignee Provisions: Under §2402, a transferee of a consumer credit agreement may not be liable for the buyer’s claims and defenses if the transferee gives the buyer a notice of the transfer, and the buyer does not give the transferee a notice of a claim within 6 months. 42 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • HAWAII H A W A I I H A W A I I H A W A I I H A W A I I H A W A I I Credit Sales Act Citation: Haw. Rev. Stat. §§476-1 to 476-32 Applicability: The act applies to the sales of goods or services by a person who regularly sells goods or services, and to whom the obligation to pay over time is subject to a finance charge or in more than 4 installments. Goods include items which are or will become fixtures. Services include repairs, alterations, or improvements upon or in connection, with real property (§476-1). Exemptions: If the seller corrects any violation prior to the institution of any action or any notification from buyer, then the seller or holder is not subject to penalties (§476- 21). Interest Rate and Fee Caps: Any payment on the account of principal, which is due on a particular date, may be deferred or extended. A finance charge may be collected in advance at the allowed interest rate (§476-6). The holder may, if the contract so provides, collect a late charge of $50 or 5 percent of the delinquent installment, whichever is less, if the installment is 10 day past due. The costs of action and reasonable attorneys’ fees may be charged if the contract is referred for collection to an attorney who is not a salaried employee or officer of the holder (§476-9). A minimum finance charge of no more than $10 is allowable. Interest added-on or deducted in advance may not exceed the rates allowed by the Financial Services Loan Companies statute. The simple interest rate is limited to 24 percent per year (§476- 28). Loan Terms: The contract shall be in writing, signed by both parties, and clearly incorporate or refer to all agreements of the parties. The contract shall include in at least 10-point bold type the words “Credit Sale Contract” both at the top of the contract and directly above buyer’s signature line (§476-3). If any scheduled payment is more than 2 times as large as the average of earlier payments, the buyer must be given the right to refinance that payment without penalty, unless a balloon payment is included due to seasonal or irregular income of buyer (§476-5). The buyer is given a 15-day right to cancel any sale in which a rebate or discount exceeding 40 percent of the total sale price is given for referral sales (§476-20). The buyer may prepay, upon 5 days notice, at any time before maturity and receive a refund of unearned interest, less a $10 acquisition fee (§476-23). Prohibited Loan Terms: Prohibited loan terms include: acceleration clauses in the absence of buyer’s default (§476-14); confessions of judgment or power of attorney, or wage assignment (§476-15); waivers of provisions of act or of any right of action against the seller or holder of the contract or any other person acting on his behalf, for any illegal acts committed during collection or repossession (§476-16); provisions for subsequent liens or security interests in goods other than the goods that are subject matter of the sale (§476-17); powers of attorney appointing the seller or holder buyer’s agent for purposes of collection or repossession (§476-18); buyer agreements not to assert a claim or defense arising out of the sale against a seller or assignee (§476- 19); buyer agreements that the law of another jurisdiction applies; consents by the buyer to service of process of another jurisdiction; appointments of agents by buyers to receive service; venue fixes; consents by the buyer to jurisdiction of court otherwise without jurisdiction (§476-30). Disclosures: Required disclosures include: a notice advising the buyer to read contract before signing it (directly above the buyer’s signature line); that the buyer has the right to a completed copy; that the buyer should keep a copy of the contract; that Volume II - Home Improvement .inancing: Summaries of State Statutes 43
    • H A W A I I the contract is covered by Hawaii Credit Sales Act; and the buyer has rights under the act and, perhaps, under other state and federal laws (§476-3). The contract must disclose the itemized amount financed; finance charge; total of payments; and total sales price. Compliance with federal Truth in Lending Act (TILA) satisfies the disclosure requirements of §476-3 (§476-4). The holder must give the buyer a written notice of any assessment of late charges prior to the next installment’s due date (§476-9). Advertising disclosures similar to federal TILA requirements are required (§476-29). Prohibited Acts: Requiring the execution of any note or series of notes which, when separately negotiated, will cut off as to third parties any right the buyer may have against the seller is prohibited (§476-19). Criminal Penalties: Any buyer who maliciously or with intent to defraud destroys, injures, or conceals the goods, or removes them from the island or sells or mortgages the goods claiming full ownership in them, shall be subject to a fine of $500 or 1 year imprisonment or both (§476-27). Civil Penalties/Enforcement: Until a signed copy of the contract is delivered to the buyer, a buyer who has not received delivery of the goods has the right to cancel and receive an immediate refund of all payments made and return of any trade-ins, unless the goods are specifically ordered or custom made (§476-7). An alteration by the holder of a contract that is both fraudulent and material discharges the buyer, unless buyer assents or is precluded from asserting the defense (§476-10). The Attorney General, the Director of the Office of Consumer Protection, or the prosecuting attorney may enforce the act (§476-31). Private Right of Action: For violations of most provisions, the buyer is given the right to recover an amount equal to the finance charge, or 10 percent of the cash price if no finance charge is specified, plus reasonable attorneys’ fees and costs; the seller is barred from recovery of any finance charges, late charges, collection charges and refinancing charges. Neither the seller nor assignee may be held liable if they show by a preponderance of the evidence that the violation was unintentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such error (§476-21). Applicability of State UDAP: Yes. Haw. Rev. Stat. §480. Violations of the door-to- door sales act are explicitly labeled unfair and deceptive practices (§481C-2). treble actual damages or $1,000, whichever is greater; injunctive relief; attorney fees and costs; and minimum damages raised to $5,000 for plaintiffs over 62 years old are enforceable. Contracts in violation of this statute are void and unenforceable. Special Assignee Provisions: The buyer’s written acknowledgment of delivery of a copy of the contract shall be a reputable presumption of delivery and of the contract being completely filled in, in any action by or against an assignee without the knowledge to the contrary (§476-10). Until the buyer has a notice of assignment, the payment made to the last known holder shall be binding upon all subsequent holders or assignees (§476-12). No contract may contain a provision in which the buyer agrees not to assert a claim or defense against an assignee. No rights of action or defense arising out of sale which buyer has against seller shall be cut off by an assignment, but the buyer’s recovery may not exceed any amounts paid or to be paid by the buyer and may be set-off (§476-19). Other: No contract, memo, or advertisement shall be required to contain any 44 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • H A W A I I H A W A I I H A W A I I H A W A I I H A W A I I disclosures which are inconsistent with the requirements of federal TILA (§476-2). While the contract is not completed, the buyer shall not remove goods from the island on which the goods are first kept, or mortgage or sell goods, without giving seller prior written notice (§476-25). Interest-Usury Citation: Haw. Rev. Stat. §§478-1 to 478-11.5 Applicability: The act applies to credit extended to a natural person primarily for personal, family, or household purposes in which the principal amount does not exceed $250,000, unless such credit is secured by real property or personal property used or expected to be used as borrower’s principal dwelling (§478-1). The act does not apply to loans made by financial services companies, or credit unions, or loans that are regulated by the Hawaii Credit Sales Act (§478-4). Exemptions: Farmer’s Home Administration (FHA) or Veteran’s Administration (VA) guaranteed or insured loans; first mortgage loans; purchase-money junior mortgages; any sale of goods or services where the rate of interest does not exceed 18 percent; any mortgage made pursuant to rules adopted by the Commissioner of Financial Institutions (§478-8) Interest Rate and Fee Caps: The interest rate cap for written contracts is: 12 percent per year (unless creditor is a regulated financial institution other than a trust company or a credit union, in which case: 24 percent per year) (§478-4). No action is maintainable to recover compound interest (§487-7). Criminal Penalties: $250 fine or one years imprisonment or both (§478-6) Civil Penalties/Enforcement: If the contracted rate of interest is greater than allowed by law, the creditor may only recover the principal; the debtor shall recover costs; and, any interest paid must be offset against principal (§478-5). Applicability of State UDAP: Yes. Haw. Rev. Stat. §480. Violations of the door-to- door sales act are explicitly labeled unfair and deceptive practices (§481C-2). Treble actual damages or $1,000, whichever is greater; injunctive relief; attorney fees and costs; and minimum damages raised to $5,000 for plaintiffs over 62 years old are enforceable. Contracts in violation of statute are void and unenforceable. Financial Services Loan Companies Citation: Haw. Rev. Stat. §§412:9-100 to 412:9-309 Applicability: The act applies to loans made by financial services loan companies to natural persons primarily for personal, family, or household purposes in which the principal amount does not exceed $25,000, unless the loan is secured by real property or personal property used or expected to be used as borrower’s principal dwelling (§412:9-100). Licensing Requirements: Haw. Rev. Stat. §§412:9-101 to 412:9-202 Interest Rate and Fee Caps: Interest, fees and other charges are as allowed by the Hawaii Interest-Usury Statute. In the alternative: 24 percent per year on precomputed Volume II - Home Improvement .inancing: Summaries of State Statutes 45
    • H A W A I I loans with a term in excess of 48 months and on simple interest loans, and on precomputed loans with a term of less than 48 months: 14 percent per year for the first 18 months, plus 10.5 percent for the next year, plus 7 percent for the next year, plus 4 percent for the final 6 months (§412:9-302). Late charges shall not exceed 5 percent of the delinquent installment and are payable only once. A prepayment penalty is allowed on a simple interest mortgage loan with a term in excess of 5 years, if it is prepaid within the first 5 years of the loan. The prepayment penalty shall be computed only on the amount prepaid in excess of 20 percent of the original principal in any 12-month period, and in any case shall not exceed 6 months interest at the maximum interest rate permissible for the amount prepaid. Nonrefundable discount, points, loan fees, and loan origination charges are not allowed on precomputed loans. Fees, charges, and expenses reasonably related to a consumer loan transaction are allowed; no such charges may be retained by the financial services loan company unless the loan is secured by real property, and the charges are bona fide and reasonable, and not unfair or deceptive. Any payment on the account of the principal due on a particular date may be deferred or extended and a finance charge may be collected in advance at allowed interest rate (§412:9-304). Civil Penalties/Enforcement: If a greater rate of interest than allowed by law is contracted for, the financial services loan company may only recover the amount that is received by the borrower in cash, credit, or the equivalent, plus any charges properly charged to the borrower which were not deducted from principal or otherwise paid by the borrower. The borrower shall only recover costs, and any interest paid must be offset against principal (§412:9-303). Applicability of State UDAP: Yes. Haw. Rev. Stat. §480. Violations of the door-to- door sales act are explicitly labeled unfair and deceptive practices (§481C-2). Treble actual damages or $1,000, whichever is greater; injunctive relief; attorney fees and costs; and minimum damages raised to $5,000 for plaintiffs over 62 years old are enforceable. Contracts in violation of statute are void and unenforceable. Special Assignee Provisions: The financial services loan company may only assign loans to financial institutions or persons who have the right to receive interest at the same interest rate, and on the same terms, as provided for in the loan (except in loans may be assigned for collection purposes to people not such financial institutions) (§412:9-309). 46 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • I DA H O I D A H O I D A H O I D A H O I D A H O I D A H O Idaho Credit Code Citation: Idaho Code §§28-41-101 to 28-49-107 Applicability: Credit transactions for a consumer purpose (except certain sections apply to all credit transactions) §28-41-204 Exemptions: Extensions of credit to governmental agencies or instrumentalities, sale of insurance, transactions with regulated public utilities or common carrier tariffs, licensed pawnbrokers are exempt (§28-41-202). Home solicitation sales, consumer credit sales of goods or services (except for agricultural purposes) in which a seller or a person given to the seller or a person acting for him, at a residence (but excluding sales made pursuant to prior negotiations between the parties at a business establishment at a fixed location, or transactions conducted by entirely by mail or telephone, or a sale which is subject to the Federal Consumer Credit Protection Act’s provisions on the consumer’s right to rescind) are exempt (§28-43-401). The creditor is not liable if the creditor discovers the violation and corrects it within 45 days of notifying the debtor, or if the violation is unintentional and is the result from a bona fide error, notwithstanding reasonable procedures (§28-45-201). Licensing Requirements: Idaho Code §28-46-301 Interest Rate and Fee Caps: There is no cap on interest rates. The finance charge is limited only by the parties’ agreement (§28-42-201). Upon any prepayment, the creditor may also collect a minimum charge, if the finance charge earned at the time of prepayment is less than any minimum charge contracted for. The minimum charge may not exceed the amount of the finance charge contracted for, or $5 on a transaction of $75 or less; or $7.50 on a transaction of more than $75. The debtor has the right to prepay in full, but for transactions secured by a mortgage or deed of trust, the parties may agree to a prepayment charge if prepaid during the first 3 years of the contract, and are capped at 6 month’s interest (different calculations for closed-end and open-ended loans) (§28-42-306). No prepayment charge is allowed if the loan is refinanced or consolidated with the same creditor (§28-42-306). Refinancing charges are permitted; no minimum charge is allowed (§28-42-303). Deferral charges are permitted for precomputed credit transactions, and refinancing and consolidations thereof (§28-42-302). The parties may agree, at the time of the precomputed transaction, that if an installment is not paid within 10 days of when due, the creditor may unilaterally grant a deferral and impose a deferral charge (§28-42-302). Consolidation charges are allowed (§28-42-304). For a precomputed credit transaction, the parties may contract for a delinquency charge that may not exceed the greater of 5 percent of the unpaid installment or $5 for payments not paid within 10 days of due (§28-42-301). For a consumer loan secured by the debtor’s residence which is not a precomputed loan, the parties may contract for a delinquency charge in the same amount, but only if the installment is not paid within 15 days of when due. (§28-42-301). For all other consumer transactions (whether open-ended or closed- ended), 5 percent or $10, whichever greater, if the installment is not paid within 15 days (§28-42-301). The creditor may impose a dishonored check fee up to $20 (§28- 22-105), if the fee was contracted for (§28-42-308). The agreement may provide for the debtor to pay reasonable attorney fees to an attorney that is not a salaried employee of the creditor, if the loan was not a regulated consumer loan of $1,000 or less (§28- 43-312). Loan Terms: The parties may agree that the interest shall compound (§28-42-404). For regulated consumer loans of $1,000 or less, the repayment must be scheduled in substantially equal installments at equal periodic intervals (except for the debtor’s Volume II - Home Improvement .inancing: Summaries of State Statutes 47
    • I D A H O seasonal or irregular income) over a period of not more than 37 months; if the principal is more than $300; over a period of not more than 25 months if the principal is $300 or less (§28-43-310). Rebate upon prepayment is allowed, but it need not be made if the rebate is less than $1 (§28-42-307). Cross collateralization is permitted (§28-43-302). A creditor may change the terms of an open-ended consumer credit account and apply any balance incurred before or after the effective date of the change (§28-43- 203). For home solicitation sales, the buyer has 3 day right to cancel (§28-43-402). Prohibited Loan Terms: Prohibited loan terms include: regulated lender taking an interest in land as security for a loan of $1,000 or less (§28-43-309); the assignment of earnings or confession of judgment (§§28-43-304, 28-43-305); any unauthorized default charges (§28-45-301); attorney fees by debtor if the loan is a regulated loan of $1,000 or less (§28-43-311). If a court finds an agreement or clause to have been unconscionable when the loan was made, then the court may refuse to enforce the agreement or may limit the application of any unconscionable clause (§28-45-106). Disclosures: The creditor must: 1) disclose prepayment charges (§28-42-306); and, 2) comply with Federal Consumer Credit Protection Act if the Act, by its terms, applies to the transaction (§28-43-201). In a home solicitation sale, the seller must provide disclosures in writing to be signed by the buyer that: designate the date of the transaction; the date on which the buyer actually signed; and, a statement of the buyer’s rights (by either complying with any notice of cancellation or a similar requirement of any trade regulation of the FTC which applies to home solicitation sales or meets the statutorily prescribed notice of the buyer’s right to cancel) (§28-43- 403. Prohibited Acts: The creditor may not take a negotiable instrument, other than a check (postdated no more than 10 days), as evidence of debtor’s obligation (§28-43- 306). Limitations on garnishment exist (§28-45-104). The agreement for a debtor’s default is only enforceable to the extent that the debtor fails to make a payment as required, or the prospect of payment, performance or realization of collateral is significantly impaired (§28-45-107). Referral sales are prohibited (§28-43-308). Extortionate extensions of credit (those where it is understood that delay in making or failure to make repayment could result in the use of violence or other criminal means to cause harm) are unenforceable (§28-45-109). The creditor may repossess after a default without judicial process, only if possession can be taken without entry into a dwelling and without the use of force or breach of peace (§28-45-108). Criminal Penalties: A regulated lender who willfully and knowingly makes excess charges is guilty of a misdemeanor (§28-45-401). A person who willfully and knowingly engages in business of regulated consumer loans without a license, or without complying with certain administrative provisions, is guilty of a misdemeanor. (§28-41-401). Any violation of disclosure provisions is a misdemeanor (§28-45-402). Civil Penalties/Enforcement: Civil penalties of up to $5,000 are allowed (§28-46-113). The Department of Finance may investigate, issue cease and desist orders, bring injunctive actions, seek temporary relief, and file civil actions seeking a civil penalty (limited to $5,000) (§§28-46-104 to 113). Private Right of Action: Private Right of Action applies if the creditor has collected an excess charge or made a loan without authority, or has violated provisions (restricting taking interest in land as security; limitations on schedule of payments or loan terms for regulated consumer loans; attorney fees; receipts, statements of account and evidences of payment; form of insurance premium loan agreement; security in sales; 48 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • I D A H O I D A H O I D A H O I D A H O I D A H O assignment of earnings; certain negotiable instruments prohibited; referral sales; limitations on default charges, assignees subject to claims or defenses, or assurance of discontinuance) the debtor can recover actual damages and a penalty of not less than $100 or more than $1,000 (§28-45-201). In such cases, a debtor does not have to pay an excess charge, and has a right to its refund; the refund may be made by reducing debtor’s obligation (§28-45-201). If the debtor has paid an amount in excess of the lawful obligation, the debtor may recover the excess amount from the person who made the excess charge or its assignee (§28-45-201). If the liable person refuses to make the refund within a reasonable time after the demand, the debtor may recover a penalty of not less than $100 or more than $1,000. If the debtor prevails, the debtor is entitled to attorney fees. (§28-45-201). For violations of disclosure provisions, liability is determined under the Federal Consumer Credit Protection Act (in lieu of that Act’s penalties) (§28-45-203). Applicability of State UDAP: Yes. Idaho Code §48-601. Contract for purchase of goods or services void if consumer suffered loss; actual damages, $1,000 minimum damages; actual damages or one $1,000 minimum damage award in a class action; restitution, injunction, punitive damages and any other appropriate relief; attorney fees to prevailing plaintiff Special Assignee Provisions: The debtor may pay the original creditor until he or she receives a proper notice of assignment (§28-42-202). The assignee is subject to all claims and defenses of the debtor against the seller, but the assignee’s liability may not exceed the amount owed to the assignee (§28-45-302). Other: The creditor may take a security interest in any property sold, and in goods upon which services are performed or in which goods sold are installed or to which they are annexed or the land to which the goods are affixed, if the debt secured is $1,000 or more (in the case of land), or $100 or more (in the case of goods) (§28-43- 301). Restrictions on deficiency judgments include: if the seller repossesses or voluntarily takes surrender of goods that were security for a sale of $1,000 or less, the buyer is not personally liable for deficiency judgment (§28-45-103). The consumer has the right to refinance balloon payments (a payment more than twice the average of earlier payments) without penalty (§28-43-307). The creditor must deliver or mail to the debtor, without request, a written receipt for each payment, and upon written request (except with respect to open-ended transactions), must provide a written statement of the dates and amounts of all payments made in the preceding 12 months (without charge once/year, up to $10 for each additional statement) (§28-43-204). After paid in full, the creditor must upon request (delivery or mail) provide written acknowledgment (§28-43 205). Volume II - Home Improvement .inancing: Summaries of State Statutes 49
