422.406(3)(3) The holder to whom an instrument issued in violation of this section is negotiated, notwithstanding that the holder may otherwise be a holder in due course of such instrument, is subject to all claims and defenses of the customer against the payee, subject to sub. (4). 422.406(4)(4) Such holder’s liability under this section is limited to: 422.406(4)(a)(a) The amount owing to the holder on such instrument at the time the holder receives notice of a claim or defense of the customer against such payee; plus 422.406(4)(b)(b) If the customer has obtained a judgment against such payee and execution with bond is issued within one year after judgment and is returned unsatisfied, the amount paid by the customer to the holder before the holder received notice of the claim or defense of the customer, if such claim is made against the holder within 2 years after such judgment is returned unsatisfied. Any judgment against the payee, other than a default judgment, shall be binding on the holder. 422.406(5)(5) Taking or arranging for the customer to sign an instrument in violation of this section is subject to s. 425.304. 422.407422.407 Defenses assertable against an assignee. 422.407(1)(1) With respect to a consumer credit transaction other than a consumer loan which is not an interlocking consumer loan (s. 422.408), an assignee of the rights of a creditor is subject to all claims and defenses of the customer against the assignor arising out of the transaction notwithstanding an agreement to the contrary, subject to sub. (2). 422.407(2)(2) An agreement by the customer not to assert against an assignee a claim or defense arising from a consumer credit transaction is enforceable only by an assignee not related to the assignor who acquires the customer’s contract in good faith and for value, who gives the customer notice of the assignment as provided in s. 422.409 and who, within 12 months after the mailing of the notice of assignment, has not received notice of the customer’s claim or defense. In the event that such assignee further assigns the customer’s obligation to another party not related to the original assignor, in good faith and for value, such party may enforce an agreement by the customer not to assert claims or defenses, only to the extent that that party’s assignor could do so under this section, and any notice by the customer to the original or subsequent assignees is effective as to such party. Such good faith assignee’s liability under this section is limited to: 422.407(2)(a)(a) The amount owing to the assignee with respect to the consumer credit transaction at the time the assignee received notice of a claim or defense of the customer against the assignor; plus 422.407(2)(b)(b) If the customer has obtained a judgment against the assignor and execution with bond is issued within one year after judgment and is returned unsatisfied, the amount paid by the customer to the assignee before the assignee received notice of the claim or defense of the customer, if such claim is made against the assignee within 2 years after execution is returned unsatisfied. Any judgment against the assignor, other than a default judgment, shall be binding on the assignee. 422.407(2m)(a)(a) In the event that an assignee, who is related to the assignor or who takes the assignment not in good faith or not for value, further assigns the customer’s obligation to a subsequent assignee not related to any prior assignor and who takes the assignment in good faith and for value, such subsequent assignee’s liability is limited to that provided for in sub. (2) if the subsequent assignee’s assignor at the time of the assignment to the subsequent assignee gives the notice required in s. 422.409 (2), subject to par. (b). 422.407(2m)(b)(b) The notice given under s. 422.409 (2) need not name the subsequent assignee. In such cases it shall state that payments may be made to the assignor, and shall otherwise comply with the requirements of s. 422.409 (2). 422.407(3)(3) Any assignee does not acquire a customer’s contract in good faith within the meaning of subs. (2) and (2m) if the assignee has knowledge, including knowledge from his or her course of dealing with other customers of the assignor or from the assignor or the assignee’s records, or written notice of violations of chs. 421 to 427, of conduct of the kind described in s. 426.108, or of substantial complaints by such other customers that such assignor fails or refuses to perform his or her contracts with such customers and fails to remedy their complaints. 422.407(4)(4) No term of an agreement may confer upon an assignee greater immunity from claims and defenses of the customer against the assignor than is permitted in this section. No term of an agreement purporting to waive defenses against an assignee is enforceable unless the agreement makes conspicuous reference to this section and to the customer’s right to assert such claim or defense against an assignee within 12 months after being furnished a notice of assignment. 422.407(5)(5) Except where execution with bond is returned unsatisfied under sub. (2) (b) or where the assignor is in bankruptcy, receivership or other insolvency proceedings or cannot be found within the state, any claims or defenses of the customer under this section can only be asserted as a matter of counterclaim, defense to or set-off against a claim by the assignee. 422.407(6)(6) Taking or arranging for the customer to sign an instrument in violation of this section is subject to s. 425.304. 422.407 AnnotationLegislative Council Note, 1973: Sections 39, 40 and 41 revise s. 422.407 so that it accomplishes its intended purpose, which is to enable a good faith assignee of a customer’s contract, and his good faith assignees, to enforce an agreement by the customer not to raise claims and defenses against assignees of the contract, once 12 months have passed following the initial good faith assignment.
