SENATE BILL REPORT

HB 1239

BYRepresentatives P. King, Schmidt and Scott

Exempting qualified pension plans from the state usury statute.

House Committe on Financial Institutions & Insurance

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):March 30, 1989; March 31, 1989

Majority Report:  Do pass.

      Signed by Senators von Reichbauer, Chairman; Fleming, McMullen, Matson, Moore, Rasmussen, Sellar, Smitherman, West.

Senate Staff:Bev Tweddle (786-7403)

                  March 31, 1989

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, MARCH 31, 1989

BACKGROUND:

The state statute regulates and sets caps on the amount of interest charged to consumers by lenders.  The code also allows but sets limits on the amount of a loan "set up" fee that a lender may charge a consumer.

Some retirement plans allow the members and members' families to acquire loans through the retirement plan.  A situation could occur where if the current applicable rate of interest is charged in addition to administrative costs (set up fees) the total of these two charges would exceed the state's usury limits.  If this occurred, the only alternative would be to charge the loan administration cost to the retirement system thereby making all plan participants share in costs for which they receive no benefit.

SUMMARY:

The state law that limits the amount of interest charged by a lender to a consumer shall not apply to loans made to subscribers or their beneficiaries from tax-qualified retirement plans.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Effective Date:The bill contains an emergency clause and takes effect immediately.

Senate Committee - Testified: Rich Birmingham, Washington State Bar Association