    • ILLINOIS ILLINOIS Illinois Interest Act Citation: Ill. Comp. Stat. Ann. ch. 815, §205/4a Applicability: Credit extended to a person in which the principal amount does not exceed $25,000 and the loan is repayable in 2 or more installments over a period not in excess of 181 months, unless such loan is for a purchase money real estate loan secured by a lien on such real estate NOTE: There are conflicting opinions of the Illinois Appeals Court about whether the $25,000 limitation applies to the act in general specifically to the real estate exception. The Illinois Supreme Court declined to review either decision Exemptions: Banks, savings and loan associations; and licensed lenders under the Illinois Consumer Installment Loan Act are exempt. Interest Rate and Fee Caps: The interest rate cap for written contract is: 9 percent per year (whenever the principal amount is $300 or more and the repayment period is 6 months or more, a minimum charge of $15 may be collected instead of interest): when the principal amount is $800 or less, the lender may also collect a service charge of $5. However, both the minimum charge and service charge may be collected from the same borrower only once in any 1 year. If the contract so provides, a delinquency charge, not exceeding 5 percent of any installment over $200 and $10 of any installment $200 or less, which is past due for 10 days or more is allowed. Reasonable attorney fees for collection or enforcement of the obligation are allowed. Loan Terms: The buyer may prepay at any time and receive a rebate of any unearned interest. Disclosures: Compliance with federal Truth in Lending Act (TILA) requirements satisfies the disclosure requirements of the act. Applicability of State UDAP: Yes. Ill. Comp. Stat. Ann. ch. 815, §505/1. Actual damages, injunctive relief, or other proper relief at court’s discretion; court “may” award attorney fees and costs to prevailing party Retail Installment Sales Act Citation: Ill. Comp. Stat. Ann. ch. 815, §§405/1 to 405/33 Applicability: Sales of goods or services by a person who regularly sells goods or services for a deferred payment price payable in one or more installments (ch. 815, §§405/2.4 & 405/2.5); goods include items purchased for personal, family, or household purposes which are used at the time of sale or subsequently in the modernization, rehabilitation, repair, alteration, improvement, or construction of real estate so as to become a part thereof whether or not severable therefrom (ch. 815, §405/2.1) Interest Rate and Fee Caps: None (ch. 815, §405/27). If the contract so provides, a delinquency charge is allowed, that does not exceed 5 percent of any installment over $200 and $10 of any installment $200 or less, which is past due for 10 days or more. Reasonable attorney fees for collection or enforcement of the obligation are permitted. (ch. 815, §405/12). 50 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • ILLINOIS ILLINOIS ILLINOIS ILLINOIS ILLINOIS Loan Terms: The contract shall be in writing, signed by both parties, and completed as to all essential provisions before signing by the buyer. The contract shall include, in at least 10-point bold type, the words “Retail Installment Contract” both at the top and directly above the buyer’s signature line (ch. 815, §405/3). The buyer may prepay at any time and receive a refund of unearned interest, less a $25 acquisition fee (ch. 815, §405/7). Prohibited Loan Terms: Prohibited loan terms include: 1) acceleration clauses in the absence of buyer’s default; 2) acceleration clauses unless the buyer has been in default in excess of 30 days or has abandoned or destroyed the property, or the holder has reasonable cause to believe the buyer is about to leave the state (ch. 815, §405/ 13); waiver of provisions of act, and 4) relieving the seller from liability for any remedies the buyer may have against the seller under the contract (ch. 815, §405/13). Disclosures: A notice must be provided that disclosures advising the buyer to read contract (which should be filled-in, before signing it) and that the buyer has rights to a completed copy; and that buyer has right to pay off in advance (ch. 815, §405/3). The contract must include a description of goods and services, type of security taken, name and address of lender and borrower, insurance included (ch. 815, §405/4). Contract must disclose itemized amount financed, finance charge, total of payments and total sales price. Compliance with federal TILA satisfies the disclosure requirements (ch. 815, §405/5). Advertising disclosures similar to federal TILA required (ch. 815, §405/29.1). Criminal Penalties: Knowing violations are a misdemeanor (ch. 815, §405/31). Civil Penalties/Enforcement: Until a signed copy of the contract is delivered to the buyer, a buyer who has not received delivery of the goods has the right to cancel and receive an immediate refund of all payments made and return any trade-ins, unless the goods were specifically ordered or custom made (ch. 815, §405/14). No person who violates the act may collect any finance, delinquency, collection, or refinance charges, unless the violation is an accident or bona fide computation error (ch. 815, §405/31). The Attorney General or the state’s attorney of any county may enforce the act (ch. 815, §405/30). Private Right of Action: The courts may award attorneys’ fees to either party as the interests of justice may require in any collection or enforcement action (ch. 815, §405/ 12). Applicability of State UDAP: Yes. Ill. Comp. Stat. Ann. ch. 815, §505/1. Actual damages, injunctive relief, or other proper relief in court’s discretion; court “may” award attorney fees and costs to prevailing party Special Assignee Provisions: The buyer’s written acknowledgment of the delivery of a copy of the contract shall be conclusive proof of the delivery in any action by or against an assignee without knowledge to the contrary (ch. 815, §405/14). A provision in which the buyer agrees not to assert a claim or defense against an assignee shall be enforceable by an assignee or holder who takes a contract for value, in good faith, and without notice of a claim or defense, unless the assignee or holder is an affiliate of the seller, or has knowledge of repetitive complaints by other buyers to the seller or to a governmental agency about seller’s failure to perform its obligations and seller has failed to remedy such complaints within a reasonable time (ch. 815, §405/17). All rights that are available against a holder in due course under UCC §3-305 are available Volume II - Home Improvement .inancing: Summaries of State Statutes 51
    • ILLINOIS to the buyer (ch. 815, §405/18). Other: Guarantors, except for parents and spouses, are liable only if they actually receive the goods or services, and receive and sign a separate notice of the guarantor’s obligations (ch. 815, §405/19). Consumer Installment Loan Act Citation: Ill. Comp. Stat. Ann. ch. 205, §§670/1 to 670/27 Applicability: Persons who make loans for $25,000 or less (ch. 205, §670/1) Exemptions: Banks, savings banks, mortgage companies, savings and loan associations, credit unions; business loans are exempt (ch. 205, §670/21). If the seller or holder corrects any bona fide error within a reasonable time after discovering an error, then the seller or holder may not subject borrower to civil penalties (ch. 205, §670/20). A licensee, acting in conformity with any rule or regulation issued by the Department of Financial Institutions, shall be presumed to have acted in accordance with the law and not be liable for any such act or practice (ch. 205, §670/20). Licensing Requirements: Ill. Comp. Stat. Ann. ch. 205, §§670/1 to 670/12.5 Interest Rate and Fee Caps: Interest cap is established as agreed to in writing. Interest shall not be payable in advance or compounded. If the contract so provides: a delinquency charge is allowed that does not exceed 5 percent of any installment over $200 and $10 of any installment $200 or less, which is past due for 10 days or more. In the case of a deferment, a charge is allowed that does not exceed the applicable interest for the installment period immediately following the last undeferred payment (ch. 205, §670/15). Other allowable facts include: the actual cost of recording any security instrument; actual costs for title insurance or examination, survey, or appraisal and points in connection with a real estate loan; actual insurance premium costs; court costs and reasonable attorney fees incurred in collection or to realize on security after default; a bad check fee not to exceed $25; and a document preparation fee not to exceed $25 (ch. 205, §670/15d). Loan Terms: The loan term shall be for 181 months or less (ch. 205, §670/17). Disclosures: Compliance with federal TILA requirements satisfies the disclosure requirements of the act, provided the lender also provides an explanation of the method used to calculate any rebate of an unearned finance charge (ch. 205, §670/ 16). Prohibited Acts: Prohibited acts include: taking a power of attorney (ch. 205, §670/ 13); allowing an obligor to owe more than $25,000 for all loans outstanding to licensee and its affiliates (ch. 205, §670/17); and false, deceptive, or misleading advertising (ch. 205, §670/18). Civil Penalties/Enforcement: The Director of Financial Institutions shall administer and enforce the act (ch. 205, §670/9). Civil fines of up to $1,000 plus attorney fees and costs (ch. 205, §670/24.5) are allowed. Private Right of Action: Yes. (ch. 205, §670/20.7). Borrowers are entitled to recover reasonable attorneys’ fees and court costs and have them set off against the balance due (ch. 205, §670/20). 52 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • ILLINOIS ILLINOIS ILLINOIS ILLINOIS ILLINOIS Applicability of State UDAP: Yes. Ill. Comp. Stat. Ann. ch. 815, §505/1. Actual damages, injunctive relief, or other proper relief in court’s discretion; court “may” award attorney fees and costs to prevailing party. Volume II - Home Improvement .inancing: Summaries of State Statutes 53
    • INDIANA Indiana Consumer Credit Code INDIANA Citation: Ind. Code Ann. §§24-4.5-1-101 to 24.4.5-1-303 Applicability: Consumer credit transactions, which include consumer credit sales and consumer loans (§§24-4.5-1-301, 24-4.5-3-104) Exemptions: Exemptions include: extensions of credit to governmental agencies or instrumentalities; sale of insurance; transactions with regulated public utilities or common carrier tariffs; licensed pawnbrokers; sale of goods; services or an interest in land not primarily for personal; family or household use or a loan incurred primarily for a purpose other than personal, family or household purpose; an extension of credit primarily for a business, commercial, or agricultural purpose; and an installment agreement for the purchase of home fuels in which no finance charge is imposed and student loans (§24-4.5-1-202). There is no liability for unintentional or bona fide errors (§24-4.5-5-202); and self-discovery of error before notice or action if creditor notifies the person of the error and corrects it, and no liability for bona fide errors notwithstanding the maintenance of reasonable procedures (§24-4.5-5-201). Licensing Requirements: Ind. Code Ann. §24-4.5-3-503 Interest Rate and Fee Caps: NOTE: nearly all dollar amounts designated in this article change on July 1 of each even-numbered year in accordance with the Consumer Price Index (CPI) (§24-4.5-1- 106). The adjusted rates are printed in Ind. Admin. Code tit. 750, r. 1-1-1. For a consumer credit sale (other than pursuant to a revolving charge account), any credit service charge may not exceed the greater of: 1) the total of 36 percent per year on the part of the unpaid balance that is $300 or less, 21 percent per year on the part that is more than $300 but not more than $1,000, and 15 percent per year on the part that is more than $1,000 (the $300 and $1,000 amounts are subject to CPI adjustment), or 2) 21 percent per year on the unpaid balance (§24-4.5-2-201). The same rates apply to supervised loans (those loans carrying an interest rate in excess of 21 percent per year) (§24-4.5-3-508). However, notwithstanding that limit, with respect to a credit sale, a seller may contract for and receive a minimum credit service charge of not more than $30 (subject to CPI adjustment) (§24-4.5-3-508). For consumer credit sales made pursuant to revolving charge accounts, the seller may charge a service charge not more than 1 3/4 percent per monthly billing cycle (or a prorated amount for non-monthly billing cycle) (§24-4.5- 2-207). The seller may impose an additional monthly charge of $.50 if there is an unpaid balance on billing date (or a prorated amount for non-monthly billing cycle) (§24-4.5-2-207). For a credit sale, a seller may also charge: official fees and taxes; insurance charges; charges for benefits conferred upon the consumer if the charges are reasonable in relation to the benefits; not of credit type, and are excluded as permissible additional charges from the credit service charge; and, for a debt secured by an interest in land, bona fide closing costs, document preparation fees, notary and credit report fees, escrow amounts and appraisal fees (§24-4.5-2-202). Credit service charges on consumer related sales are capped at 21 percent (§24-4.5-2- 602). Loan finance charges on consumer related loans are capped at the same rate as non-supervised consumer loans (21 percent per §24-4.5-3-201) (§24-4.5-3-602). For a consumer loan, a creditor may charge official fees and taxes; insurance 54 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • INDIANA INDIANA INDIANA INDIANA INDIANA charges; revolving loan fees; and for a debt secured by an interest in land bona fide closing costs if reasonable in amount and not for the purpose of evasion for title examination fees, document preparation fees, notary and credit report fees, escrow amounts and appraisal fees; charges for other benefits conferred upon the consumer if reasonable in relation to the benefits, not of credit type, and excluded as permissible additional charges from the loan finance charge; a dishonored check charge not to exceed $20; and certain revolving loan transaction fees (not to exceed the lesser of 2 percent of the transaction or $10) (§24-4.5-3-202). Upon refinancing, parties to either a consumer credit sale or consumer loan may grant the seller or creditor a refinance charge at a rate not exceeding the permitted rate (§§24-4.5-2-205 (credit sales)), (24-4.5-3-205 (consumer loans)). Deferral charges are permitted for both precomputed consumer credit sales and loans (§24-4.5-2-204, 24- 4.5-3-204). Parties may agree, at time of precomputed consumer credit sale or loan, or the refinancing or consolidation, that if an installment is not paid within 10 days of when it is due, the seller/creditor may unilaterally grant a deferral and impose a deferral charge (§24-4.5-2-2-04, 24-4.5-3-204). For a consumer credit sale, or consumer loan, or the refinancing, or consolidation thereof, the parties may contract for a delinquency charge not to exceed $5 for payments not paid within 10 days of the due date (§§24-4.5-2-203.5, 24-4.5-3-203.5). A dishonored check charge is permitted; it may not exceed $20 ((§§24-4.5-2-202 (credit sales)), (24-4.5-3-202 (loans)). For either a consumer credit sale or loan, the creditor may add advances to perform covenants of consumer and may charge a finance charge not exceeding the rate disclosed to the consumer (§§24-4.5-2-208, 24-4.5-3-208). The agreement may provide for the payment by the buyer/borrower of reasonable attorney fees of attorney not a salaried employee of creditor ((§§24-4.5-2-413 (consumer credit sales)), (§24- 4.5-3-404 (consumer loans)). Loan Terms: For a consumer credit sale, the seller may take a security interest in the property sold, and in goods upon which services are performed; in which goods sold are installed, or to which annexed; or, in land to which goods are affixed or which is maintained, repaired or improved as a result of the sale, so long as amount financed is $1,000 or more (if security interest is in land), or $300 or more (if there is security interest in goods) (the $300 and $1,000 amounts are subject to CPI adjustment) (§24- 4.5-2-407). For non-revolving supervised loans of $1,000 or less, the creditor must schedule the repayment in substantially equal installments at equal periodic intervals, except to the extent that the schedule of payments is adjusted to the seasonal or irregular income of the debtor, and over a period of not more than 37 months, if the principal is more than $300, or not more than 25 months, if $300 or less (§24-4.5-3- 511). The buyer (consumer credit sale) or borrower (consumer loan) may prepay in full (§§24-4.5-2-209, 24-4.5-3-209). Rebate occurs upon prepayment, and is computed as provided for by the Code (need not rebate if the required rebate is less than $1 (§§24-4.5-2-210, 24-4.5-3-210). Cross collateralization is permitted in consumer credit sales (§§24-4.5-2-408, 24-4.5-2-409). Consolidation is permitted of both consumer credit sales and loans (§§24-4.5-2-206, 24-4.5-2-306). For home solicitation sales, the seller must meet the notice and cancellation requirements of 16 C.F.R. 429 (§24-4.5-2-502). Prohibited Loan Terms: Prohibited loan terms include: assignment of earnings; default charges beyond reasonable expenses incurred; and confession of judgment (§§24-4.5- 2-410, 24-4.5-2-414 to 24-4.5-2-415 (consumer credit sales)), (§§24-4.5-3-403, 24-4.5- 3-405, 24-4.5-3-407 (consumer loans)). If a court finds an agreement or clause to have been unconscionable when made, then the court may refuse to enforce the Volume II - Home Improvement .inancing: Summaries of State Statutes 55
