Chapter 425

425.103 425.103 Accrual of cause of action; “default”.

425.103(1) (1) Notwithstanding any term or agreement to the contrary, no cause of action with respect to the obligation of a customer in a consumer credit transaction shall accrue in favor of a creditor except by reason of a default, as defined in sub. (2).

425.103(2) (2) “Default”, with respect to a consumer credit transaction, means without justification under any law:

425.103(2)(a) (a) With respect to a transaction other than one pursuant to an open-end plan and except as provided in par. (am); if the interval between scheduled payments is 2 months or less, to have outstanding an amount exceeding one full payment which has remained unpaid for more than 10 days after the scheduled or deferred due dates, or the failure to pay the first payment or the last payment, within 40 days of its scheduled or deferred due date; if the interval between scheduled payments is more than 2 months, to have all or any part of one scheduled payment unpaid for more than 60 days after its scheduled or deferred due date; or, if the transaction is scheduled to be repaid in a single payment, to have all or any part of the payment unpaid for more than 40 days after its scheduled or deferred due date. For purposes of this paragraph the amount outstanding shall not include any delinquency or deferral charges and shall be computed by applying each payment first to the installment most delinquent and then to subsequent installments in the order they come due;

425.103(2)(am) (am) With respect to an installment loan not secured by a motor vehicle made by a licensee under s. 138.09 or with respect to a payday loan not secured by a motor vehicle made by a licensee under s. 138.14; to have outstanding an amount of one full payment or more which has remained unpaid for more than 10 days after the scheduled or deferred due date. For purposes of this paragraph the amount outstanding shall not include any delinquency or deferral charges and shall be computed by applying each payment first to the installment most delinquent and then to subsequent installments in the order they come due;

425.103(2)(b) (b) With respect to an open-end plan, failure to pay when due on 2 occasions within any 12-month period;

425.103(2)(bm) (bm) With respect to a motor vehicle consumer lease or a consumer credit sale of a motor vehicle, making a material false statement in the customer’s credit application that precedes the consumer credit transaction; or

425.103(2)(c) (c) To observe any other covenant of the transaction, breach of which materially impairs the condition, value or protection of or the merchant’s right in any collateral securing the transaction or goods subject to a consumer lease, or materially impairs the customer’s ability to pay amounts due under the transaction.

425.103(3) (3) A cause of action with respect to the obligation of a customer in a consumer credit transaction shall be subject to this subchapter, including the provisions relating to cure of default (ss. 425.104 and 425.105).

425.103(4) (4) A cause of action arising from a transaction which resulted in the creation of a security interest in personal property shall also be subject to the limitations provided in subch. II.

425.103 History History: 1971 c. 239; 1973 c. 3; 1975 c. 407; 1979 c. 10; 1995 a. 225; 1997 a. 302; 2005 a. 110; 2013 a. 20.

425.103 Annotation When a lender was promptly informed that a borrower had a valid disability insurance claim that would cover payments, it was an unconscionable practice to include an unpaid monthly charge that would be covered by the disability insurance in computing the unpaid balance for purposes of establishing default. Bank One Milwaukee, N.A. v. Harris, 209 Wis. 2d 412, 563 N.W.2d 543 (Ct. App. 1997), 96-0903.

425.103 Annotation Under sub. (2) (a), when payments are scheduled less than two months apart, a consumer is in default when an amount greater than one full payment remains unpaid for over ten days, not when a single payment is unpaid for more than ten days. Indianhead Motors v. Brooks, 2006 WI App 266, 297 Wis. 2d 821, 726 N.W.2d 352, 06-1002.

425.103 Annotation This section does not create a right for consumers to enforce when a merchant includes a particular provision in a loan agreement. Rather, it limits the circumstances in which a merchant can sue a customer for defaulting on a loan. Nelson v. Santander Consumer USA, Inc., 931 F. Supp. 2d 919 (2013).

425.103 Annotation Creditor’s Remedies Under Wisconsin Consumer Act. WBB Dec. 1973.

425.104 425.104 Notice of customer’s right to cure default.

425.104(1) (1) A merchant who believes that a customer is in default may give the customer written notice of the alleged default and, if applicable, of the customer’s right to cure any such default (s. 425.105).

425.104(2) (2) Any notice given under this section shall contain the name, address and telephone number of the creditor, a brief identification of the consumer credit transaction, a statement of the nature of the alleged default and a clear statement of the total payment, including an itemization of any delinquency charges, or other performance necessary to cure the alleged default, the exact date by which the amount must be paid or performance tendered and the name, address and telephone number of the person to whom any payment must be made, if other than the creditor.

