H-4459

AN ACT Relating to consumer credit transactions; reenacting and amending RCW 63.14.130; and creating new sections.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that the continued regulation of consumer credit transactions, including the interest rates that may be charged for the transactions, protects the public from unfair practices and excessive interest rates. However, the legislature recognizes that many of the state laws regulating consumer credit transactions and interest rates have been directly or indirectly superseded and supplemented by federal statutes and regulations. The legislature also notes the inconsistencies and contradictions contained in the many state statutes addressing consumer credit transactions. Moreover, these statutes have failed to accommodate changes in both commercial practices and economic conditions. In particular, some state auto dealers and small retailers who do not issue retail credit cards are experiencing difficulties in obtaining credit for the financing of purchases by consumers because the retail rate permitted under state law is less than the rate charged by large credit suppliers. It is therefore the intent of the legislature to develop a single, comprehensive chapter of law regulating consumer credit transactions and to temporarily increase the interest rate that may be collected on retail installment transactions while the legislature acts to retain, modify, or repeal existing statutes regulating consumer credit transactions.

NEW SECTION. Sec. 2. (1) There is hereby created a joint select committee on consumer credit transactions. The committee shall consist of eight voting members appointed jointly by the speaker of the house of representatives and the president of the senate. The voting membership shall be chosen equally from each major political caucus and shall include members of the house of representatives financial institutions and insurance committee, the house of representatives commerce and labor committee, the senate financial institutions committee, and the senate commerce and labor committee. One member of the select committee appointed by the speaker of the house of representatives and one member of the select committee appointed by the president of the senate shall be designated to serve as cochairs of the committee. Each of the speaker of the house of representatives and the president of the senate may appoint three nonvoting members to participate in the meetings of the joint select committee. Nonvoting members shall be limited to representatives of labor, consumer, retail, financial, and legal groups who possess a working knowledge of consumer credit transactions. The governor may appoint a representative of the executive branch with responsibility for regulating consumer loan companies to serve as a nonvoting member of the select committee.

(2) Legislative members of the committee shall be reimbursed for expenses as provided under RCW 44.04.120. Nonvoting members of the committee shall serve without compensation for their service as members of the committee, but may be reimbursed for their travel expenses in accordance with RCW 43.03.050 and 43.03.060.

(3) Staff support for the joint select committee on consumer credit transactions shall be provided by the senate committee services and the office of program research as mutually agreed by the cochairs of the joint select committee.

(4) The committee shall expire immediately after its presentation of the final report to the legislature under section 5 of this act.

NEW SECTION. Sec. 3. (1) The joint select committee on consumer credit transactions created in section 2 of this act shall review state and federal statutes governing consumer credit transactions and shall prepare a report:

(a) Summarizing federal and state statutes governing consumer credit transactions;

(b) Identifying the state statutes preempted or superseded by federal law and judicial interpretations of federal law;

(d) Identifying any inconsistency among state statutes affecting consumer credit transactions.

(2) With the assistance of the institute for public policy, the committee shall survey the professional and academic literature addressing the impact of interest rate regulation on consumer credit markets and shall prepare a report identifying the beneficial and detrimental effects of state interest rate regulation upon state consumer credit.

(3) The committee shall study and develop legislation creating to the greatest extent possible a single, comprehensive statutory title of law regulating consumer credit transactions including any regulation of interest rates, service charges, and similar fees on consumer credit.

Sec. 4. RCW 63.14.130 and 1989 c 112 s 1 and 1989 c 14 s 5 are each reenacted and amended to read as follows:

The service charge shall be inclusive of all charges incident to investigating and making the retail installment contract or charge agreement and for the privilege of making the installment payments thereunder and no other fee, expense or charge whatsoever shall be taken, received, reserved or contracted therefor from the buyer.

(1) Except as provided in subsections (2) and (3) of this section, the service charge, in a retail installment contract, shall not exceed the highest of the following:

(a) A rate on outstanding unpaid balances which exceeds six percentage points above the average, rounded to the nearest one‑quarter of one percent, of the equivalent coupon issue yields (as published by the Board of Governors of the Federal Reserve System) of the bill rates for twenty-six week treasury bills for the last market auctions conducted during February, May, August, and November of the year prior to the year in which the retail installment contract is executed; ((or))

(b) One and one-half percent per month on the outstanding unpaid balances for contracts entered into between July 1, 1992, and July 1, 1994; or

(2) The service charge in a retail installment contract for the purchase of a motor vehicle shall not exceed the highest of the following:

(a) A rate on outstanding unpaid balances which exceeds six percentage points above the average, rounded to the nearest one‑quarter of one percent, of the equivalent coupon issue yield (as published by the Board of Governors of the Federal Reserve System) of the bill rate for twenty-six week treasury bills for the last market auction conducted during February, May, August, or November, as the case may be, prior to the quarter in which the retail installment contract for purchase of the motor vehicle is executed; ((or))

(b) One and one-half percent per month on the outstanding unpaid balances for contracts entered into between July 1, 1992, and July 1, 1994; or

As used in this subsection, "motor vehicle" means every device capable of being moved upon a public highway and in, upon, or by which any person or property is or may be transported or drawn upon a public highway, except for devices moved by human or animal power or used exclusively upon stationary rails or tracks.

(3) The service charge in a retail installment contract for the purchase of a vessel shall not exceed the highest of the following:

(a) A rate on outstanding balances which exceeds six percentage points above the average, rounded to the nearest one‑quarter of one percent, of the equivalent coupon issue yield, as published by the federal reserve bank of San Francisco, of the bill rate for twenty-six week treasury bills for the last market auction conducted prior to the quarter in which the retail installment contract for purchase of the vessel is expected; ((or))

(b) One and one-half percent per month on the outstanding unpaid balances for contracts entered into between July 1, 1992, and July 1, 1994; or

As used in this subsection, "vessel" means any watercraft used or capable of being used as a means of transportation on the water, other than a seaplane.

(4) The service charge in a retail charge agreement, revolving charge agreement, lender credit card agreement, or charge agreement, shall not exceed one and one-half percent per month on the outstanding unpaid balances. If the service charge so computed is less than one dollar for any month, then one dollar may be charged.

(5) A service charge may be computed on the median amount within a range which does not exceed ten dollars and which is a part of a published schedule of consecutive ranges applied to an outstanding balance, provided the median amount is used in computing the service charge for all balances within such range.

NEW SECTION. Sec. 5. The joint select committee on consumer credit transactions shall present a written progress report to the legislature by January 1, 1993, and a final report by January 1, 1994.