    • agreement or may limit the application of any unconscionable clause (§24-4.5-5-108). INDIANA If a supervised loan is for $1,000 or less, the creditor may not take interest in land as security (the $1,000 subject to CPI adjustment) (§24-4.5-3-510). Disclosures: Sellers and creditors must make disclosures required by the Federal Consumer Credit Protection Act, unless the act provides that the transaction is exempt (§§24-4.5-2-301 and 24-4.5-3-301). Prohibited Acts: The seller or creditor may not use multiple agreements for a single credit sale or loan for the purpose of obtaining a higher credit service charge than would otherwise be allowed; the same rule applies to consumer loans (§§24-4.5-2-402 and 24-4.5-3-509). Referral sales (§24-4.5-2-411) garnishment before judgment (§§24- 4.5-5-104 to -105) are prohibited. Extortionate extensions of credit, those where it is understood that delay in making or failure to make repayment could result in the use of violence, or other criminal means to cause harm, make repayment unenforceable. An extension of credit made at a rate of more than 45 percent per annum by a creditor with a reputation for the use or threat of use of violence or other criminal means to cause harm is prima facie evidence of an unenforceable extension of credit (§24-4.5-5- 107). Criminal Penalties: Knowing charges in excess of those permitted is a class A misdemeanor; making supervised loans without a license is a Class A misdemeanor, and engaging in the business of making consumer credit sales, consumer leases, or consumer loans, or of taking assignments of rights against debtors without complying with certain administrative provisions is a Class A misdemeanor (§24-4.5-5-301). Knowingly giving false or inaccurate information required to be disclosed is also a Class A misdemeanor (§24-4.5-5-302). Civil Penalties/Enforcement: Civil penalties may be made up to $5,000 (§24-4.5-6- 113). This act is enforceable by the “Department,” meaning members of the Department of Financial Institutions; the Division of Consumer Credit administrates the administration article (§24-4.5-6-103). The Department may investigate, issue cease and desist orders, bring injunctive actions, seek temporary relief, and file civil actions seeking a civil penalty (limited to $5,000) (§24-4.5-6-106 to §24-4.5-6-113). Private Right of Action: With respect to limitations on the schedule of payments or loan term for supervised loans, or authority to make supervised loans, the debtor has the right to recover from the violator or assignee a penalty determined by the court not more than 3 times the amount of the credit service charge or loan charge (§24-4.5-5- 202). If the creditor is not authorized to make consumer loans, the loan is void and the consumer may recover any paid principal or finance charge from either creditor or assignee (§24-4.5-5-202). If the debtor is entitled to a refund, it may be made by reducing the debtor’s obligation, and if the person liable (including assignee) refuses to make a refund within a reasonable time after demand, the debtor may recover a penalty in a court-determined amount not exceeding the greater of either the amount of the charge or 10 times the amount of the excess charge (§24-4.5-5-202). Furthermore, if the creditor made an excess charge in deliberate violation or reckless disregard, a penalty can be recovered even if the creditor refunded the excess charge (§24-4.5-5-202). A creditor who violates the disclosure provisions for either credit sales or consumer loans is liable for the sum of: 1) twice the amount of the credit service or loan finance charge, but not less than $100 or more than $1,000 (if individual action, cap is set as for class actions), and attorney fees and costs (§24-4.5-5-203). The disclosure liability provision applies to mortgage transactions, if the transaction is otherwise a credit sale or consumer loan (§24-4.5-5-201). If the creditor violates §125 56 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • INDIANA INDIANA INDIANA INDIANA INDIANA of the Federal Consumer Credit Protection Act concerning a debtor’s right to rescind a credit sale or loan, the creditor may not accrue interest during the rescission period (§24-4.5-5-204). This provision applies to mortgage transactions if the transaction is otherwise a credit sale or consumer loan (§24-4.5-5-201). If the creditor repeatedly fails to provide the debtor with a statement of an annual percentage rate or credit service or loan finance charge, and has received written notice from the administrator of such failure, any such subsequent failure shall relieve the debtor from any obligation to pay any credit service charge or loan finance charge (§24-4.5-5-202). If the creditor fails to comply with provisions on disclosure (other than for advertising) required for credit sales or consumer loans, the creditor is liable for twice the amount of the credit service/loan finance charge (but not less than $100 nor more than $1,000) (§24-4.5-5- 202). No liability for acts done in good faith in conformity with administrative rules (§24-4.5-5-202). Applicability of State UDAP: Applicable, but there are no private remedies available for “real estate transactions” (Ind. Code Ann. §24-5-0.5-1). Special Assignee Provisions: Assignees of consumer credit sale are subject to all claims and defenses of buyer notwithstanding holder in due course status, but are liable only to the extent of the amount owed to the assignee (§5-2-403). Buyer/ borrower is authorized to pay the original seller until the buyer/borrower receives notification of the assignment of the rights to payment that reasonably identifies the rights assigned (§§24-4.5-2-412 (consumer credit sales)) (24-4.5-3-406 (consumer loans)). Other: For consumer credit sales, if the seller repossesses or voluntarily accepts surrender of the goods that were the subject of a sale and in which the seller has a security interest, or of goods in which the seller otherwise has a security interest, the buyer is not personally liable if the cash sale price was $1,000 or less ($1,000 subject to CPI adjustment) (§24-4.5-5-103). Buyer/borrower has the right to refinance balloon payments, those that are more than twice as large as the average of all the other payments (revolving loan accounts or loans on which only loan finance charges are payable prior to time final scheduled payment due are excepted) ((§24-4.5-2-405 (credit sales)), (§24-4.5-3-402 (loans)). Volume II - Home Improvement .inancing: Summaries of State Statutes 57
    • IOWA Iowa Consumer Credit Code I O W A Citation: Iowa Code Ann. §§537.1101 to 537.6203 Applicability: The act applies to consumer credit transactions, which include consumer credit sales and consumer loans. Exemptions: Extensions of credit to governmental agencies or instrumentalities; certain sales of insurance; transactions with regulated public utilities or common carrier tariffs; securities transactions with regulated broker-dealers; and licensed pawnbrokers are exempt (§537.1202). The creditor has no liability for a penalty if the creditor discovers the error before the action or before the consumer gives written notice of the error, and notifies the consumer of the error and corrects it within 45 days (§537.5201). There is no liability if the violation is unintentional, and from a bona fide error that occurred notwithstanding reasonable procedures to avoid the error (§537.5201). Licensing Requirements: Iowa Code Ann. §537.2301 Interest Rate and Fee Caps: For a consumer credit sale involving closed-end credit and not involving a motor vehicle, the finance charges capped at 21 percent per annum; the seller may receive a minimum finance charge of $5 or less when the amount financed does not exceed $75, or $7.50 when the amount financed exceeds $75 (§537.2201). For a consumer sale made pursuant to open-end credit, the greatest of: 1) the average daily balance of the open end account in the relevant cycle, which is the sum of the amount unpaid each day in the cycle divided by the number of days; 2) the balance of the open-end account at the beginning of the first day of the cycle, after deducting all payments and credits of the cycle except those attributable to purchases charged to the account during the cycle; and 3) the median amount within a specified range including the balance of the open end account not exceeding that permitted by 1) and 2); the creditor must make the same charge on all balances within the specified range (§537.2202). A similar provision governs finance charges on open-end loans (§537.2402). Consumer loan finance charges are capped at 21 percent for supervised lenders, unless allowed by other laws (§537.2401). The creditor may also charge official fees and taxes; insurance charges; registration fees; certificate of title or license fees; specified closing costs (if debt secured by an interest in land); charges for other benefits conferred upon the consumer if reasonable in relation to the benefits, are not of credit type, and are authorized by the administrator; loss and liability insurance; and certain consumer credit insurance (§537.2501). Upon prepayment in full (but not in part) of any consumer credit transaction, the creditor may collect a minimum charge of not more than $5, if the amount financed was $75 or less, or $7.50 if the amount financed was more than $75 as the contracted for and the earned finance charge was less than the minimum contracted for (§537.2201). If the finance charge does not exceed 18 percent per year, the parties may agree to refinance and contract for a finance charge at a rate up to 21 percent (§537.2504). If the finance charge exceeds 18 percent per year, the refinance charge may not exceed the original rate (§537.2504). If the parties agree to defer all or part of an unpaid installment, the creditor may receive a deferral charge that is not in excess of 1 1/2 percent per month, so long as the charge doesn’t exceed the finance charge disclosed pursuant to §§537.3201 and 537.2503. The parties may consolidate debts; 58 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • I O W A I O W A I O W A I O W A I O W A the finance charge on consolidated debts may not exceed 21 percent (§§537.3201 and 537.2503). Delinquency charges permitted for non-open-end credit payments not paid within 10 days of due date, provided that for a precomputed transaction, the charge may not exceed the greater of 5 percent of the unpaid installment (to a maximum of $20) or the deferral charge that would be permitted to defer the unpaid amount for the delinquent period, and for an interest-bearing transaction, the charge may not exceed 5 percent of the unpaid installment (to a maximum of $15) (§537.2502). For open-end credit, the parties may contract for a delinquency charge of up to $15 (§537.2502). The creditor may add advances to perform covenants of consumer, after giving prior notice and a reasonable opportunity for the consumer to perform, and may charge a finance charge not exceeding the rate disclosed to the consumer in the Truth in Lending Act (TILA) statement (§537.2306). Loan Terms: For supervised, non-open-end credit loans of $1,000 or less, payments must be scheduled in substantially equal installments and periodic intervals, except to the extent adjusted to seasonal or irregular income of debtor (§537.2401). If the amount financed is $300 or less, the repayment period may not exceed 25 months; if the loan is over $300 but not more than $1,000, the repayment may not exceed 37 months, provided; the creditor may make a loan repayable in a single payment if the amount financed does not exceed $1000 and the finance charge does not exceed 21 percent (§537.2401). The consumer may prepay (§537.2509). Rebate is required upon prepayment of a precomputed consumer credit transaction (§537.2510). Cross collateralization is permitted (§537.3302). Consolidation is permitted (§537.2505). Prohibited Loan Terms: For a supervised loan, a creditor may not contract for a security interest in the consumer’s residence, if the finance charge is more than 15 percent and the amount financed is $2,000 or less (§537.2307). If the loan is a supervised loan, the creditor may not take a non-purchase-money security interest in clothing, one dining table and set of chairs, one refrigerator, one heating stove, one cooking stove, one radio, beds, bedding, one couch, two living room chairs, cooking utensils or kitchenware used by the consumer (§537.3301). The creditor cannot provide for unauthorized default charges (§537.3402). No assignment of earnings are permitted (§537.3306). No confession of judgment is permitted (§537.3306). Provisions for payment of attorney fees by consumer are prohibited (§537.2507). If a trier of fact finds an agreement or clause to have been unconscionable when made, or an agreement was induced by unconscionable conduct, then the court may refuse to enforce the agreement or may limit the application of any unconscionable clause; certain defined factors indicate unconscionability (§537.5108). Disclosures: A TILA statement is required (§537.3201). Disclosures must provide the consumer with a copy of any writing evidencing a consumer credit transaction (other than an open-ended credit transaction) (§537.3203). A clear and conspicuous notice stating the consumer: should not sign before reading; is entitled to a copy: is entitled to prepay at any time with such penalty and minimum charges allowed by the agreement and §537.2510; and is entitled to a refund of unearned charges. A sample notice must be provided (§537.2510). For open-end credit, it must be conspicuously stated the highest finance rate charged by that creditor to any consumer within the last calendar year for each type of credit sale (§537.3212). Negotiable instrument notes taken in a consumer credit transaction that provides for consumer’s signature must state that it is a consumer credit transaction (§537.3211). A notice of right to cure is prescribed (§537.5111). A notice to cosigners (other than consumer’s spouse) is required (§537.3208). Volume II - Home Improvement .inancing: Summaries of State Statutes 59
    • I O W A Prohibited Acts: Discrimination is prohibited (§537.3311). False, misleading, and deceptive advertising is prohibited (§537.3209). A statement of rates in the form of an add-on or discount rate or any form other than actuarial method as a percent per year or as required to be disclosed under TILA is prohibited (§537.3210). The creditor may not use multiple agreements to disguise a single transaction in order to obtain a higher finance charge (§537.3304). No unauthorized default charges except for reasonable expenses incurred in realizing a security interest are permitted (§537.3402). If the transaction is a consumer credit sale, the creditor may not take a negotiable instrument other than a check or share draft, if postdated, by not more than 10 days (§537.3308). Referral sales are prohibited (§537.3309). No garnishment before judgment is permitted (§537.5105). Extortionate extensions of credit, those where it is understood that delay in making or failure to make repayment could result in the use of violence or other criminal means to cause harm, are unenforceable (§537.5107). Criminal Penalties: Willfully charging in excess of the amounts allowed, willfully making supervised loans without authority, and willfully engaging in the business of consumer credit transactions without filing the notice and paying the fees required are serious misdemeanors (§537.5301). Willfully giving false or inaccurate information or failure to comply with TILA disclosures is also a serious misdemeanor (§537.5302). Civil Penalties/Enforcement: Civil penalties may be incurred of up to $5,000 (§537.6113). The Attorney General or the Attorney General’s designee enforces the act (§537.6103). For supervised financial organizations and persons licensed under other Code provisions, the official or agency charged with investigating or supervising such organizations or persons has enforcement power (§§537.6105, 537.6108). The enforcing authority may: bring an injunction action; apply for temporary relief; bring action for all amounts of money (other than penalties) that a consumer has the right to recover; or may bring an action for a civil penalty of up to $5,000 (§§537.6110 to 537.6113). Private Right of Action: For violation of most sections, the consumer may recover actual damages and a penalty of between $100 and $1,000 (§537.5201). The consumer is entitled to a refund of any charges in excess of the amount allowed. The creditor may not make a refund by reducing the consumer’s obligation without notice to consumer of right to refund and consumer does not request within 30 days (§531.5201). If the creditor has contracted for or received a charge in excess of that allowed, or if consumer is entitled to refund and the creditor refuses, the consumer may recover the excess charge and a penalty of between $100 and $1,000 (§531.5201). If a violation has occurred, the court shall award reasonable attorney fees (§531.5201). A creditor who fails to make disclosures required under TILA (other than advertising of credit terms) is liable for an amount twice the finance charge, but not less than $100 or more than $1,000, and in the case of a successful action, reasonable attorney fees (§537.5203). The creditor liability is in lieu of TILA liability (§537.5203). If the consumer shows unconscionability, entitled to attorney fees (§537.5108. If consumer alleges unconscionability and has brought an action that is found to be groundless, the creditor is entitled to attorney fees (§537.5108). Applicability of State UDAP: Applicable. Iowa Code Ann. §714.16. No private remedies specified. Special Assignee Provisions: The consumer is authorized to pay the original creditor until the consumer receives notification of assignment of rights to payment which 60 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • I O W A I O W A I O W A I O W A I O W A reasonably identifies the rights assigned (§537.3204). An assignee of the consumer credit sale subject to all claims and defenses of the consumer against the seller arising from the sale, regardless of whether assignee is holder in due course, unless the consumer has agreed, in writing, not to assert such claims against an assignee and the assignee is unrelated to the seller and acquired the contract in good fair and for value, and has given required notice of the assignment. The consumer has 30 days to send assignee notice of the facts giving rise to the claim or defense (§537.3404). The consumer may assert a claim or defense against the assignee only if the consumer has made a good faith attempt to obtain satisfaction from the seller, and only to extent of amount owing to the assignee (§537.3404). A creditor who makes a consumer loan for the purpose of enabling a transaction with a particular seller is subject to all the claims and defenses of the consumer against the seller if the creditor: 1) knows that the seller has arranged for a commission or similar fee for the extension of credit by the creditor; 2) the creditor is related to the seller (unless relationship remote or not a factor in the transaction); 3) the seller guarantees the loan or otherwise assumes the risk of loss by the creditor; 4) the creditor supplies the seller with the contract document evidencing the loan and the seller knows the credit terms and participates in the document’s preparation; 5) the loan is conditioned upon the consumer’s purchase of the property or services from the particular seller, or otherwise knowingly participates with the seller in the sale. The consumer may assert a claim or defense against such a creditor only if the consumer has made a good faith attempt to settle with the seller, and only to the extent of the amount owing to the creditor. The consumer may recover amounts paid in excess of those allowed from assignee (§537.5201). Any action that may be brought against the original creditor in any credit transaction involving a security interest in land may be maintained against any subsequent assignee of the original creditor where the assignee, its subsidiaries or affiliates were in a continuing business relationship with the original creditor, unless the assignment is involuntary or the assignee shows it did not have reasonable grounds to believe the original creditor was violating this act and that it maintained reasonable procedures to apprize it of the existence of the violations (§537.5203). Other: If the consumer transaction is a credit sale, the creditor may take a security interest in the property sold, and in goods upon which services are performed, in which goods sold are installed, or to which annexed, or in land to which goods are affixed or which is maintained, repaired or improved as a result of the sale, so long as amount financed is $1,000 or more (if security interest is in land), or $300 or more (if security interest in goods) (§537.3301). Default is defined and includes the failure to make a payment within 10 days of the due date (§537.5109). The consumer has the right to cure before the creditor may commence an action or repossess collateral, but a notice is not required prior to attachment petition, which requires its own notices. If the consumer has a right to cure, the creditor may not accelerate the balance of debt until 20 days after proper notice of right to cure; the consumer may cure until expiration of the period by tendering amounts due, without acceleration, or by tendering necessary performance (if not a payment default) (§537.5109). If the creditor commences an action for money judgment prior without following notice and right to cure procedure, the action must be dismissed (§537.5110). If the seller or creditor repossesses goods, the creditor must comply with UCC (§537.5103). The consumer has the right to refinance balloon payments (a scheduled payment that is more than twice as large as the average of the earlier scheduled payments, but does not have that right if the amount financed exceeds $5,000 and is secured by an interest in land) (§537.3308). The creditor must deliver or mail to the consumer a written receipt for each payment (§537.2306). Upon a written request, the creditor must provide, without charge, a written statement of the dates and amounts of Volume II - Home Improvement .inancing: Summaries of State Statutes 61
