SENATE BILL REPORT

SHB 366

BYHouse Committee on Financial Institutions & Insurance (originally sponsored by Representatives Lux, Sayan, Nelson, Cole, Rasmussen, Brekke, K. Wilson, Belcher, Fisch and Locke)

Revising the maximum interest rate calculation on retail installment contracts for the purchase of motor vehicles.

House Committe on Financial Institutions & Insurance

Senate Committee on Financial Institutions

Senate Hearing Date(s):April 3, 1987

Majority Report:  Do pass as amended.

      Signed by Senators Moore, Chairman; Bender, Vice Chairman; Bottiger, Fleming, McDermott, Metcalf, Pullen, von Reichbauer.

Senate Staff:Stephanie Yates (786-7416)

                  April 3, 1987

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS, APRIL 3, 1987

BACKGROUND:

Retail purchases using installment credit may be made under a retail installment contract.  It is generally entered into for the purchase of a single item or group of items with an established term for completing payments.  Additional purchases may not be added to the contract without the making of a new contract.  The maximum interest rate which may be charged on a retail installment contract is determined by calculating the average of four quarterly auctions of 26-week treasury bills for the year prior to the year in which the contract is made.  The maximum interest rate is six percentage points over the average.  The rate stays the same for an entire year.

SUMMARY:

The maximum interest rate that may be charged on a retail installment contract for the purchase of a motor vehicle is based on the auction of 26-week treasury bills in the quarter prior to the quarter in which the contract is made.  The maximum interest rate is 6 percent over the treasury bill rate for the prior quarter.

SUMMARY OF PROPOSED SENATE AMENDMENT:

The maximum interest rate permissible on a retail charge agreement is changed from 18 percent per annum to the higher of 15 percent per annum or eight percentage points above the 26-week treasury bill rate for the month prior to the month in which the retail charge agreement is executed.

Fiscal Note:      none requested

Senate Committee - Testified: Representative Gene Lux, original sponsor