422.407 AnnotationNew s. 422.407 (2m), created by this act, accomplishes the same result in those cases where the first assignment is made to a related assignee, who further assigns the contract to an unrelated good faith assignee. This latter arrangement is not dealt with by present s. 422.407. New (2m) also recognizes existing business patterns in that it allows the related assignee to service an account, although the contract has been further assigned to an unrelated good faith assignee. In these cases the good faith assignee receives the protection of this section, provided the customer has been given the required notice of assignment. [Bill 432-A]
422.408(1)(1) The lender in an interlocking consumer loan is subject to the claims and defenses the consumer may have against the seller or lessor in the consumer transaction for which the proceeds of the loan are used, subject to sub. (3). 422.408(2)(2) For purposes of this section, a consumer transaction pursuant to a seller credit card shall be deemed to be a consumer loan transaction if the transaction is other than a purchase or lease of goods or services from the issuer of the seller credit card, from a person related to such issuer or from others licensed or franchised to do business solely under the business or trade name or designation of such issuer. 422.408(3)(3) For purposes of this section, a consumer loan transaction is an “interlocking consumer loan” if the creditor knows or has reason to know that all or a meaningful part of the proceeds of the loan are used to pay all or part of the customer’s obligations to the seller or lessor under a consumer sale or lease, and if: 422.408(3)(a)(a) The lender is a person related to the seller or lessor; 422.408(3)(b)(b) The lender supplies to the seller or lessor, or the seller or lessor prepares, documents used to evidence the loan, other than sales slips or drafts used to evidence purchases pursuant to an open-end credit plan; 422.408(3)(c)(c) The lender directly or indirectly pays to the seller or lessor any commission, finder’s fee or other similar consideration based upon or measured by the consumer loan; 422.408(3)(d)(d) The lender has recourse to the seller or lessor for nonpayment of the consumer loan transaction through a guaranty, maintenance of a reserve account or otherwise, but this paragraph shall not apply to transactions pursuant to a credit card issued by a lender not related to the seller or lessor; 422.408(3)(e)(e) The lender has knowledge, including knowledge from the lender’s course of dealing with other customers of the seller or lessor or from the lender’s records, or written notice of substantial complaints by such other customers, that such seller or lessor fails or refuses to perform the seller’s or lessor’s contracts with them and that such merchant fails to remedy such complaints within a reasonable time; or 422.408(3)(f)(f) The loan exceeds $100, is disbursed directly to the seller or lessor and is made pursuant to a credit card to finance a purchase from a seller’s or lessor’s place of business in this state, if the seller or lessor has a direct or indirect contractual relationship with the issuer permitting the seller or lessor to honor the credit card. 422.408(4)(4) To the extent that a lender under an interlocking consumer loan is subject to claims or defenses of the customer against a merchant under this section, the lender’s liability is limited to claims or defenses arising from the consumer transaction financed by the proceeds of the loan, and may not exceed that portion of the unpaid balance of the loan at the time the lender has notice of the claim or defense, which the proceeds used to pay all or part of the customer’s obligation on which the claim is based bears to the entire amount financed of the loan, unless the customer has obtained a judgment against the merchant and execution thereon has been returned unsatisfied, in which event the lender shall in addition be liable in a similar manner for the proportionate amount paid by the customer to the lender with respect to the interlocking consumer loan before the lender received notice of the claim or defense of the customer. 422.408(5)(5) With respect to a loan which constitutes an interlocking consumer loan solely by reason of sub. (3) (f), the lender shall be liable as provided in sub. (4) only if the lender receives notice of the customer’s claim or defense within 12 months after the transaction is charged against the customer’s account, and the unpaid balance of such a loan for purposes of sub. (4) shall be determined pursuant to the method set forth in s. 422.418. 422.408(6)(6) This section shall not apply to consumer loans extended for the purpose of acquiring residential real property which are secured by a first lien mortgage or equivalent security interest on such property and on which the annual percentage rate disclosed pursuant to subch. III is less than 12 percent. 422.408 HistoryHistory: 1971 c. 239; 1991 a. 316. 422.408 AnnotationThe lender liability limits under sub. (4) do not limit the liability of lenders subject to the Home Improvement Trade Practices Code promulgated under s. 100.20. Jackson v. DeWitt, 224 Wis. 2d 877, 592 N.W.2d 262 (Ct. App. 1999), 98-0493. 422.408 AnnotationPreservation of Consumer Defenses in Interlocking Loans and Credit Card Transactions—Recent Statutes, Policies, and a Proposal. Littlefield. 1973 WLR 471.