    • payments made within the past 12 months and the total amount unpaid (§537.2306). I O W A Upon the fulfillment of all obligations, the creditor shall, upon request, deliver or mail written evidence acknowledging payment in full (§537.2306). The creditor must credit payments, on the date of receipt, unless the consumer failed to follow creditor- specified requirements. In such case, the creditor must credit the account within 2 days of receipt (§537.3206). If the consumer credit transaction for delivery of goods, services or both is 4 or more installments, the consumer may cancel with respect to such part as has not yet been performed (§537.3310). NOTE: Organization and Powers of the Iowa Consumer Credit Code Administration are found at Iowa Admin. Code §§61-10.1 to 61-16.1. Iowa Regulated Loan Act (Iowa Small Loan Law) Citation: Iowa Code Ann. §§536.1 to 536.29 Applicability: The act applies to persons engaged in the business of making loans of money, credit, goods, or things in the amount of $25,000 or less (§536.1). Licensees may not charge more than would be permitted, if not a licensee for a loan in excess of $25,000 (§536.15). Exemptions: Exemptions include: banks, trust companies, building and loan associations, credit unions, licensed pawnbrokers, and corporations entitled to do business as Industrial Lenders under Chapter 536A. Licensing Requirements: Iowa Code Ann. §536.1 Interest Rate and Fee Caps: The maximum interest rates are 3 percent per month on any part of unpaid principal of $150 or less; 2 percent per month on unpaid principal of more than $150 but not more than $300; 1 1/2 percent per month on unpaid principal of more than $300 but not more than $700; and 1 percent per month on any unpaid principal in excess of $700 (§536.13). The Iowa Banking Board may establish a maximum rate of interest for those loans whose unpaid principal balance is $10,000 or less; for those loans whose unpaid principal balance is more than $10,000, the creditor may charge the greater of the rate allowed by chapter 535 or that allowed for supervised financial organizations by §536.13. The Iowa Consumer Credit Code supersedes these rates as to loans covered by both that Code and this act (§536.13). Prohibited Loan Terms: Licensees may not charge more than would be permitted, if not a licensee, for a loan in excess of $25,000 (§536.15). Civil Penalties/Enforcement: State Superintendent of Banking (§§536.9, 536.28, 536.29) Applicability of State UDAP: Yes. (§714.16). No private remedies are specified. Other: The creditor must: 1) permit prepayment; 2) mark every obligation as paid or canceled; and 3) release any security interest upon repayment of loan (§536.14). 62 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • I O W A I O W A I O W A I O W A I O W A Iowa Industrial Loan Law Citation: Iowa Code Ann. §§536A.1 to 536A.31 Applicability: The act applies to any corporation engaged in the business of loaning money to be repaid in one payment or in weekly, monthly or other periodic installments and charging interest, fees, or other compensation for the use of such money (§536A.2). Exemptions: Banks, trust companies, building and loan associations, savings and loan associations, insurance companies, regulated loan companies governed by Chapter 536 or credit unions; persons who make only loans secured by first mortgages on real estate; licensed real estate brokers or salespersons; persons engaged exclusively in purchasing commodity financing or commercial paper; pawnbrokers, persons engaged in the mercantile business; loans made to a domestic or foreign corporation (§536A.5) Licensing Requirements: Iowa Code Ann. §§536A.3, 536A.7 to 536A.15 Interest Rate and Fee Caps: The interest rate is capped at 10 cents on the hundred by the year (§536A.23). Service charges are capped at $1 for each $50 of the amount of the note, not to exceed $120 (§536A.23). The creditor may also collect a bona fide, reasonable, non-evasive appraisal fee on a loan secured by a mortgage or deed of trust (§536A.23). The Iowa Consumer Credit Code supersedes these rates, except with respect to allowed appraisal fees (§536A.31). Loan Terms: The borrower may prepay the loan (§536A.26). Prohibited Acts: It is prohibited to require the purchase of insurance from the creditor as a condition for obtaining a loan (§536A.23). Criminal Penalties: Any violation of Chapter 536A which is not also a violation of the Iowa Consumer Credit Code, or operating an industrial loan company without a license, is a serious misdemeanor (§536A.27). Civil Penalties/Enforcement: The Superintendent of Banking within the Banking Division of the Department of Commerce shall enforce the Iowa Consumer Credit Code for industrial loan licensees (§536A.29). Applicability of State UDAP: Yes. (§714.16). There are no private remedies specified. Other: The provisions of the Iowa Consumer Credit Code apply to consumer loans made by a licensee of the Industrial Loan Act (§536A.31). Money and Interest Citation: Iowa Code §§535.2 to 535.14 Applicability: Interest bearing transactions (§535.2) Interest Rate and Fee Caps: The interest rate is capped at 5 cents on the hundred per year (except as otherwise agreed or allowed) for the following loans: 1) money due by Volume II - Home Improvement .inancing: Summaries of State Statutes 63
    • express contract; 2) money after such contract becomes due; 3) money loaned; 4) I O W A money received to the use of another and retained beyond a reasonable time without consent; 5) money due on the settlement of accounts; 6) money due upon open accounts after 6 months from the due date; and, 7) money due or to become due where there is a contract to pay interest and no rate is stipulated (§535.2). However, the following persons may agree to pay ANY rate of interest: 1) persons borrowing money for the purpose of acquiring real property or refinancing a contract for deed; 2) persons borrowing money in an amount over $215,000 for the purpose of constructing improvements on real property; 3) vendees under a contract for deed; 4) domestic or foreign corporations or Real Estate Investment Trust (REIT); 5) persons borrowing money for business or agricultural purposes; and 6) persons borrowing money or obtaining credit in an amount more than $25,000 for personal, family or household purposes (§535.2). Otherwise, the maximum rate agreed to in a written agreement may not exceed 2 percentage points above the monthly maturity interest rate of U.S. government notes and bonds (§535.2). The creditor may collect a loan processing fee that does not exceed 2 percent of the principal, and may also collect a commitment fee, closing fee, or both that is agreed to in writing; such loan fees are not included in the determination of the maximum interest rate charge (§535.2). Regarding home equity lines of credit, the creditor may collect an account maintenance fee of not more than $15, which is not included in the determination of the maximum interest rate charge (§535.10). The interest rate on a home equity line of credit may not exceed 1 3/4 percent per month (§535.10). The creditor may additionally collect the following costs incurred by the creditor so long as they are disclosed to the borrower: credit reports; appraisal fees paid to third party (or if performed by creditor, fee that is a reasonable estimate of creditor’s expense); attorney’s opinions; abstracting fees paid to a third party (or if performed by creditor, a reasonable estimate of creditor’s expense); county recorder’s fees; inspection fees; mortgage guarantee insurance charge; survey fees; termite inspection fees; and title guaranty fees (§535.8). Prohibited Loan Terms: No prepayment penalties are allowed on loans used in whole or in part to purchase a single-family or 2-family dwelling to be occupied by the borrower or for agricultural land; the creditor may require a 30-day advance notice of the intent to prepay the entire outstanding balance (§535.9). Disclosures: If the transaction involving accounts receivable is subject to TILA, the creditor must give all disclosures as required by TILA (§535.11). Prohibited Acts: No loan origination fees, closing fees, commitment fees, or similar charges not made pursuant to a written agreement are permitted (§535.8). The creditor may not charge the borrower for the cost of revenue stamps or real estate commissions paid by the seller (§535.8). If the loan is for the purchase of a single- family or two-family dwelling, the creditor may not prohibit the transfer of interest to a third party for use as a residence or allow the creditor to make a change in the interest rate, the repayment schedule or the term of the loan as a result of such a transfer unless has reasonable grounds to believe that its security interest or likelihood of repayment impaired (§535.8). The creditor may not, as a condition of making a loan, require the borrower to place the money or property (other than that given as security) on deposit with the creditor or some other person if the affect is to increase the yield to the creditor (escrow funds are allowed) (§535.8). Real estate which is the consumer’s principal dwelling shall not be subject to foreclosure when the balance secured is $2,000 or less (§535.10). Civil Penalties/Enforcement: If the creditor has contracted for a rate of interest greater than allowed, the creditor must forfeit 8 cents on the hundred upon the amount of 64 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • I O W A I O W A I O W A I O W A I O W A principal remaining unpaid upon the contract and forfeit to the borrower the unpaid principal, the amount of which shall also be paid to the state (§535.5). Private Right of Action: If the creditor collects an unauthorized fee or charge, the borrower may recover free, or charge plus attorney fees and costs (§535.8). If the creditor receives unauthorized interest, the borrower may recover such moneys, plus attorney fees and costs (§535.8). The borrower may recover unauthorized prepayment fees with attorney fees and court costs (§535.9). Applicability of State UDAP: Applicable. Iowa Code Ann. §714.16. No private remedies are specified. Special Assignee Provisions: Any assignee of a usurious contract in good faith in the usual course of business and without notice may recover, from the usurer, the full amount of consideration paid, less any sums realized on the contract (§535.7). Other: When the foreclosure of a mortgage results from a due-on-sale clause, the mortgagor has 3 years to redeem (§535.8). The Iowa Consumer Credit Code (see Iowa Consumer Credit Code Statute) applies to home equity lines of credit (provisions regarding restrictions on interest in land as security, finance charges for open end credit, and rebate upon prepayment provisions do not apply) (§535.9). The creditor must comply with the Iowa Consumer Credit Code §537.3206, regarding the prompt crediting of payments, for a loan secured by owner-occupied residential real property (see Iowa Consumer Credit Code Statute) (§535.14). Volume II - Home Improvement .inancing: Summaries of State Statutes 65
    • KANSAS K A N S A S Kansas Uniform Consumer Credit Code Citation: Kan. Stat. Ann. §§16a-1-101 to 16a-9-102 Applicability: The statute applies to consumer credit transactions, which include consumer credit sales and consumer loans (§16a-1-301). Exemptions: Exemptions include: extensions of credit to governmental agencies or instrumentalities; insurance sales; transactions with regulated public utilities or common carrier tariffs; licensed pawnbrokers; and transactions covered by the insurance premium finance company act (§16a-1-201). Consumer sales do not include sales made pursuant to a lender, credit card, or a sale of an interest in land (unless the parties agree the transaction will be subject to the Code) (§16a-1-301). Consumer loans do not include first mortgages, unless the loan-to-value ratio at the time the loan is made exceeds 100 percent, or loans made by a qualified plan to a participant in such plan or his or her family member (§16a-1-301). The creditor has no liability for a penalty if the creditor discovers the error before institution of an action or receipt of written notice of the error, and notifies the consumer of the error and corrects it; nor does a creditor have liability for penalties for good faith compliance with a written administrative interpretation (§16a-5-201). No liability is incurred for bona fide errors of law or fact notwithstanding the maintenance of reasonable procedures (§16a- 5-201). Licensing Requirements: Kan. Stat. Ann. §§16a-2-301 to 16a 3. These requirements apply only to those persons making or taking assignments of supervised loans, and those loans carrying an annual percentage rate exceeding 12 percent. Interest Rate and Fee Caps: For closed-end consumer credit sales, a seller may charge a finance charge at any rate agreed to by the parties, but may only charge a prepaid finance charge not to exceed the lesser of 2 percent of the amount financed or $100 (§16a-2-201). For closed-end credit consumer loans that are not secured by a first or second mortgage, the periodic finance charge may not exceed 36 percent on any amount of $860 or less, and 21 percent on any loan that exceeds $860 (§16a-2- 401). If any consumer loan is secured by a second mortgage, the periodic finance charge may not exceed 18 percent (§16a-2-401). If the consumer loan is secured by a first mortgage, and the parties agree to make it subject to the Uniform Consumer Credit Code (UCCC), then the periodic finance charge may not exceed 18 percent (§16a-2-401). The periodic finance charge limits for loans secured by first and second mortgages do not apply to loans for which the rate, term, or amortization table may be varied (§16a-2-401). If a loan secured by a first mortgage constitutes a consumer loan by virtue of the loan-to-value ratio exceeding 100 percent, then the periodic finance charge may not exceed the rate set by §16-207(b): 12 percentage points above the yield of 30-year fixed rate conventional home mortgages committed for delivery within 61 to 90 days accepted under Freddie Mac’s daily offerings for sale on the last day on which commitments for such mortgages were received in the preceding month (§16a- 2-401). For an open-end credit sale, a seller may charge a finance charge at any rate agreed to by the parties; this provision does not apply to a sale of an interest in land (§16a-2-202). In addition to the maximum finance charges, a creditor may contract for and receive: official fees and taxes; charges for insurance; permitted delinquency charges; charges for other benefits conferred on the consumer, if they are of value to the consumer and the charges are reasonable in relation to the benefits; and a service charge for an insufficient check (not to exceed $10 or, if a larger amount was contracted for, such amount (not exceeding $30)) (§16a-2-501). For consumer loans secured by a first or second mortgage, the prepaid finance charges may not exceed 8 percent of the amount financed; a prepaid finance charge payable to the creditor or a 66 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • K A N S A S K A N S A S K A N S A S K A N S A S K A N S A S related person may not exceed 5 percent of the amount financed (§16a-2-501). For any other consumer loan, the prepaid finance charges may not exceed the lesser of 2 percent of the amount financed or $100, and those charges may be charged in addition to the periodic finance charge (§16a-2-501). A creditor may impose a prepayment fee on a precomputed transactions of $5 where the amount financed was $75 or less, or $7.50 if the amount financed was more than $75, so long as the finance charge earned at the time of prepayment is less than 2 percent of the amount financed or $100, but only if the prepayment in full (§16a-2-501). Consumers may prepay other loans without penalty; upon repayment (but not upon a refinancing) the creditor may collect a minimum charge of $5 if the amount financed was $75 or less, or $7.50 on other loans, if the minimum charge was contracted for and the finance charge earned at the time of prepayment is less than the minimum charge contracted for (§16a-2-509). Refinancing charges allowed (§16a-2-504). If a creditor refinances a consumer loan within 12 months of the date of the original loan, then the prepaid finance charge payable to the creditor of a loan secured by a first or second mortgage may not exceed 5 percent of the additional amount financed, and prepaid charge payable to creditors of other loans may not exceed the lesser of 2 percent of the additional amount financed or $100 (§16a-2-504). The parties to a consumer credit transaction may contract for a delinquency charge on any installment not paid in full within 10 days of its due date, but such charge may not exceed 5 percent of the unpaid amount of the installment or $25, whichever is less; the parties may, instead, contract for a delinquency charge not to exceed $10 ($5 if the installment is $25 or less) on any installment not paid in full within 10 days of its due date (§16a-2-502). The creditor may add advances to perform covenants of the consumer after giving prior notice and a reasonable opportunity for the consumer to perform, and may charge a finance charge not exceeding the rate disclosed to the consumer (§16a-2-506). Attorney fees and costs of collection may be contracted for, but may not exceed 15 percent of the unpaid debt after default (§16a-2-507). Loan Terms: For a consumer credit sale, a seller may take a security interest in the goods upon which services are performed or in which goods sold are installed or to which they are annexed, or in land to which the goods are affixed or which is maintained, repaired or improved as a result of the sale of the goods or services, if in the case of a security interest in land the debt secured is $3,000 or more, or, in the case of a security interest in goods the debt secured is $900 or more (§16a-3-301). Upon prepayment of a precomputed credit transaction, a creditor must rebate the portion of the finance charge attributable to the period following prepayment (§16a-2- 501). If the loan finance charge exceeds 12 percent and the amount financed is $1,000 or less, the installment payments must be scheduled to be payable in substantially equal installments and intervals except to accommodate seasonal or irregular income of the debtor; furthermore, the repayment period may not exceed 37 months if the amount financed is more than $300 but not more than $1,000, and the repayment period may not exceed 25 months if the amount financed is $300 or less. Cross collateralization is allowed (§16a-3-302). Prohibited Loan Terms: A creditor may not take a security interest in the land if the debt secured is less than $3,000, or in goods if the debt secured is less than $900 (§16a-3-301). If a consumer loan is secured by a first or second mortgage on the consumer’s principal residence and for which either the loan-to-value ratio exceeds 100 percent or the annual percentage rate exceeds the code mortgage rate (the greater of 12 percent or 5 percent plus Freddie Mac’s 30-year fixed rate on conventional mortgages), then it may not provide for the negative amortization of principal or a balloon payment (a payment that is equal to or more than twice the amount of any other payment) (added by 1999 Kan. S.B. 301). An agreement of the Volume II - Home Improvement .inancing: Summaries of State Statutes 67
    • K A N S A S parties for default on the part of the consumer is enforceable only to the extent that the consumer fails to make a payment as required, or the prospect of payment, performance, or realization of collateral is significantly impaired (§16a-5-109). No surcharge is permitted for the use of a credit card (§16a-2-403). Creditors may not impose unauthorized default charges (§16a-3-402). No assignment of earnings or confession of judgment is permitted (§§16a-3-305, 16a-3-306). If a trier of fact finds an agreement or clause to have been unconscionable when made, or an agreement was induced by unconscionable conduct, then the court may refuse to enforce the agreement or may limit the application of any unconscionable clause (§16a-5-108). Disclosures: The agreement must contain a clear, conspicuous, and printed notice that the consumer should not sign the agreement before reading it; the consumer is entitled to a copy of the agreement and to prepay the unpaid balance at any time without penalty (§16a-3-202). A default notice and a notice of right to cure are prescribed (§16a-5-110). Prohibited Acts: A supervised lender, that is, one who makes a loan with an annual finance charge exceeding 12 percent, may not make false, misleading, or deceptive advertisements regarding loans (added by 1999 Kan. S.B. 301). A creditor may not use multiple agreements to obtain a higher finance charge than would otherwise be permitted (§16a-3-304). Creditors may not take a negotiable instrument for a consumer credit sale other than a currently dated check (§16a-3-307). Referral sales are prohibited (§16a-3-309). The creditor may not accelerate the maturity of the unpaid balance, nor take possession of collateral due to a consumer’s failure to make a required payment, until 20 days after a notice of the consumer’s right to cure is given. Until that time, the consumer may cure the default by tendering unpaid sums due, without acceleration, plus any unpaid delinquency or deferral charges (§16a-5- 111). The creditor may take possession of the collateral without judicial process only if consumer voluntarily surrenders possession or if possession can be taken without entry into a dwelling and without the use of force or other breach of the peace. Extortionate extensions of credit, that is those where it is understood that delay in making or failure to make repayment could result in the use of violence or other criminal means to cause harm, are unenforceable (§16a-5-107). An extension of credit made at a rate of more than 36 percent per annum by a creditor with a reputation for the use or threat of use of violence or other criminal means to cause harm is prima facie evidence of an unenforceable extension of credit (§16a-5-107). Criminal Penalties: Intentional violations are a class A nonperson misdemeanor; a second or subsequent conviction is a severity level 7 nonperson felony (§16a-5-301). No imprisonment is allowed if a person proves that he or she had no knowledge of the rule and regulation or order (§16a-5-301). Criminal liability of a person is in lieu of criminal liability under The Truth in Lending Act (TILA). A person other than a supervised financial organization, attorney or collection agency who does not purchase the credit obligation, but who willfully engages in the business of entering into consumer credit transactions or of taking assignments of rights against consumer arising therefrom and undertakes collection or enforcement without complying with notice requirements or fee payments, is guilty of a class A misdemeanor (§16a-5-301). Civil Penalties/Enforcement: The court may impose a civil penalty of up to $5,000 (§16a-6-113). Consumers are entitled to recover civil penalties (see “Private Right of Action” below). Civil penalty of up to $5,000 is allowed (§§16a-6-108, 16a-6-113). The Consumer Credit Commissioner, upon