HOUSE BILL REPORT

SSB 5641

BYSenate Committee on Financial Institutions & Insurance (originally sponsored by Senators von Reichbauer and Moore)

Setting service charge limits on vessel retail installment contracts.

House Committe on Financial Institutions & Insurance

Majority Report:  Do pass.  (14)

      Signed by Representatives Dellwo, Chair; Chandler, Ranking Republican Member; Anderson, Baugher, Beck, Crane, Day, Dorn, Inslee, P. King, Nutley, Schmidt, K. Wilson and Winsley.

House Staff:John Conniff (786-7119)

AS PASSED HOUSE APRIL 6, 1989

BACKGROUND:

A consumer may purchase property and defer full payment for the property in accordance with a retail installment contract requiring monthly payments including interest. The interest rate that may be charged by a retail seller is limited to an amount based upon the average of four quarterly auctions of 26 week U.S. treasury bills for the previous year plus 6 percent.

In 1987, the Legislature modified the interest rate calculation for retail installment contracts for the purchase of motor vehicles. Instead of limiting interest to the average of quarterly treasury bills for the previous year, a car dealer may use the average treasury bill auction rate for the previous quarter; thus, allowing the dealer to use a more recent rate.

SUMMARY:

The interest rate that may be charged under a retail installment contract for the purchase of watercraft used or capable of being used as transportation on the water, except seaplanes, cannot exceed 6 percent over the last quarterly auction rate for U.S. treasury bills. In other words, the interest rate chargeable for retail installment contracts for the purchase of boats is the same as that chargeable for retail installment contracts for the purchase of cars.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    John Swanberg, Northwest Marine Trade Association; and Keith Hopper, Washington Bankers Association.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    These changes are necessary to allow boat sellers to use the same method of determining the permitted interest rate on retail installment contracts as allowed automobile dealers.  Many boats are sold as a package including trailers and sometimes trucks.  While the basic rate of interest is the same, the change allows the interest rate to be calculated according to more recent treasury bill rates and allows the entire boat package to be financed at the same rate.

House Committee - Testimony Against:      None Presented.