SENATE BILL REPORT

2SHB 1653

BYHouse Committee on Judiciary (originally sponsored by Representative Appelwick)

Regulating credit agreements.

House Committe on Judiciary

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):February 20, 1990; February 22, 1990

Majority Report:  Do pass.

      Signed by Senators von Reichbauer, Chairman; Johnson, Vice Chairman; McCaslin, McMullen, Matson, Moore, Rasmussen, Smitherman.

Senate Staff:Gerard S. Poliquin (786-7403)

                  February 23, 1990

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, FEBRUARY 22, 1990

BACKGROUND:

Washington has a "statute of frauds" that makes certain kinds of agreements or promises unenforceable by any party unless they are made in writing.  Agreements that must be in writing to be enforceable include: (1) an agreement to be performed more than one year after its making; (2) an agreement to pay the debts of another; (3) an agreement in consideration of marriage except for a mutual agreement to marry; (4) an agreement by an executor to pay for damages out of his or her own estate; and (4) an agreement to buy or sell real estate on a commission.

Other statutes also require writings for specific purposes:  for assignments for the benefit of creditors; for conveyances of real property; and for rental of residential property.

SUMMARY:

A credit agreement is not enforceable against a creditor unless the agreement is in writing and signed by the creditor.  A credit agreement means a commitment to extend credit, or to modify such a commitment, or to agree not to enforce repayment provisions of such a commitment.  Partial performance of an unwritten agreement does not make the agreement enforceable against the creditor.

A creditor must give written notice to a debtor that oral agreements are not enforceable.  If such notice is not given, then the requirement that agreements be in writing before a debtor can sue does not apply.  However, once notice has been given to a particular debtor, it is valid for any subsequent written credit agreement.

The prohibition against suing creditors for non-written credit agreements does not apply to credit card agreements or loans to individuals that are primarily for personal, family, or household purposes.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Senate Committee - Testified: Keith Hopper, Washington Bankers Association