determining a violation, has the power to order cease and desist from unlawful acts or practices, to censure, to impose a civil penalty up to a maximum of $5,000 for each violation, or to revoke or suspend the person’s 68 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • K A N S A S K A N S A S K A N S A S K A N S A S K A N S A S license or bar the person from subsequently applying for a license (§16a-6-108). The Commissioner may also bring a civil injunction action against a creditor and apply for appropriate temporary relief for the consumer, and may bring a civil action for all amounts of money, other than penalties, which a consumer or class of consumers has the right to recover under the Act. If the court finds that the defendant has engaged in a course of repeated and willful violations, may impose a civil penalty of up to $5,000 (§§16a-6-111 to 16a-6-113). Private Right of Action: Violation of provisions apply to the collection of excess charges or enforcement of rights, restrictions on interests in land as security, limitations on the schedule of payments or loan terms for supervised loans, attorney fees, security in sales and leases, assignments of earnings, authorizations to confess judgment, prohibition of certain negotiable instruments, assignees subject to defenses, or limitations on default charges, the consumer has a cause of action to recover actual damages and a right other than a class action to recover a penalty of not less than $100 nor more than $1000 (§16a-5-201). If a creditor has violated the licensing provisions, the loan is void and the consumer is not obligated to pay either the amount financed or the finance charge (§16a-5-201). The consumer is not obligated to pay a charge in excess of that allowed, and is entitled to a refund of twice the excess charge, which may be made by reducing the consumer’s obligations (§16a-5-201). If the creditor refuses the refund the consumer may recover a penalty of not less than $100 nor more than $1,000 (§16a-5-201). Consumers are entitled to reasonable attorney fees and costs for any action (§16a-5-201). A creditor who fails to make the required disclosures is liable for an amount twice the amount of the finance charge, but not less than $200 or more than $2,000, and in the case of a successful action, reasonable attorney fees (§16a-5-203). Any action that may be brought against the original creditor in any credit transaction involving a security interest in land may be maintained against any subsequent assignee of the original creditor where the assignee, its subsidiaries or affiliates were in a continuing business relationship with the original creditor, unless the assignment was involuntary or the assignee shows it did not have reasonable grounds to believe the original creditor was violating this act and that it maintained reasonable procedures to apprise it of the existence of the violations (§16a-5-203). The creditor has liability in lieu of TILA liability (§16a-5-203). Applicability of State UDAP: Yes. Kan. Stat. Ann. §50-623. Declaratory judgment; injunction; actual damages; maximum statutory damages of $5,000 per violation; reasonable attorney fees to prevailing party Special Assignee Provisions: The consumer is authorized to pay the original creditor until the consumer receives notification of assignment of rights to payment which reasonably identifies the rights assigned (§16a-3-202). The assignee is subject to all claims and defenses of the buyer, notwithstanding an agreement to the contrary or the assignee is a holder in due course of a prohibited negotiable instrument (§16a-3-404). A buyer may assert claims or defenses against the assignee only if the buyer has attempted in good faith to obtain reasonable satisfaction from the seller for the claims, if the buyer, when requested to do so by the seller or assignee, has given notice in writing to the seller and assignee stating the claims or defenses, and only to the extent the amount owed to the assignee for the sale at the time of the assignee has notice of such claims or defenses, and only as a matter of defense to or set off against claims by the assignee, although buyer may bring rescission action (§16a-3- 404). A lender who makes a consumer loan for the purpose of enabling a consumer to buy or lease from a particular seller or lessee goods or services is subject to all claims and defenses of the consumer against the seller arising from the sale if: the Volume II - Home Improvement .inancing: Summaries of State Statutes 69
    • K A N S A S lender knows that the seller arranged for a commission, brokerage, or referral fee for the extension of credit by the lender; the lender is related to the seller (unless remote or not a factor in the transaction); the seller guarantees the loan, or otherwise assumes the lender’s risk of loss; or the lender directly supplies the seller with the loan contract document used by the consumer, and the seller significantly participates in the preparation of the document; or the loan is conditioned upon the consumer’s purchase of goods or services from the particular seller, but the lender’s payment of proceeds of the loan to the seller does not itself establish that the loan was so conditioned (§16a-3-405). Such claims or defenses may only be asserted against the lender under the same conditions as may be asserted against an assignee (§16a-3- 405). Other: Consumers cannot waive their rights and benefits under the Code (§16a-1-107). The consumer is not liable for a deficiency unless the creditor has disposed of the goods in good faith and in a commercially reasonable manner (§16a-5-103). If the seller repossesses or voluntarily accepts the surrender of the goods that were the subject of the sale and in which the seller has a security interest, the buyer is not personally liable to the seller for the unpaid balance of the debt arising from the sale of a commercial unit of goods of which the cash sale price was $1,000 or less; the seller is not obligated to resell the collateral unless the buyer has paid 60 percent or more of the cash price and has not signed after default a statement renouncing his rights in the collateral (§16a-5-103). If the seller repossesses or voluntarily accepts surrender of the goods that were not the subject of the sale but in which the seller has a security interest to secure a debt from a sale of goods and services costing $1,000 or less, the buyer is not personally liable to the seller for the unpaid balance of the debt arising from the sale, and the seller’s duty to dispose of the collateral is governed by the Uniform Commercial Code (§16a-5-103). If a creditor takes possession or voluntarily accepts surrender of the goods in which it has a security interest to secure a debt arising from a consumer loan in which the loan is subject to defenses arising from sales, and the net proceeds of the loan paid to or for the benefit of the debtor were $1,000 or less, the debtor is not personally liable to the creditor for the balance of the debt arising from the loan and the creditor’s duty to dispose of the collateral is governed by the provisions on disposition of collateral of the Uniform Commercial Code (§16a-5-103). If any scheduled payment is a balloon payment (more than twice as large as the average of earlier scheduled payments), the consumer may refinance the amount of that payment at the time it is due without penalty on no less favorable terms than the terms of the original transaction (§16a-3-308). The creditor must credit a payment on the date of receipt, or within 5 days if consumer failed to comply with reasonable requirements delivered to consumer in writing (added by 1999 Kan. S.B. 301). The creditor must deliver or mail to the consumer a written receipt for each payment (§16a-3-202). Upon written request, the creditor must provide, without charge, a written statement of the dates and amounts of payments made within the past 15 months and the total amount unpaid (§16a-3-202). Upon fulfillment of all obligations, the creditor shall, upon request, deliver or mail written evidence acknowledging payment in full (§16a-3-202). Interest-Usury Citation: Kan. Stat. Ann. §§16-201 to 16-207d Applicability: General imposition of interest Interest Rate and Fee Caps: The maximum interest allowed on judgments is the 70 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • K A N S A S K A N S A S K A N S A S K A N S A S K A N S A S adjusted rate equal to 4 percentage points above the New York Federal Reserve Bank discount rate (§16-204). Judgments pursuant to the code of civil procedure for limited actions are capped at 12 percent (§16-204). For contracts, the rate that is specified in the contract may not exceed that authorized by law (§16-205). For first mortgages (except where parties agreed to make transaction subject to the Uniform Consumer Credit Code), the maximum rate is 12 percentage points above the yield of the 30-year fixed rate conventional home mortgages committed for delivery within 61-90 days accepted under Freddie Mac’s daily offerings for sale on the last day on which commitments for such mortgages were received in the preceding month (§16-207). This limitation does not apply to: 1) second mortgages covered by the Uniform Consumer Credit Code (UCCC); 2) business or agricultural loans; and 3) loans made by a qualified plan to a member (or family member thereof) of the plan, or an adjustable rate note secured by a mortgage (§16-207). Consumer adjustable rate loans are governed by jointly-adopted rules of the state Bank Commissioner, Consumer Credit Commissioner, Savings and Loan Commissioner, and Credit Union Administrator (§16-207d). Loan Terms: The creditor may collect: 1) actual filing and recording fees paid to a public official or agency of the state or federal government; and 2) reasonable expenses (§16-207). Prohibited Acts: No prepayment penalties for prepayment of home loan secured by a real estate mortgage prepaid more than 6 months after execution are allowed (§16- 207). Private Right of Action: Any person contracting for a greater rate of interest than authorized shall forfeit all unauthorized interest, and shall also forfeit a sum equal to the amount of such unauthorized excess (§16-207). Applicability of State UDAP: Yes. Kan. Stat. Ann (§50-623. Declaratory judgment; injunction; actual damages; maximum statutory damages of $5,000 per violation; reasonable attorney fees to prevailing party Other: There is a specific override of §501(a)(1) of Title V of P.L. 96-221 with respect to loans, mortgages, credit sales, and advances made after effective date of act (§16- 207a). Volume II - Home Improvement .inancing: Summaries of State Statutes 71
    • KENTUCKY Installment Sales Contracts KENTUCKY Citation: Ky. Rev. Stat. §§371.310 to 371.990 Applicability: The act applies to the sales of goods or services, when purchased primarily for personal, family or household purposes, from a person who regularly sells goods or services using contracts with a time price differential payable in one or more installments. Goods include items which are used at the time of the sale or subsequently in the modernization, rehabilitation, repair, alteration, improvement, or construction of real estate so as to become a part thereof whether or not severable therefrom (§371.210). Exemptions: If the seller corrects any violation, other than a willful or intentional violation, within 10 days after notification from buyer, then the seller or holder is not subject to penalties (§371.990). Interest Rate and Fee Caps: None (§371.260). If the contract so provides, a delinquency charge is permitted, that does not exceed $10 or 5 percent of the overdue installment, whichever is greater, for any installment which is past due for 10 days or more, or in lieu of such charge interest does not exceed the highest lawful contract rate. An extension or deferral charge of 1.5 percent per month may be charged for the period of any extension (§371.270). Loan Terms: The contract shall be in writing, signed by both parties, and completed as to all essential provisions. The contract shall be designated a “Retail Installment Contract” (§371.220). The buyer may prepay at any time and receive a refund of unearned interest, less a $20 acquisition fee (§371.260). Prohibited Loan Terms: No act or agreement of the buyer before or at the time of making the contract shall waive any provisions of the act or any remedies granted to the buyer by law (§371.320). Disclosures: Required disclosures include: a notice advising the buyer to read the contract, which should be filled-in, before signing it; and, a notice that buyer has right to a completed copy (§371.220). The contract must include a description of the goods and services; and the name and address of lender and borrower. The contract must disclose itemized amount financed, finance charge, insurance charges, official fees, the total of payments, and total sales price (§371.220). Prohibited Acts: Signing the contract when essential provisions are blank is prohibited (§371.250). Criminal Penalties: Willful violations are a misdemeanor punishable by a fine of $500 and 6 months imprisonment or both (§371.990). Civil Penalties/Enforcement: Until a signed copy of the contract is delivered to the buyer, any buyer who has not received delivery of the goods has the right to cancel and receive an immediate refund of all payments made and return of any trade-ins (§371.220). No person who violates the act may collect any time price differential, or delinquency, or collection charges, unless the violation is an accident or bona fide error (§371.990). Applicability of State UDAP: Yes. (§367.110). Actual damages; equitable relief the court deems necessary and proper; punitive damages; attorney fees and costs to 72 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • KENTUCKY KENTUCKY KENTUCKY KENTUCKY KENTUCKY prevailing party Special Assignee Provisions: The buyer’s written acknowledgment of the delivery of a copy of the contract shall be a conclusive proof of delivery and that contract was completed, in any action by or against an assignee without knowledge to the contrary, and presumptive proof in any other action (§371.250). Until the buyer has notice of the assignment, any payment made to the last known holder shall be binding upon all subsequent holders (§371.310). Industrial Loan Corporations Citation: Ky. Rev. Stat. §§291.410 to 291.990 Applicability: Industrial loan corporations who make loans for $7,500 or less (§291.460) Licensing Requirements: Yes. §§291.420 to 291.450 Interest Rate and Fee Caps: The maximum interest rate allowed is: 7 percent per year, unless made under authority of §291.460(4) which, by reference, allows a rate of 8 percent per year on loans of up to $10,000. The maximum allowable charge upon closing a loan fee for examining and investigating the borrower is at a rate of $1 for each $50 of principal, but not to exceed $40. (§291.460). A delinquency charge of $5 or 5 percent of any installment, whichever is less, for any installment that is past due for 10 days or more may be charged. A deferment charge may not exceed 7 percent per year interest. Attorney fees may not exceed 15 percent of the unpaid balance and court costs, if note referred to an attorney who is not a salaried employee of the holder for collection (§291.500). The actual cost of recording any security instrument, and actual insurance premium costs are permissible charges (§291.470). Loan Terms: The loan term shall not exceed 5 years and 32 days (§291.460). The buyer may prepay, in whole or in part, at any time and receive a refund of unearned interest, less a $10 acquisition fee (§291.500). Prohibited Loan Terms: Prohibited loan terms include: 1) principal amount exceeding $7,500 (§291.460); 2) the assignment of wages; and 3) a first lien or first mortgage as security (§291.510). Disclosures: In the contract or a separate statement, the total charge, the total and schedule of payments, and the amount financed must be disclosed (§291.510). Prohibited Acts: Splitting a loan for the purpose of obtaining a greater charge than would otherwise be allowed is prohibited (§291.510). Criminal Penalties: Willful violations of the act are a misdemeanor punishable by a fine of not less than $100 nor more than $1,000 (§291.990). Civil Penalties/Enforcement: Any contract in the making or collection of which any willful violation of the act has been done is void and the lender has no right to collect any interest or charges whatsoever on the loan (§291.520). The Department of Banking and Securities shall administer and enforce the act (§291.530). Applicability of State UDAP: Yes. Ky. Rev. Stat. §367.110. Actual damages; Volume II - Home Improvement .inancing: Summaries of State Statutes 73
    • equitable relief the court deems necessary and proper; punitive damages; attorney KENTUCKY fees; and costs to prevailing party Interest-Usury Citation: Ky. Rev. Stat. §§360.010 to 360.990 Exemptions: The maximum rate of interest established herein shall not amend or repeal the maximum rate established by any other Kentucky law regulating particular types of transactions (§360.010). Interest Rate and Fee Caps: Interest is allowed at any rate as agreed upon in writing for loans in excess of $15,000; for loans of $15,000 or less, the maximum rate is 19 percent or a rate not in excess of 4 percent over the local Federal Reserve discount rate on 90-day commercial paper, whichever is less. Banks may charge a minimum interest charge of $10 (§360.010). Civil Penalties/Enforcement: If a greater rate of interest than allowed by law has been knowingly charged, reserved or received, the entire interest is forfeited (§360.020). Private Right of Action: Twice the amount of interest thus paid, if the creditor has taken or received interest at greater than the allowed rate (§360.020) Applicability of State UDAP: Yes. Ky. Rev. Stat. §367.110. Actual damages; equitable relief the court deems necessary and proper; punitive damages; attorney fees; and costs to prevailing party Consumer Credit Contracts Citation: Ky. Rev. Stat. §§367.600 to 367.610 Applicability: The purchase of money loans on a deferred payment basis, made to consumers who purchase goods or services primarily for personal, family or household use from a seller who refers consumers to the creditor, or who is affiliated with the creditor by common control, contract or business arrangement (§367.600) Exemptions: Contracts which comply with Federal Trade Commission or similar rules relating to preservation of consumer claims and defenses in credit transactions are exempt (§367.610). Private Right of Action: The buyer’s rights hereunder may only be asserted as a defense or set off against a claim by an assignee (§367.610). Applicability of State UDAP: Yes. Ky. Rev. Stat. §367.110. Actual damages; equitable relief the court deems necessary and proper; punitive damages; attorney fees; and costs to prevailing party Special Assignee Provisions: An assignee is subject to all defenses of the buyer against the seller arising out of the sale notwithstanding any agreement to the contrary; the assignee’s liability is limited to the amount owed to the assignee at the time the defense is raised against the assignee (§367.610). 74 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • LOUISIANA LOUISIAN A LOUISIAN A LOUISIAN A LOUISIAN A LOUISIAN A Interest and Usury Citation: La. Civ. Code Ann. Art. 2924, §§9:3501-3509 Applicability: The act establishes interest rates. §9:3506 applies the statute only to “conventional” obligations bearing simple interest from date on the unpaid balance and shall not apply to or affect precomputed interest or discount loans. Exemptions: §9:3504 exempts certain loans from the operation of the usury statutes, including loans federally guaranteed, graduated payment mortgages, and adjustable rate mortgages. Interest Rate and Fee Caps: §2924(C) caps interest rates at 12 percent, but requires the Commissioner of Financial Institutions to yearly set a rate, based on the average accepted auction price for the last auction of 52 week treasury bills, and the interest presumably cannot go above the 12 percent. §9:3503 sets the maximum interest rate on mortgages at 12 percent; §9:3506 states that where a federal-related mortgage is exempt from the interest rate limitations, the other provisions limiting costs and expenses which may be charged do apply. §9:3505 lists costs and expenses not to be considered interest. Applicability of State UDAP: La. Rev. Stat. Ann. §51:1401 et seq. Appears to be broad enough; actions subject to the Banking Commissioner are exempt; allows actual damages, up to treble damages Louisiana Consumer Credit Law Citation: La. Civ. Code Ann. §§9:3510 to 3565 Applicability: The act applies to consumer credit sales, defined under §9:3516 (12) as a sale “in which the purchaser is permitted to defer all or part of the purchase price or other consideration in 2 or more installments excluding the down payment when the thing is purchased primarily for personal, family or household purposes.” Exemptions: §9:3512 contains exclusions from the act, none of which appear to apply to consumer credit loans. Licensing Requirements: §§9:3557 to 3561 govern the licensing of consumer lenders. Interest Rate and Fee Caps: §9:3519 sets the interest rates for consumer loans; allows rates of up to 36 percent for loans up to $1,400; 27 percent for that portion of loans of $1,400-$4,000; 24 percent for that portion of loans of $4,000 to $7,000; and 21 percent for that portion of the unpaid principal exceeding $7,000. §9:3520 sets the interest rates for consumer credit sales at 24 percent for loans up to $1,750; 18 percent for loans of $1,750 to $5,000; 12 percent for loans of over $5,000; or 18 percent. §9:3524 sets the loan finance charge for lender credit cards at 18 percent. §9:3527 sets limitations on delinquency charges. §9:3528 sets the maximum deferral charges allowed. Loan Terms: §§9:3531 to 3533 address prepayment of consumer credit transactions, and rebates. §§9:3542 to 3550 govern the imposition of insurance in a consumer credit transaction. Volume II - Home Improvement .inancing: Summaries of State Statutes 75
