HOUSE BILL REPORT

HB 1653

BYRepresentative Appelwick

Regulating credit agreements.

House Committe on Judiciary

Majority Report:  The second substitute bill be substituted therefor and the second substitute bill do pass.  (15)

      Signed by Representatives Appelwick, Chair; Crane, Vice Chair; Padden, Ranking Republican Member; Dellwo, Forner, Hargrove, Inslee, P. King, R. Meyers, H. Myers, Schmidt, Scott, D. Sommers, Tate and Wineberry.

House Staff:Bill Perry (786-7123)

AS REPORTED BY COMMITTEE ON JUDICIARY FEBRUARY 1, 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 example for assignments for the benefit of creditors, for conveyances of real property and for rental of residential property.

SUMMARY:

SECOND SUBSTITUTE:  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 loans to individuals that are primarily for personal, family, or household purposes.

SECOND SUBSTITUTE BILL COMPARED TO ORIGINAL:  The substitute applies explicitly to enforceability by both creditors and debtors.  The substitute does not exclude loans to private persons for non-commercial purposes.  The substitute provides for notice to creditors for each credit agreement or not more than a year before a subsequent agreement.

Fiscal Note:      Not Requested.

Effective Date:The bill takes effect on July 1, 1990.

House Committee ‑ Testified For:    Keith Hopper, Washington Bankers Association.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    The second substitute is an improvement over the bill passed by the House last year.  It removes non-commercial credit agreements, and credit card transactions from the statute of frauds provisions.

House Committee - Testimony Against:      None.