SENATE BILL REPORT

SB 5641

BYSenators von Reichbauer and Moore

Setting service charge limits on vessel retail installment contracts.

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):February 10, 1989

Majority Report:  That Substitute Senate Bill No. 5641 be substituted therefor, and the substitute bill do pass.

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

Senate Staff:Benson Porter (786-7470)

                  February 14, 1989

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, FEBRUARY 10, 1989

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.  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 remains the same for an entire year.

In 1987, the Legislature established an exception to maximum service charge for a retail installment contract for the purchase of a motor vehicle.  Rather than using the average of the four quarterly auctions for the year prior to the year in which the contract is made, the maximum interest rate on a motor vehicle retail installment contract is now based on the auction of 26 week treasury bills in the quarter prior to the quarter in which the contract is made.  No similar provision for the calculation of the interest rate on retail installment contracts for vessels exists.

SUMMARY:

The maximum interest rate that may be charged on a retail installment contract for the purchase of a vessel 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.

A vessel is defined as any watercraft, other than a seaplane, used or capable of use as a means of transportation on water.

EFFECT OF PROPOSED SUBSTITUTE:

The State Treasurer shall compute the maximum service charge for vessels and file this charge for publication in the Washington State Register.  The Treasurer already calculates and provides for publication of the maximum service charge for installment contracts for retail goods and motor vehicles.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Senate Committee - Testified: Jack Swanberg, Bill West, John Woodring, George Prescott, Northwest Marine Trade Association (pro)