    • Prohibited Acts: Any violation of the act is prohibited. L OUISIAN A Criminal Penalties: §9:3553 makes any violation of the act a misdemeanor. Civil Penalties/Enforcement: §9:3552 states that if the court finds a violation of the act, the consumer is entitled to a refund of all loan finance charges or credit service charges and has the right to recover 3 times the amount of such loan finance charges or service charges together with reasonable attorney fees. The right to recover accrues only after a 30-day notice is given to the seller. The extender of the credit is not liable for any violation made in good faith, or in instances of “self discovered violations.” Private Right of Action: Implied Applicability of State UDAP: La. Rev. Stat. Ann. §51:1401 et seq. Actions subject to the Banking Commissioner are exempt; allows actual damages, up to treble damages Other: §§9:3538 to 41 apply to home solicitation sales, and contain the standard 3- day notification requirements. These sections contain a special provision providing protection for elderly victims of home solicitation sales: “The home solicitation of a consumer who is an aged person where a loan is made encumbering the primary residence of that consumer for the purposes of paying for home improvements and where the transaction is part of a pattern or practice in violation of (15 U.S.C. 1639) is prohibited." 76 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • MAINE MAINE MAINE MAINE MAINE MAINE Maine Consumer Credit Code Citation: Me. Rev. Stat. Ann. tit. 9-A §§1-101 to 9-407 Applicability: Under §1-201, the act applies to consumer credit transactions and open- end credit plans made or entered into in Maine. §1-102 contains the standard Uniform Consumer Credit Code (UCCC) statement of purposes and policies. Exemptions: §1-202 contains exclusions (most of which are not relevant to consumer credit); an exclusion is included for loans or credit sales made to finance or refinance the acquisition of real estate or the initial construction of a dwelling, or a loan secured by a first mortgage on real estate. Licensing Requirements (cite only): §§2-301 to 310 contain the licensing requirements for businesses making supervised consumer loans. Interest Rate and Fee Caps: §2-201(2) limits finance charges for consumer credit sales. The finance charge can be no greater than: (i) 30 percent on an unpaid balance under $1,000; (ii) 21 percent on an unpaid balance between $1,000 and $2,800; (iii) 15 percent on an unpaid balance over $2,800, or 18 percent. §2-2017 states: “(T)he finance charge on any transaction involving the credit sale of goods or services used in the modernization or improvement of real property, in which the seller or his agent installs the goods or provides the services related to the modernization, rehabilitation, repair, alteration, or improvement of the real property, may not exceed 18 percent.” §2- 202 sets limits on finance charges for open ended credit sales. §2-401 limits the finance charge for consumer loans to: (i) 30 percent on unpaid balances under $2,000; (ii) 24 percent on unpaid balances between $2,000 and $4,000; and (iii) 18 percent on unpaid balance in excess of $4,000. However, in no event may the total finance charge on a loan totaling over $8,000 exceed 18 percent. §2-402 controls finance charges for loans with open-ended credit. Sections 2-501-510 contain the UCCC list of allowed additional charges, including delinquency charges, deferral charges, finance charges on refinancing and consolidation, and attorney fees. Title 9-B, §432 (outside the UCCC) sets the default interest rate where there is no agreement at 6 percent. Prohibited Loan Terms: §§3-301 to 312 contain the standard UCCC “limitations on agreements and practices” provisions. §3-301 allows a seller to take a security interest in the property sold, but limits the seller’s ability to take a security interest in other property to transactions over $2,800 (security in land), or $1,000 (security in personal property). §3-304 prohibits the use of multiple agreements to obtain a higher finance charge than allowed. §3-308 limits when a creditor may schedule balloon payments, and §309 prohibits referral sales techniques. Disclosures: §§3-201 to 206 contain the standard UCCC disclosure provisions, including provisions: 1) prohibiting false or misleading advertising, 2) requiring the lender to provide a written copy of the agreement, 3) requiring a notice of assignment; 4) requiring the lender to provide receipts, and 5) requiring a notice to cosigners. §3.310 requires certain disclosures when an agreement contains a variable rate of interest. Prohibited Acts: Any violation of the act is prohibited. Criminal Penalties: §5-301 makes any violation of the act a misdemeanor. Civil Penalties/Enforcement: The Maine UCCC contains the standard UCCC remedies and penalties provisions (§§5-101 to 5-202). §5-103 restricts deficiency where the Volume II - Home Improvement .inancing: Summaries of State Statutes 77
    • MAINE goods financed are worth less than $2,800. §5-107 prohibits extortionate extensions of credit. §5-108 allows a court to set aside part or all of an agreement, if it is found to be unconscionable. §5-110 requires the seller to give the consumer notice of default and a right to cure. §5-115 prohibits a seller from making misrepresentations to a consumer. §5-201 sets forth the consumer’s remedies, including the right to recover actual damages and a refund of any excess finance charge, as well as a chance of recovering attorney fees. Applicability of State UDAP: Maine’s UDAP, Title 5, §§206, et seq, encompasses UCCC: related unfair or deceptive actions; the remedy provision of the UCCC does not limit non-UCCC remedies. The UDAP allows for awards of actual damages and attorney fees, but does not specifically provide for treble damages or punitive damages. Special Assignee Provisions: §3.203 allows the consumer to pay the original creditor until he receives notification of an assignment. §3-403 makes the assignee subject to the claims and defenses of the consumer, but limits that liability to the amount of money owing to the assignee. Other: Sections 3.501 to 3.507 govern home solicitation sales, and includes the standard notice of right to cancel requirement, and the right to cancel within three days of the sale. Sections 9-101 to 407 contain special provisions for consumer credit transactions secured by first lien mortgage. (Note: the UCCC grants rulemaking authority to the Bureau of Consumer Protection, which has adopted rules implementing parts of the UCCC.) Door to Door Home Repair Transient Sellers Act Citation: Me. Rev. Stat. Ann. §§14501 to 14512 Applicability: Applies to “transient sellers of home repair services,” defined in §14501 (9) as a seller of home repair services who engages in the business of door to door sales or solicitation who does not have a permanent address in the municipality in which the sale occurs. Exemptions: Under §14502, the Act does not apply to the original construction of a home. Licensing Requirements (cite only): Under §14505, transient sellers must register with the state. Loan Terms: Home repair service contracts must comply with the provisions governing consumer solicitations or sales, §§4661 to 4670 (providing a 3-day rescission provision), transient sales §§4681-4689 (requiring registration and disclosure of registration), home solicitation sales, Title 9-A, §§3-501 to 3-507 govern (UCCC home solicitation provision), and home construction contracts, and Title 10, §§1486-1490 (contains required provisions for home construction contracts). Disclosures: Disclosures required in statutes as cited above (i.e. right to rescind on home solicitation sale, etc.) Criminal Penalties: §14512 makes any violation of the act a Class D crime. 78 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • MAINE MAINE MAINE MAINE MAINE Civil Penalties/Enforcement: §14512 provides for a civil penalty of up to $2,000. Applicability of State UDAP: Yes. §14512 makes any violation of the act an unfair trade practice in violation of Title 5, §207. Volume II - Home Improvement .inancing: Summaries of State Statutes 79
    • M A RY L A N D RY Home Improvement Law MAR YLAND Citation: Md. Bus. Reg. Code Ann. §§8-101 to 8-702 Applicability: The act applies to: additions, alterations, conversions, improvements, modernization, remodeling, and repairs to or the replacement of a building or part of a building used or designed to be used as a residence or to a structure or land adjacent to that building. The act applies to the connection, installation or replacement of a dishwasher, disposal, or refrigerator with an icemaker to existing plumbing lines (§8- 101). Exemptions: Construction of a new home; work done to comply with guarantee of completion of a new building; connection, installation or replacement of an appliance to existing plumbing lines that requires alteration of the plumbing lines; sale of materials if the seller does not directly or indirectly perform any work in connection with the installation or application of the materials (§8-101) Licensing Requirements: Yes. §§8-301 to 8-317 Loan Terms: The contract must be signed, in writing, and describe clearly each document it incorporates. The contract must include the: name, address, and license number of contractor and each salesperson involved in the sale; start and finish dates; description of the work and materials; consideration; number and amount of any payments including finance charge; description of the security; and phone number of the Maryland Home Improvement Commission. A contract which violates this section is not invalid merely because of the noncompliance (§8-501). Disclosures: If the payment is secured by an interest in residential real estate, a notice in at least 10-point bold type on the contract’s first page, stating that: 1) the contract creates a lien against the property and may cause loss of that property if failure of payment, 2) homeowner has the right to consult an attorney, and 3) borrower has a 3-day right to rescind the contract. This notice must be independently initialed by the homeowner (§8-501). Prohibited Acts: A salesperson may not represent more than one contractor; use a form that does not disclose the name of the contractor; choose a contractor for the owner; or accept compensation from or pay compensation, to anyone other than the contractor the salesperson represents (§8-502). Prohibited acts include: 1) promising or offering any compensation or reward for referrals; 2) paying or offering any gift, bonus, trading stamps or cash loan as an inducement to enter into a contract (§8- 503); 3) knowingly preparing or arranging for a mortgage or promissory note which recites a greater obligation than the consideration for the home improvement (§8-610); and 4) demanding or receiving payment before the contract is signed, or taking a deposit in excess of one-third of the contract price before or at the time of execution of the contract (§8-617). Civil Penalties/Enforcement: Maryland Home Improvement Commission enforces the act through regulations, injunctions, restitution, and orders for completion (§§8-201 to 8-214) (up to $5,000 fine per violation (§8-260)). Applicability of State UDAP: Yes. (Md. Com. Law Code Ann. §§13-101, 14-101). Actual damages; attorney fees “may” be awarded; seller receives attorney fees if action in bad faith or frivolous 80 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • MAR YLAND MAR YLAND MAR YLAND MAR YLAND MAR YLAND Retail Installment Sales Citation: Md. Com. Law Code Ann. §§12-601 to 12-636 Applicability: The act applies to the sales of goods in which part or all of the price is payable in one or more installments, and the seller takes collateral or a security interest in the goods sold. Goods is defined as tangible personal property with a cash price of $25,000 or less. Sales finance companies include those companies in the business of acquiring or investing or lending on the security of installment sales agreements; including home improvement transactions made between other parties, if collateral is required by the contractor (§12-601). Interest Rate and Fee Caps: For any installment sale agreement made after July 1, 1982; the interest rate cap is 24 percent per year simple interest. A minimum charge of $10, or if the agreement for a term of eight months or less, $8 is allowed (§12-610). Certain conditions apply to refinancing pre-July 1, 1982 contracts (§12-610.1). Variable rates are forbidden in certain contracts (§12-610.2). Court costs allowed by court in any action to realize upon security or recover possession of the goods or enforce any obligation of buyer or his surety. A bad check fee may not exceed $15 if check dishonored upon second presentment (§12-614). Official fees actually paid out may be charged; credit against last installment may be required if charged but not paid (§12-616). An extension or deferral charge of 1 percent per month of amount extended or deferred may be charged for the period of any extension (§12-619). A statement of the account balance must be supplied upon the request without charge once every 60 days; the fee for any other requested statement is limited to 50 cents (§12-621). If the contract so provides, a delinquency charge not exceeding the lesser of $10 or 5 percent of the overdue installment, for any installment which is past due for 10 days or more may be charged. Court costs and attorneys’ fees may not exceed 15 percent of the amount due if referred for collection to an attorney who is not a salaried employee of the holder (§12-623). Loan Terms: If the buyer is required to make any payment in addition to a down payment prior to delivery of the goods, the buyer has the right to cancel before the delivery of the goods, and the seller must refund at least 90 percent of all payments made, including the down payment, within 10 days (§12-615). The buyer may prepay part or all of amount due at any time, without penalty, and receive a refund of unearned interest, but the holder is entitled to retain a finance charge of at least $6. This right applies to all sales of consumer goods, even if the cash price of goods exceeds $25,000 (§§12-612 & 12-620). Prohibited Loan Terms: Prohibited loan terms include: confession of judgment or power of attorney therefore; balloon payments more than double the average installment or due in an interval less than one-half intervals between other payments, unless the borrower is given the absolute right upon the default of such excess or irregular payment to a new payment schedule conforming to previous average in amount and interval; any repossession or acceleration clause based on holder deeming itself insecure; any waiver of any tort claim or provision allowing the seller the right to enter the buyer’s premises unlawfully; making the person acting for the holder the buyer’s agent; and the assignment of wages (§12-607). No act or agreement of the buyer shall waive any benefit or protection accorded to the buyer by the act (§12- 629). Disclosures: Required disclosures include: name and address of parties; date; clear description of goods sold; cash price; other charges; principal balance; insurance coverage and charges; finance charge; schedule and amount of payments. A clear Volume II - Home Improvement .inancing: Summaries of State Statutes 81
    • MAR YLAND statement is required of any collateral taken and a notice in 12-point bold type directly above the buyer’s signature line stating: entitlement to a copy of this agreement when signed; borrower’s rights under the state installment sales law to prepay and obtain a rebate of unearned finance charge; borrower’s rights to redeem if the property is repossessed; and requirement of a resale in certain circumstances (§12-606). The holder may serve a notice of intent to repossess 10 days in advance. The holder must send a notice within 5 days after repossession explaining the buyer’s right to redeem; the amount required to redeem; the rights of buyer as to resale and possible liability for any deficiency; and the exact location where the goods are stored and an address where payments may be made (§12-624). Prohibited Acts: False, misleading, or deceptive advertising is prohibited (§12-602). Additional prohibited acts include: discriminating on the basis of sex, marital status, geographic area of residence, neighborhood or age (§12-603); failing to provide the buyer with a copy of the contract (§12-604); taking a contract which contains any blanks (§12-607); contracting for, charging, or receiving any charges (directly or indirectly) in excess of those allowed by the act (§12-614); and repossessing, except by legal process or self-help without the use of force (§12-624). Criminal Penalties: Knowing violations are a misdemeanor punishable by a fine not exceeding $100 for a first offense and $500 for any subsequent offense (§12-636). Civil Penalties/Enforcement: If the seller does not provide a signed copy of the contract to the buyer within 15 days, the contract is void and the buyer has the unconditional right to cancel and the seller must immediately refund all payments and deposits (§12-605). The failure to issue a statement and any instruments required to release security within 15 days of payment in full, subjects the holder to $10 fine and liability for damages (§12-622). The holder may not collect any finance, delinquency, or collection charges if: 1) the contract fails to include required information, 2) the seller fails to deliver the required copy to the buyer, or the contract includes a finance charge in excess of that allowed by law, unless finance charge violation is unintentional and in good faith and holder corrects the error within 10 days after holder notice it or buyer notifies holder in writing. If contract contains any of provisions forbidden by §12-607 that provision is void and holder may not collect any finance, delinquency or collection charges (§12-630). Commissioner of Consumer Credit to enforce the act (§12-631). Applicability of State UDAP: Yes. (§§13-101, 14-101). Actual damages; attorney fees “may” be awarded; seller receives attorney fees if action in bad faith or frivolous Special Assignee Provisions: Any note taken by a seller or a sales finance company must refer to the agreement out of which it arises. If a note is assigned, it is subject to all defenses which the buyer may have against the seller or sales finance company. The buyer’s written acknowledgment of delivery of a copy of the contract shall be conclusive proof of delivery in any action by or against an assignee, without knowledge to the contrary (§12-628). Until the buyer has a written notice of assignment, the payment made to last known holder or notice given hereunder shall be binding upon all subsequent holders (§§12-611 and 12-617). Other: The buyer may redeem goods for 15 days after the holder gives required post- repossession notice, unless the goods were already repossessed once within the previous 18 months or the goods repossessed due to the buyer’s fraud or wrongful concealment or damage of the goods (§12-625). The holder must sell any repossessed goods at a public auction if the buyer has paid at least 50 percent of the 82 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • MAR YLAND MAR YLAND MAR YLAND MAR YLAND MAR YLAND cash price of the goods and the buyer requests a sale within 15 days after the holder gives the required post-repossession notice, and gives the holder a deposit of $10 or 10 percent of the time balance due to cover the costs of the sale (§12-626). If there is not a resale of any repossessed goods, all the buyer’s obligations are discharged and the holder may retain the goods (§12-627). Consumer Loans—Credit Provisions Citation: Md. Com. Law Code Ann. §§12-301 to 12-317 Applicability: Persons who make loans for $6,000 or less (§12-303) Exemptions: Banks, trust companies, savings banks, savings and loan associations, and credit unions are exempt (§11-202). A licensee acting in good faith in conformity with any form or written opinion issued by the Attorney General or the Commissioner of Financial Institutions shall be presumed to have acted in accordance with the law, and not liable for any resulting violation (§12-316.1). Licensing Requirements: Md. Fin. Inst. Code Ann. §§11-201 to 11-223. Interest Rate and Fee Caps: For a loan of $2,000 or less: 2.75 percent per month on the portion of the loan $500 or less; 2 percent per month on the portion of loan over $500 but not more than $700; 1.25 percent per month on the balance. For a loan of more than $2,000 but not more than $3,500: 1.75 percent per month. For a loan of more than $3,500 but not more than $5,000: 1.5 percent per month. For a loan of more than $5,000: 1.35 percent per month. As an alternative, for certain loans made after July 1, 1982, the lender may charge: for loans of $2,000 or less, 2.75 percent per month on the part of the balance $1,000 or less and 2 percent per month on the remainder; for loans of more than $2,000: 2 percent per month. If any balance remains unpaid 6 months after maturity, the lender may charge interest not to exceed 6 percent simple interest. A lender may not add more than 60 days outstanding interest to the principal in any refinancing. Advance or compounded interest is forbidden (§12-306). Title insurance premiums or reasonable attorney’s fees paid for searching and insuring the title to any real property securing the loan may be charged. A bad check fee of $15 may be charged if the check is dishonored on second presentment (§12-307). If the contract so provides, court costs and attorney’s fees, not to exceed 15 percent of the amount due may be charged if the loan is referred for collection to an attorney who is not a salaried employee of the lender. Fees are set by the court if the suit is filed on any loan for less than $2,000 (§12-307.1). Any profit or advantage a person contracts for or receives by a collateral sale, purchase, or agreement in connection with negotiating, arranging, or making a loan is considered a charge for the loan (§12-310). Loan Terms: The loan term shall be: 30.5 months or less for loans of $700 or less; 36.5 months or less for loans of more than $700 but less than $2,000; 72.5 months for loans of more than $2,000 (§12-306). The buyer may prepay in full or in part at any time, without penalty (§12-308). The principal amount of the loan, schedule of payments and agreed amount and rate of interest and fees and charges must be included in contract (§12-311). Prohibited Loan Terms: Confession of judgment or power of attorney therefore; assignment of wages; taking a security interest in real property in any loan for less than $2,000; taking a security interest in personal property in any loan for less than Volume II - Home Improvement .inancing: Summaries of State Statutes 83