422.409422.409 Notice of assignment. 422.409(1)(1) The customer is authorized to pay the assignor until the customer receives notification of assignment of the rights to payment pursuant to a consumer credit transaction and that payment is to be made to the assignee. A notification which does not reasonably identify the rights assigned is ineffective. If requested by the customer, the assignee must seasonably furnish reasonable proof that the assignment has been made and unless the assignee does so the customer may pay the assignor. 422.409(2)(2) The notification of assignment shall be in writing and addressed to the customer at the customer’s address as stated in the contract, shall be accompanied by a copy of the contract or shall identify the contract, describe the goods or services, state the names of the assignor and the customer, the name and address of the assignee, the number, amount and due dates or periods of payments scheduled to repay the indebtedness and, except in the case of a transaction secured by a first lien mortgage or equivalent security interest for the purpose of the acquisition of a dwelling, the total of payments. A provision in the assigned contract that the customer waives or will not assert claims or defenses against the assignee under s. 422.407 (2) shall not be effective unless the notification of assignment also contains a clear and conspicuous statement that the customer has 12 months within which to notify the assignee in writing of any complaints, claims or defenses the customer may have against the assignor and that if the customer does not give such notice, the assignee or subsequent assignees will have the right to enforce the contract free of such claims or defenses subject to chs. 421 to 427. 422.409 Cross-referenceCross-reference: See also ss. DFI-WCA 1.36 and 1.37, Wis. adm. code. 422.410422.410 Statements of compliance or performance. Statements in the form of acknowledgments, certificates of performance or otherwise, signed by the customer, to the effect that there has been compliance with any of the requirements of chs. 421 to 427 or performance by the other party or parties to the transaction shall create no presumption that the facts recited in such statements are true. 422.410 HistoryHistory: 1971 c. 239; 1979 c. 89. 422.411(1)(1) Except as provided in subs. (2) and (2m), with respect to a consumer credit transaction no term of a writing may provide for the payment by the customer of attorney fees. 422.411(2)(2) With respect to a consumer transaction in which credit is extended for the purpose of acquiring or refinancing the acquisition of residential real property, which is secured by a first lien or purchase money mortgage or equivalent security interest on such property, and on which the annual percentage rate disclosed pursuant to subch. III is 12 percent or less, the creditor may contract for the customer’s payment of reasonable attorney fees actually incurred by the creditor, but the customer shall be liable for such fees only to the extent: 422.411(2)(a)(a) Such fees are payable to a licensed attorney who is not an employee of the creditor; and 422.411(2)(b)(b) Such fees do not exceed 5 percent of the amount of the judgment entered against the customer, or $100 in the event no judgment is so entered and the dispute is settled prior to judgment. 422.411(2m)(2m) A lender licensed under s. 138.09 may contract for the customer’s payment of reasonable attorney fees actually incurred by the licensed lender to foreclose a mortgage or equivalent security interest in residential real property, but the customer is liable for attorney fees only if all of the following conditions are satisfied: 422.411(2m)(a)(a) The fees are payable to a licensed attorney who is not an employee of the licensed lender. 422.411(2m)(b)(b) The fees do not exceed 5 percent of the amount of the judgment entered against the customer, or $100 in the event a judgment is not entered and the dispute is settled before judgment. 422.411(3)(3) Taking or arranging for the customer to sign an instrument in violation of this section is subject to s. 425.304. 422.411 AnnotationLegislative Council Note, 1973: Broadens the range of residential real estate transactions in which the limited amount of attorney fees allowed by the Wisconsin consumer act can be contracted for. The amendment’s effect is to allow all first lien and purchase money creditors, and creditors refinancing a first lien or purchase money transaction, to contract for attorney fees. As the section now reads, only purchase money first mortgagees may contract for them. As amended, all such creditors will be treated in an equal manner. [Bill 432-A]