    • MAR YLAND $700 (§12-311) Disclosures: At the time the loan is made, a statement (in English) quoting §§12-306, 12-307, 12-312-12-313 (limiting the interest rates and charges payable under consumer loans) (§12-308) Prohibited Acts: Prohibited acts include: 1) making loans if not licensed (§12-302); 2) making loans for amounts larger than $6,000 (§12-303); 3) evading any provisions of the act by structuring a transaction as a purchase or assignment of wages, or as a pretended purchase of property (§12-303); 4) false, deceptive, or misleading advertising (§12-304); 5) discriminating on the basis of race, color, creed, national origin, sex, marital status, or age in granting or denying credit (§12-305); 6) taking an instrument with blanks in it as security for a loan (§12-311); and 7) splitting any loan and thereby receiving charges in excess of those permitted by act (§12-313). Criminal Penalties: Knowing violations are a misdemeanor (§12-316). Civil Penalties/Enforcement: A lender who loans or contracts to loan a borrower an amount in excess of $6,000, whether in one or more transactions, shall not receive any interest, fees, or charges under this statute (§12-303). The state Commissioner of Financial Regulation shall administer and enforce the act (§12-304). If any charge in excess of amounts allowed by the act is willfully contracted for or received, the lender may not receive any compensation with respect to the loan. If the excess charge is not made willfully, and the lender does not correct the error before the borrower makes the next loan payment, then the lender is liable to the borrower for 3 times the excess amount received, but otherwise may receive principal and interest under the loan (§12-313). Loans for under $6,000 made by an unlicensed person are unenforceable if a greater rate of interest than allowed by statute is charged, unless the excess rate is contracted for because of a clerical error and the person corrects the error before receiving any payments (§12-314). Applicability of State UDAP: Yes. Md. Com. Law Code Ann. §§13-101, 14-101. Actual damages; attorney fees “may” be awarded; seller receives attorney fees if action in bad faith or frivolous Special Assignee Provisions: If the loan is used to buy goods or services primarily for personal, family or household purposes, and the lender knows that the seller arranged for the credit or the lender otherwise knowingly participated in the sale, then the lender is subject to the defenses and claims that the borrower may have against the seller. Knowing participation defined as being a related person to the seller; having proceeds of loan made payable to seller; taking a purchase money security interest in the goods bought; seller guaranteed the loan; lender supplied the seller a form to use; or the loan was conditioned upon the purchase from a particular seller. Lender’s liability limited to amount owed to lender at time of notice of buyer’s claim or defense (§12-309). Preservation of a Consumer’s Claims and Defenses in Consumer Credit Transactions Citation: Md. Com. Law Code Ann. §14-302 Applicability: Consumer credit contracts, which include any instrument which evidences a debt arising from a purchase money loan (any loan applied to a purchase 84 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • MAR YLAND MAR YLAND MAR YLAND MAR YLAND MAR YLAND of goods or services from a seller who refers consumers to the creditor or is affiliated with the creditor by common control, contract, or business arrangement) or which arises from a financed sale (credit extended to a consumer in connection with a credit sale). Exemptions: The act does not apply if the seller does not require consumer credit contract to be a negotiable instrument or contain a clause waiving a consumer’s claims against the seller as to any holder of the contract, and the seller also does not transfer, sell, pledge, or assign the contract except under circumstances in which transferee is subject to all claims and defenses the consumer has against the seller. Disclosures: Every consumer credit contract must include a notice in 10-point bold type that any holder is subject to all of the buyer’s claims and defenses against the seller; debtor’s recovery under the contract limited to the amount paid by the debtor pursuant to the contract. Prohibited Acts: Prohibited acts include: 1) taking or receiving (directly or indirectly) any consumer credit contract which fails to include the required notice; or 2) accepting the proceeds of any loan which fails to include the required notice. These acts are explicitly declared unfair and deceptive practices. Applicability of State UDAP: Yes. Md. Com. Law Code Ann. §§13-101 and 14-101. Actual damages; attorney fees “may” be awarded; the seller receives attorney fees if the action is done in bad faith or is frivolous Special Assignee Provisions: Any holder is subject to all claims of the buyer against the seller arising out of the sale. The assignee’s liability is not to exceed the amount paid by the debtor under the note. Secondary Mortgage Loan Law Citation: Md. Com. Law Code Ann. §§12-401 to 12-415 Applicability: Loans made by licensed mortgage lenders, or by those exempt from the licensing requirement, which are secured by a mortgage upon real property which is used as a dwelling, if the property is subject to a lien for one or more prior mortgages (§12-401) Exemptions: Charges authorized by any federal lending program provided the loan is eligible for purchase under the program and the sum of fees, interest, discount, points and other charges does not exceed 24 percent per year (§12-404.1) Licensing Requirements: Md. Com. Law Code Ann. §12-402; Md. Fin. Inst. Code Ann. §§11-501 to 11-524, Maryland Mortgage Lender Law Interest Rate and Fee Caps: For loans made after July 1, 1982: 24 percent per year simple interest, but no interest in advance or compound interest and certain other conditions imposed; otherwise 16 percent per year simple interest (§12-404). Charges are limited to: official fees paid for recording and satisfying instrument securing the loan; an origination fee not to exceed $250 or 10 percent of the net loan proceeds; a delinquency charge of $2 or 5 percent of the amount past due, whichever is greater, if delinquency over due 10 days or more (§12-405). No balloon payments are allowed (except that loans to aid in sale of borrower’s residence or purchase of a new Volume II - Home Improvement .inancing: Summaries of State Statutes 85
    • MAR YLAND residence may include a balloon payment at maturity if the borrower is given the right to postpone the balloon payment 1 time for 6 months, providing borrower keeps making regular monthly payments and no new closing costs or processing fees are imposed) (§12-404). Loan Terms: Prepayment, in part or in full, is allowed at any time without penalty and any unearned interest must be refunded (§12-407). Prohibited Loan Terms: Waiver of borrower’s rights under act; assignments of wages; acceleration clause in absence of buyer’s default (§12-409) Disclosures: Federal Truth in Lending Act (TILA) disclosures are required (§12-407). The purpose of the loan must be stated on form developed by the Commissioner of Financial Regulation (§12-407.1). Prohibited Acts: Prohibited acts include: 1) contracting for or receiving any interest, discount, fee, commission, or other consideration in excess of amount allowed by act (§12-411); 2) making or offering to make a second mortgage loan except within terms and conditions allowed by the act (§12-412); 3) making false or misleading advertisements (§12-403); 4) refinancing a loan more often than once during any 12 months or twice within any 5 years (§12-408); and, 5) discriminating solely on the basis of age in granting or denying any loan application (§12-403.1). A commission or finder’s fees shall be paid by the lender, and only to a lawyer, a licensee hereunder, or a licensed real estate broker (§12-406). Criminal Penalties: Willful violations is a misdemeanor punishable by $1,000 fine or 1 year’s imprisonment or both (§12-414). Civil Penalties/Enforcement: The commissioner of Financial Regulations shall enforce the act (§§12-407 & 12-407.1). For any violation other than a bona fide computation error, the lender may not collect interest, costs, or other charges but may collect principal. Knowing violations entitle the borrower to collect 3 times the amount of excess interest and charges collected (§12-413). Applicability of State UDAP: Yes. Md. Com. Law Code Ann. §§13-101, 14-101. Actual damages; attorney fees “may” be awarded; seller receives attorney fees if the action is in bad faith or is frivolous Credit Grantor Closed-End Credit Provisions Citation: Md. Com. Law Code Ann. §§12-1001 to 12-1028 Applicability: Any credit grantor making a closed-end loan to a consumer borrower for personal, family, or household purposes secured by residential real property. Credit grantors include any federal or state bank, trust company, depository institution, or savings bank having a Maryland branch and also anyone not required to be licensed but who makes a secondary mortgage loan on residential real property (§12-1001). Exemptions: Loans made prior to October 1, 1994, by a home improvement contractor not licensed as required hereunder are not unenforceable or a violation because of such lack of licensing (§12-1015). Credit grantors not liable for unintentional, good faith violations of act if error corrected and borrower made whole for any losses, including reasonable attorneys’ fees and interest, within 10 days after grantor receives 86 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • MAR YLAND MAR YLAND MAR YLAND MAR YLAND MAR YLAND notice of error or violation from borrower. Burden of proving violation unintentional and in good faith is on credit grantor (§12-1019). If credit grantor corrects, within 60 days, any error it discovers on its own without receiving notice from the borrower, grantor not liable for violating act (§12-1020). Licensing Requirements: Md. Com. Law Code Ann. §12-1015. Interest Rate and Fee Caps: Interest rate may not exceed 24 percent per year simple interest (§12-1003). Loan fees, points, finders’ fees, other charges, and mortgage broker’s fee must total no more than 10 percent of the original extension of credit. Such fees are prohibited for consumer loans not secured by residential real property. No such fee limitations apply to loans secured by a first mortgage. Reasonable charges are allowed for services rendered, incurred in good faith by lender and not retained by lender, including: commitment fees; official fees; insurance premiums; title examination; filing fees; and attorney fees and travel expenses (§12-1005). A bad check fee may not exceed $15, if the check is dishonored upon the second presentment (§12-1008). No more than one refinancing charge in any 12 month period of the loan may be charged, if the new loan is made by the credit grantor, secured by a second mortgage, and made to cure a default on loan being refinanced (§12-1010). If the contract so provides, court costs and other collection costs, and reasonable attorneys’ fees if the loan referred for collection to an attorney not a salaried employee of holder may be charged (§12-1011). A lender’s inspection fee may only be imposed to ascertain the completion of a new home or repairs, alterations or other work required by the credit grantor (§12-1027). Reasonable attorneys’ fees for processing and closing first mortgage loan are allowed (§12-1008). Loan Terms: The buyer may prepay in full at any time, without penalty, and receive a refund of unearned interest (§12-1009). Prohibited Loan Terms: Balloon payments are prohibited on loans to consumers not secured by residential real property; however, balloon payments are allowed on loans secured by residential real property if the borrower is given the right to postpone payment 1 time, for 6 months, and provided the buyer continues to make payments and no fees or charges are imposed by the postponement (§12-1003). Confession of judgment or power of attorney therefore; any repossession or acceleration clause based on holder deeming itself insecure; demand for the person act for holder buyer’s agent; and assignment of wages are prohibited (§12-1023). Disclosures: The holder may serve a notice of intent to repossess tangible personal property 10 days in advance, but must send a notice within 5 days after the repossession explaining: 1) the buyer’s right to redeem; 2) the amount required to redeem; 3) the rights of the buyer as to resale and possible liability for any deficiency; 4) the exact location where the goods are stored; and 5) the address where the payment may be made (§12-1021). Prohibited Acts: Failing to deliver a copy of the contract to the borrower (§12-1013.2); failing to release security after payment in full (§12-1024); repossession except by legal process or self-help without the use of force (§12-1021) Criminal Penalties: Willful violations are a misdemeanor punishable by a $1,000 fine and 1 year’s imprisonment or both (§12-1017). Civil Penalties/Enforcement: The Commissioner of Financial Regulation is authorized to enforce the act. Obtaining an administrative hearing before the Commissioner Volume II - Home Improvement .inancing: Summaries of State Statutes 87
    • MAR YLAND requires the borrower to waive any right to bring a cause of action on matters addressed in the complaint or hearing (§12-1016). For any violation other than a bona fide computation error, the credit grantor may not collect interest, costs, or other charges (may collect principal). Knowing violations entitle the borrower to collect 3 times the amount of excess interest and charges collected (§12-1018). Applicability of State UDAP: Yes. Md. Com. Law Code Ann. §§13-101, 14-101. Actual damages; attorney fees “may” be awarded; seller receives attorney fees if the action is in bad faith or is frivolous Special Assignee Provisions: The buyer’s written acknowledgment of the delivery of a copy of the contract shall be conclusive proof of delivery in any action by or against an assignee without knowledge to the contrary (§12-1013.2). Until the buyer has a written notice of assignment, and payment made to the last known holder or notice given hereunder shall be binding upon all subsequent holders (§12-1023). Other: After October 1, 1993, the credit grantor must elect, in writing, to make a loan under this act and not as otherwise permitted by some other applicable law (§12- 1013.1). The buyer may redeem goods for 15 days after the holder gives required a post-repossession notice, unless the goods have been already repossessed once within the previous 18 months or the goods were repossessed due to the buyer’s fraud or wrongful concealment or damage of the goods. The holder must sell any repossessed goods at a private sale or public auction in a commercially reasonable manner if the buyer has paid at least 60 percent of the cash price of the goods or 60 percent of the loan. If there is not a resale of any repossessed goods, all the buyer’s obligations are discharged and the holder may retain the goods (§12-1021). The lender must present a financing agreement to a first mortgage borrower 72 hours before the time of settlement (§12-1022). Lending institutions must pay 3 percent simple interest or the passbook savings interest rate on all funds held in escrow under a first mortgage loan (§12-1026). 88 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • MASSACHUSETTS MASSACHUSETTS MASSACHUSETTS MASSACHUSETTS MASSACHUSETTS MASSACHUSETTS Licensing of Certain Mortgage Lenders and Brokers Citation: Mass. Gen. Law Chapter 255E Applicability: §255E:2 states that no person may act as a mortgage broker or mortgage lender with respect to residential property without first obtaining a license from the Commissioner. Exemptions: §255E:2 lists a number of exemptions, including: persons lending or brokering less than 5 times a year; banks; savings and loans; and credit unions. Licensing Requirements (cite only): The entire chapter is a licensing requirement. Prohibited Acts: Violating the licensing provisions is prohibited (§255E:7). Civil Penalties/Enforcement: §§255E:76 gives the Commissioner authority to enforce. Applicability of State UDAP: A violation of the licensing provision is presumably a violation of Chapter 93A. Retail Installment Sales and Services Citation: Mass. Gen. L. Chapter 255D Applicability: This act licenses businesses issuing sales finance agreements, and sets forth requirements for the agreements. Exemptions: §255D:2 exemptions include: banks, savings and loans, and credit unions. Licensing Requirements: §255D:2-8 Interest Rate and Fee Caps: §255D:10 sets the interest rate cap at 21 percent. Loan Terms: §255D:9 sets forth requirements as to the form and content of the agreements, including: 1) a notice to the buyer not to sign the agreement if there are blank forms, and that the buyer is entitled to a copy of it; 2) that the buyer may pay loan off in full at any time; 3) that under certain circumstances, the buyer may redeem the property if repossessed; and, 4) that the seller has no right to unlawfully enter premises. The section also requires notification to the buyer of cancellation rights within 3 days (home solicitation sale only). The section prohibits a seller from assigning such a contract within 5 days of the sale. The seller is also required to include in the contract the information required to be included under §140D:12 and 13, pursuant to §255D:31. §255D:13 requires a refund credit for prepayment in full. The buyer has a right to cancel until the seller delivers to him, in person or by mail, the contract, or if it is a home solicitation sale, within 3 business days of the sale (§255D:14). §255D:16 sets forth the requirements for extension agreements. §255D:17 sets forth the requirements for refinancing agreements. §255D:18 addresses add on purchases. §255D:19 contains requirements that the seller must go through to modify an installment sales agreement. §§255D:20 and 21 set forth requirements and rights if the buyer is in default. §255D:21 requires a notice of default by the seller before the seller can take any action, and a right to cure. §255D:22 limits the ability of a creditor to repossess without judicial involvement. It also limits the creditor’s ability to collect a deficiency, if the balance owed is under Volume II - Home Improvement .inancing: Summaries of State Statutes 89
    • MASSACHUSETTS $1,000. §255D:26 contains provisions governing the inclusion of insurance in a retail agreement, and precludes the seller from charging the buyer more for insurance than the seller is being charged by the insurer. Prohibited Loan Terms: Retail sales agreement shall provide for a security interest in (a) personal property other than the goods sold or worked on under the agreement unless such goods become affixed to such personal property; (b) after acquired collateral; or (c) goods subject to a prior retail sales agreement (§255D:15). Disclosures: §255D:31 requires the seller to comply with the truth in lending disclosure requirements of Chapter 240D. Prohibited Acts: §255D:9A states that in any transaction involving the modernization, rehabilitation, repair, alteration, improvement, or construction of real property, a writing signed by the buyer that such work has been satisfactorily completed shall not be valid unless the work to be performed by the seller is actually completed. §255D:10 prohibits: blank spaces in contracts; confession of judgments; schedule of unequal payments; “any provision for repossession of goods or for the acceleration of the time when any part or all of the total of payments becomes payable other than for default of the buyer”; granting holder to unlawfully enter buyer’s premises; waiver of rights buyer may have against seller; power of attorney to the seller or holder; assignment of wages; and limitations on any express warranties. Criminal Penalties: §255D:30 makes a violation of the Chapter a misdemeanor. Civil Penalties/Enforcement: The violation of any provision of the chapter bars the creditor from collecting any finance charge, delinquency, or collection charge, but does not bar his right to recover the principal or to recover the goods (§255D:29). Private Right of Action: Implicit Applicability of State UDAP: Chapter 93A is broad enough to encompass credit transactions. The exemption in §93A:3 for “action otherwise permitted by any regulatory board” could encompass the licensed lenders, but surely not if they were in violation of the licensing/usury laws. An individual may bring an action for actual damages and up to 3 times actuals, and attorney fees, but must first give the creditor a 30-day notice (§93A:9). Rates of Interest and Loans Citation: Mass. Gen. L. Chapters 107 and 140 Applicability: Ch. 107 establishes the default rate of interest, while Ch. 140 regulates lenders and establishes other rates of interest. §140:96-113 applies to small lenders, while loans secured by mortgages, are exempt from the small loan licensing requirements (§140:90A). Licensing Requirements: §140:96-113 for small lenders Interest Rate and Fee Caps: §107:3 sets the default interest rate at 6 percent. §140:90 sets the interest for loans of less than $1,000 at 18 percent. §140:90A addresses home mortgages: “No person shall directly or indirectly charge, take, or receive for a loan of more than $1,500 secured wholly or partially by a mortgage of real 90 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • MASSACHUSETTS MASSACHUSETTS MASSACHUSETTS MASSACHUSETTS MASSACHUSETTS estate having an assessed value of not over $40,000, having a dwelling house … a greater rate than (18 percent).” §140:96 sets the limit for small loans (under $6,000) at 12 percent, unless the lender receives a license, pursuant to §96-113. §96:100 gives the board the authority to establish from time to time the interest rates allowed by licensed small lenders. Prohibited Acts: Violation of usury statutes is prohibited. Criminal Penalties: §140:90E makes any violation of 90A a misdemeanor. Civil Penalties/Enforcement: Under §140:90D, a loan made in violation of 90A is discharged upon payment in full of the principal, plus 18 percent. “If an action is brought upon a loan coming within the purview of §90A, the verdict or finding entered for the plaintiff in such action shall in no event exceed the amount that would be required to discharge by payment or tender the indebtedness at the time of such verdict or finding.” §140:103 sets penalties for violating the licensing provisions, including revocation of the license and voiding the loan. Private Right of Action: Implicit above Applicability of State UDAP: Chapter 93A is broad enough to encompass credit transactions. The exemption in §93A:3 for “action otherwise permitted by any regulatory board” could encompass the licensed lenders, but surely not if they were in violation of the licensing/usury laws. An individual may bring an action for actual damages and up to 3 times actuals, and attorney fees, but must first give the creditor a 30-day notice (93A:9). Volume II - Home Improvement .inancing: Summaries of State Statutes 91
    • MICHIGAN MICHIGAN Home Improvement Finance Act Citation: Mich. Comp. Laws §§445.1101 to 445.1431 Applicability: The act applies to the sale of chattels used in the repair, alteration, rehabilitation, modernization, or improvement of real property, or the provision of services to apply or install such goods; and home improvement contracts where all or part of the contract price is to be paid in installments, provided that the cash price is $300 or more (§445.1102). Exemptions: Exemptions include: construction of a new home; real property used for a commercial or business purpose; sales of goods by a seller who neither arranges to perform nor performs directly or indirectly any labor in connection with the goods’ installation or application; sales for under $300; sales of only an appliance designed to be free-standing and not built into and permanently affixed as an integral part of the structure; soans contracted for or obtained directly by the buyer from the lending institution, person, or corporation (§445.1102). Interest Rate and Fee Caps: If the contract is payable in substantially equal monthly installments, beginning 1 month from the date the finance charge accrues, the interest rate cap is 8 percent per year, with a minimum finance charge of $12 allowed. If the contract is payable in irregular or unequal installments in either amount or period, or if payments do not begin for more than 1 month after the date the finance charge accrues; the interest rate cap which will provide the same yield as if the contract were payable in equal installments, beginning within 1 month is applied. If the amount of any particular installment is 2 times or more the amount of any other payment other than the down payment, the finance charge is in respect to the portion of the principal amount financed included in that installment, and the interest rate cap is 6 percent per year, simple interest, payable over the entire period from the date the finance charge begins to accrue to the due date of the larger installment, in substantially equal payments throughout entire period. Special rates apply to contracts entered into before December 31, 1991 (§445.1301). The finance charge for any consolidated time balance shall not exceed the rates specified above (§445.1307). Simple interest is allowed (§445.1309). A delinquency charge is allowable for each installment overdue 10 days or more allowed, and may not exceed 5 percent of the payment due or $5, and may be charged only once. Court costs actually incurred and attorney’s fees not exceeding 20 percent of the amount due and payable under the contract may be charged, if the contract is referred to an attorney who is not a salaried employee of the seller or holder for collection (§445.1209). The holder may agree, in writing, to extend or defer all or part of any scheduled payment, but may charge no more than 1 percent per month simple interest on the amount of the installment or installments or part thereof deferred during the period of the deferral, plus any added insurance premiums (§445.1304). No costs, credit investigation charges, insurance premiums, examination, service, brokerage, commission, interest, discount, expense, fee, fine, penalty or other thing of value may be collected if not authorized by the act (§445.1406). Loan Terms: The buyer may cancel the contract until 5:00 p.m. of the business day following the execution of the contract by giving written notice to the contractor or his agent in person or by certified mail (§445.1203). Every home improvement contract must be dated and in writing (§445.120). At either the top of each contract or directly above the buyer’s signature line the words “home improvement installment contract” shall appear in at least 10-point bold type (§445.1202). Every home improvement installment contract shall include the name and address of the home improvement contractor and buyer, the location of the premises to be improved, and a description of 92 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • MICHIGAN MICHIGAN MICHIGAN MICHIGAN MICHIGAN the goods and services involved sufficient to identify them. A statement including similar information must be provided at the time any subsequent home improvement sale is added-on to the original contract (§§445.1203 and 445.1308). If the premium paid for any group credit life or other insurance is included in the contract, the contract must state which party is responsible for procuring insurance (§445.1205). The buyer may prepay at any time and shall receive a refund of any unearned interest (§445.1303). Prohibited Loan Terms: Prohibited loan terms include: 1) an agreement by the buyer not to assert any claim or defense arising out of the sale against the home improvement contractor or their assignee, or an agreement to waive any right of action against the contractor or a holder or other persons acting on their behalf for any illegal act committed in the collection of payments; 2) an acceleration clause in the absence of the buyer’s default in performance; 3) any clause relieving the home improvement contractor from liability for any claims the homeowner may have against the home improvement contractor; 4) any clause authorizing the seller or holder or any person acting on their behalf to enter upon the premises unlawfully or authorizing them to commit a breach of the peace in connection with any repossession or other entry upon the premises; and 5) a liquidated damages clause entitling the contractor to damages for any cancellation, rescission, or failing or refusing to accept delivery of the goods or performance of the services. Any prohibited term listed above is void if it is included in the contract, but shall not otherwise affect the validity of the contract (§445.1206). Disclosures: The amount financed; the finance charge; the total of payments; the total sales price; the amounts included for insurance; the official fees; and a separate notice of any larger payments (if the contract is not payable in substantially equal payments) must be disclosed in the written home improvement installment contract. Compliance with federal Truth in Lending Act (TILA) disclosure requirements shall satisfy this requirement of the act. A statement providing similar information must be provided at the time any subsequent home improvement sale is added on to the original contract (§§445.1111, 445.1203 and 445.1308). In a home improvement installment contract, a notice to the homeowner must be printed in 8-point bold-faced type stating: not to sign before reading the agreement, entitlement to a completely filled-in copy of the agreement, the right to pay off the loan in advance and, under certain conditions, the right to obtain a partial refund of the finance charge, and the right to cancel (§445.1202). Prohibited Acts: Prohibited acts include: failing to deliver a completed copy of a home improvement installment contract to the buyer at the time the contract is executed (§445.1204); taking a negotiable instrument other than a currently dated check or draft as evidence of the obligation of a buyer (§445.1207); splitting the loan in order to qualify for an exclusion from coverage by the act (§445.1302); refinancing more than one home improvement installment contract, unless the original home improvement contract allowed the contractor the option of adding on subsequent home improvement sales to the original amount financed (§§445.1305 & 445.1306); promising or offering any compensation or reward to a buyer for procuring a home improvement contract with others; offering any gift, bonus, award, merchandise or cash loan as an inducement to enter into a home improvement contract (§445.1404); making any cash loan in connection with a home improvement contract or with any extension, deferment, refinancing, add-on or consolidation agreement pertaining thereto (§445.1407): and no act, agreement or statement by a buyer shall constitute a valid waiver of any provision of the act intended for the protection of the buyer (§445.1409). Criminal Penalties: A criminal violation by any officer, employee, or agent of a home Volume II - Home Improvement .inancing: Summaries of State Statutes 93
    • MICHIGAN improvement contractor or financing agency is deemed a violation by such contractor or agency unless the management of the entity had no actual or constructive knowledge of the wrongful conduct (§445.1405). Any person who willfully violates the act or directs or consents to such violation is guilty of a first degree misdemeanor (§445.1421). Civil Penalties/Enforcement: Until an executed copy of the home improvement installment contract is provided to the buyer, or until the statement summarizing the terms of the addition to the original contract of any subsequent home improvement sale is provided to the buyer, the buyer is not obligated to pay (§§445.1204 and 445.1308). Any costs and charges not authorized by the act are unenforceable and must be offset against principal still owed or remitted to owner (§445.1406). The Attorney General or the prosecuting attorney of any county may sue to restrain or prevent any violation. Any person who violates any order, injunction or decree issued in such action may be fined $1,000 (§445.1422). Applicability of State UDAP: Yes. Mich. Comp. Laws §445.901. Injunction; declaratory relief; actual damages, $250 minimum damages plus attorney fees; class action for actual damages; restitution; strike unconscionable clauses; receiver or other appropriate relief Special Assignee Provisions: The buyer’s written acknowledgment of the delivery of a copy of a home installment contract shall be evidence of such delivery in any action or proceeding involving an assignee of the contract without knowledge to the contrary when he purchases the contract (§445.1204). Clauses in which the buyer agrees not to assert any claim or defense arising out of the sale against the home improvement contractor or their assignee, or waives any right of action against the contractor or a holder or other persons acting on their behalf for any illegal act committed in the collection of payments, are prohibited (§445.1206). The holder of a home improvement contract is subject to all the claims and defenses of the buyer arising out of the home improvement installment sale; the buyer’s recovery shall not exceed the amount paid to the holder thereunder (§445.1207). Unless notice of assignment has been given, payment by the owner to the last known holder shall be binding upon any subsequent holder or assignee (§445.1401). Other: Other provisions of the act regulate home improvement charge agreements, but, as such, agreements may not be secured by a lien on the buyer’s principal residence; these provisions are not summarized herein (see Mich. Laws 1985, Public Act No. 202, §§204a and 204b). Upon written request, once per year, the holder of a contract must provide the buyer with a written statement of all payments made and any amount still owed. Additional statements should be made available for a fee not to exceed $1 (§445.1402). Upon payment in full, the seller must release all encumbrances (§445.1403). Credit Reform Act Citation: Mich. Comp. Laws §§445.1851 to 445.1864 Applicability: Extensions of credit for the sale of goods and services by a regulated lender, which includes depository institutions, sellers under the Michigan Home Improvement Act, and licensees under the Michigan Consumer Financial Services Act, Motor Vehicle Sales Finance Act or Regulatory Loan Act (§445.1852) 94 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • MICHIGAN MICHIGAN MICHIGAN MICHIGAN MICHIGAN Exemptions: A regulated lender is not liable for violations if the lender has fully complied with the federal TILA and shows that the violation was an unintentional and bona fide error notwithstanding the maintenance of procedures reasonably adopted to avoid the error. Errors in legal judgment as to a person’s obligations under the act are not bona fide errors. Regulated lenders bear the burden of proving that a violation was unintentional and bona fide (§445.1862). Interest Rate and Fee Caps: The maximum interest rate is 25 percent per year (§445.1854). Any processing fee charged in connection with the making, closing, disbursing, extending, readjusting, or renewing of any extension of credit may not exceed 2 percent of the amount of credit; the late fee charged for any installment payment received after the expiration of the agreed-upon grace period may not exceed $15 or 5 percent of the installment due, whichever is greater; and the fee for dishonored checks shall not exceed $25 (§445.1856). Depository institutions may also charge any fee or charge that is agreed to and accepted by the borrower (§445.1857). Neither depository institutions nor other regulated lenders may require excessive fees or charges (§§445.1856, 445.1857). Loan Terms: Pre-computed interest is allowed in a home improvement sales contract, provided any rebate due at prepayment is computed according to the actuarial method (§445.1855). Prohibited Loan Terms: In extensions of credit for personal, family or household purposes: powers of attorney to confess judgment, waiver of borrower’s or buyer’s rights under this act, and an agreement by a borrower or buyer to pay a penalty (late payment and prepayment charges are not penalties) are prohibited loan terms (§445.1858). Prohibited Acts: Regulated lenders (other than depository institutions subject to 12 U.S.C. 1972) may not require, as a condition of approving a loan, that the borrower contract for additional financial services offered by the regulated lender or a service provider designated by the lender. But the lender may offer a combination of 2 or more such services at a reduced price (§445.1859). Civil Penalties/Enforcement: The Commissioner of the Financial Institutions Bureau of the Michigan Department of Consumer and Industry Services given the power to investigate complaints (§445.1860). The Attorney General or the prosecuting attorney for the county where the violation occurred is given the right to bring actions for declaratory or injunctive relief, actual damages, $1,000 statutory damages, and for attorney fees and costs if the regulated lender is found to have violated the act, plus a civil fine of $10,000 for willful and knowing violations and $20,000 for persistent violations. The Attorney General is also given the right to bring class actions (§445.1861). Any regulated lender who violates the act is barred from recovering any interest or other charges and must pay the buyer’s reasonable attorney fees and court costs (§445.1861). Private Right of Action: The borrower may bring an individual or class action for declaratory or injunctive relief, actual damages, $1,000 statutory damages, and for attorney fees and costs if the regulated lender is found to have violated the act (§445.1861). Applicability of State UDAP: Yes. Mich. Comp. Laws §445.901. Injunction; declaratory relief; actual damages, $250 minimum damages plus attorney fees; class action for actual damages; restitution; strike unconscionable clauses; receiver or other appropriate relief Volume II - Home Improvement .inancing: Summaries of State Statutes 95
    • MICHIGAN Secondary Mortgage Loan Act Citation: Mich. Comp. Laws §§493.51 to 493.81 Applicability: The act applies to loans with a term of greater than 90 days which are made to a person for personal, family, or household purposes and which are secured by a mortgage upon real property that is used as a dwelling, if the property is subject to a lien for 1 or more prior mortgages. The act applies if the property is located in Michigan, even if the lender is not (§493.51). Exemptions: Charges authorized by any federal lending program designed to promote the making of secondary mortgage loans (§493.72), and depository financial institutions subject to other laws of Michigan, the laws of another state, or the United States when engaging in secondary mortgage transactions are exempt (§493.79). Licensing Requirements: Mich. Comp. Laws §§493.52 to 493.70 Interest Rate and Fee Caps: Interest rate cap is as permitted by the Credit Reform Act (25 percent), but not to be added or deducted in advance (§493.71). Charges are limited to: charges for optional credit life, credit health and accident or other insurance; reasonable and necessary charges that are the actual expenses incurred by the lender or exclusive broker in connection with making, closing, disbursing, extending, readjusting, or renewing the second mortgage; a non-refundable processing fee that is no more than 5 percent of the gross amount of the loan; and other charges as authorized by the Credit Reform Act. Charges may be paid only once (§493.72). Prohibited Loan Terms: Prohibited loan terms include: powers of attorney to confess judgment; waivers of borrowers’ rights under Michigan or federal law; assignments of wages; provisions designed to compel, encourage or induce a borrower to incorporate to evade the provisions of the act; and provisions by which the debtor agrees to pay damages absent a court judgment (§493.73). Prohibited Acts: Prohibited acts include: transferring or assigning a secondary mortgage loan before 75 percent or more of the loan proceeds have been distributed to, or for the benefit of, the borrower, unless the loan provides, in writing, that the proceeds shall be disbursed in installments, upon request of the borrower or upon completion of renovations or repairs to the dwelling situated on the mortgaged property; failing to place any third-party funds held into trust or escrow prior to proper disbursement (includes fees held to pay title or other insurance premiums, taxes, recording fees, but does not include fees to process the loan application, appraise the property or obtain a credit report); failing to make a secondary mortgage loan pursuant to a written commitment if the borrower has timely and completely satisfied all of the conditions; taking a security interest in real property before closing the secondary mortgage loan in order to secure the payment of fees assessed in connection with the loan application (§493.74); and willfully or knowingly making false, misleading, or deceptive advertisements (§493.76). Civil Penalties/Enforcement: The commissioner of the Financial Institutions Bureau of the Michigan Department of Consumer and Industry Services is given the power to license, regulate, and investigate second mortgage brokers, lenders, and servicers (§493.56b). Remedies are available under the Michigan Credit Reform Act. A civil fine of $1,000 for each violation may be charged (§493.77). Private Right of Action: Regardless of whether a person seeks damages or has an adequate remedy at law, an action for declaratory relief, injunctive relief, actual 96 Volume II - Home Improvement .inancing: Summaries of State Statutes
    • MICHIGAN MICHIGAN MICHIGAN MICHIGAN MICHIGAN damages or statutory damages of $250, whichever is greater, together with reasonable attorneys’ fees and costs, is available (§493.77). Applicability of State UDAP: Yes. Mich. Comp. Laws §445.901. Injunction; declaratory relief; actual damages, $250 minimum damages plus attorney fees; class action for actual damages; restitution; strike unconscionable clauses; receiver or other appropriate relief Volume II - Home Improvement .inancing: Summaries of State Statutes 97
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