422.412422.412 Restriction on liability in consumer lease. In a consumer lease, the obligation of a customer upon expiration of the lease may not exceed the average payment allocable to a monthly period under the lease. This limitation does not apply to charges for damages to the leased property occasioned by other than normal use or for other default. 422.412 HistoryHistory: 1971 c. 239; 1997 a. 302. 422.413422.413 Limitation on default charges. 422.413(1)(1) Except as provided in sub. (2g), no term of a writing evidencing a consumer credit transaction may provide for any charges as a result of default by the customer other than reasonable expenses incurred in the disposition of collateral or goods subject to a motor vehicle consumer lease and such other charges as are specifically authorized by chs. 421 to 427 and 429. 422.413(2g)(2g) In any consumer credit transaction in which the collateral is a motor vehicle as defined in s. 340.01 (35), a trailer as defined in s. 340.01 (71), a snowmobile as defined in s. 340.01 (58a), a boat as defined in s. 30.50 (2), an aircraft as defined in s. 114.002 (3), or a mobile home or manufactured home as defined in s. 101.91, a writing evidencing the transaction may provide for the creditor’s recovery of all of the following expenses, if the expenses are reasonable and bona fide: 422.413(2g)(a)(a) Expenses of taking and holding the collateral if paid to persons not related to the creditor. 422.413(2g)(b)(b) Travel and transportation expenses of the creditor or the creditor’s employees in taking possession of the collateral. 422.413(2g)(c)1.1. If the collateral is not redeemed by the customer under s. 425.208, the greater of expenses determined under subd. 2. or of all of the following expenses of preparing the collateral for sale if paid to persons not related to the creditor: 422.413(2g)(c)1.a.a. Expenses for cleaning and restoring the appearance of the collateral, not to exceed $100. 422.413(2g)(c)1.b.b. Expenses for repair of damage to the collateral if covered by insurance, not to exceed the lesser of any deductible amount or $250. 422.413(2g)(c)1.c.c. Expenses for mechanical repairs to the collateral, not to exceed $200. 422.413(2g)(c)2.2. Expenses for any repair to the collateral which increase the selling price of the collateral, not to exceed the amount by which the selling price is increased because of the repairs, if paid to persons not related to the creditor. The selling price of the collateral before repairs shall be established by any reasonable method, at no cost to the customer. 422.413(2r)(2r) Notwithstanding s. 409.615 (1), the proceeds of any disposition of collateral referred to in sub. (2g) shall be applied in the following order to: 422.413(2r)(d)(d) The satisfaction of indebtedness secured by the security interest under which the disposition of the collateral is made. 422.413(2r)(f)(f) The satisfaction of indebtedness secured by any subordinate security interest in the collateral, subject to the restrictions set forth in s. 409.615 (1) (c) and (2). 422.414422.414 Use of multiple agreements. 422.414(1)(1) No creditor shall divide or otherwise encourage the customer or customers to become obligated at the same time on more than one consumer loan, more than one consumer credit sale, or one or more interlocking consumer loans (s. 422.408) and consumer credit sale for the purpose of obtaining a higher rate of finance charge than would otherwise be permitted under chs. 421 to 427. 422.414(2)(2) Multiple agreements which arise out of substantially the same transaction shall be presumed to be in violation of this section. 422.414 HistoryHistory: 1971 c. 239; 1979 c. 89. 422.415422.415 Changes in open-end credit terms. 422.415(1)(1) Except as provided in sub. (2), no creditor shall make any change in the terms of open-end credit plans that is adverse to the interests of the customer with respect to any outstanding balances or that imposes or alters a charge permitted under s. 422.202 (2m). For the purposes of this section, a change shall be presumed to be adverse if the result thereof is to increase the rate of the finance charge or the amount of the periodic payment due. Outstanding balances shall be determined on the assumption that all payments shall be credited first to any finance charges that may be due and then to the payment of debts in the order in which the entries to the account showing the debts were made. 422.415(2)(2) A change that is adverse to the interests of the customer with respect to outstanding balances or that imposes or alters a charge permitted under s. 422.202 (2m) may be made if any of the following conditions is met: 422.415(2)(a)(a) The change is required by legislation, regulations or administrative rules becoming effective after the date of the agreement with the customer and the creditor has mailed or delivered to the customer written notice disclosing such proposed change not less than 3 months prior to the effective date of such change or such lesser period of time as may be available before such change is required to be made. 422.415(2)(b)(b) The change is made within 3 months of March 1, 1973 or within 3 months after the repeal or expiration of any federal legislation, administrative order, rule, guideline or regulation, the purpose of which was to limit or freeze finance charges or other charges, in effect on March 1, 1973, whichever is later. 422.415(2)(c)(c) The creditor mails or otherwise delivers to the customer a written disclosure of the proposed change not less than 90 days prior to the effective date of such change.