425.104 History History: 1971 c. 239.

425.104 Annotation Notice need not be given if the obligation is entirely past due and fully owed, making it impossible for the customer to restore the loan to current status. Rosendale State Bank v. Schultz, 123 Wis. 2d 195, 365 N.W.2d 911 (Ct. App. 1985).

425.104 Annotation The s. 425.105 (1) prohibition of suits except when notice is given pursuant to this section imposes timing and content requirements for the notice. A notice that did not meet the timing requirements of sub. (1) and s. 425.103 (2) (a) never gave notice “pursuant to” this section. Thus, suit was barred by s. 425.105 (1). Indianhead Motors v. Brooks, 2006 WI App 266, 297 Wis. 2d 821, 726 N.W.2d 352, 06-1002.

425.104 Annotation Section 421.108 generally imposes the obligation of good faith on the performance or enforcement of duties that are defined in the Wisconsin Consumer Act. The particular duties defined in this section and s. 425.105 (1) do not necessarily fall outside the ambit of the good faith doctrine. CreditBox.com, LLC v. Weathers, 2023 WI App 37, 408 Wis. 2d 715, 993 N.W.2d 802, 22-0746.

425.104 Annotation Courts construe sub. (2) strictly, so even minor defects or omissions are enough to render a notice of right to cure invalid. Bahena v. Jefferson Capital Systems, LLC, 363 F. Supp. 3d 914 (2019).

425.104 Annotation Billing statements are not sufficient to give notice of a right to cure to an unsophisticated consumer, so they cannot qualify as right-to-cure notices under sub. (2). Bahena v. Jefferson Capital Systems, LLC, 363 F. Supp. 3d 914 (2019).

425.104 Annotation This section establishes requirements regarding what information a right-to-cure notice must contain, and it is permissive in the sense that it does not obligate merchants to send such notices whenever a customer defaults. But s. 425.105 lays out the requirements for merchants who wish to sue on a default, and s. 425.105 (1) makes providing notice a mandatory prerequisite to suit. Bahena v. Jefferson Capital Systems, LLC, 363 F. Supp. 3d 914 (2019). See also Boerner v. LVNV Funding LLC, 358 F. Supp. 3d 767 (2019).

425.105 425.105 Cure of default.

425.105(1) (1) A merchant may not accelerate the maturity of a consumer credit transaction, commence any action except as provided in s. 425.205 (6), or demand or take possession of collateral or goods subject to a consumer lease other than by accepting a voluntary surrender thereof (s. 425.204), unless the merchant believes the customer to be in default (s. 425.103), and then only upon the expiration of 15 days after a notice is given pursuant to s. 425.104 if the customer has the right to cure under this section.

425.105(2) (2) Except as provided in subs. (3) and (3m), for 15 days after such notice is given, a customer may cure a default under a consumer credit transaction by tendering the amount of all unpaid installments due at the time of the tender, without acceleration, plus any unpaid delinquency or deferral charges, and by tendering performance necessary to cure any default other than nonpayment of amounts due. The act of curing a default restores to the customer the customer’s rights under the agreement as though no default had occurred.

425.105(3) (3) A right to cure shall not exist if the following occurred twice during the preceding 12 months:

425.105(3)(a) (a) The customer was in default on the same transaction or open-end credit plan;

425.105(3)(b) (b) The creditor gave the customer notice of the right to cure such previous default in accordance with s. 425.104; and

425.105(3)(c) (c) The customer cured the previous default.

425.105(3m) (3m) A right to cure shall not exist with respect to a default specified under s. 425.103 (2) (bm).

425.105(4) (4) With respect to consumer credit transactions in which the creditor has a security interest in, and possession of, instruments or documents, as each is defined in s. 409.102 (1), which threaten to decline speedily in value, this section does not restrict the creditor’s rights to dispose of such property pursuant to subch. VI of ch. 409 and the terms of the creditor’s security agreement.

425.105 History History: 1971 c. 239; 1975 c. 407, 421; 1991 a. 316; 2001 a. 10; 2005 a. 110.

425.105 Annotation The sub. (1) prohibition of suits except when notice is given pursuant to s. 425.104 imposes timing and content requirements for the notice. A notice that did not meet the timing requirements of ss. 425.103 (2) (a) and 425.104 (1) never gave notice “pursuant to s. 425.104.” Thus, suit was barred by sub. (1). Indianhead Motors v. Brooks, 2006 WI App 266, 297 Wis. 2d 821, 726 Wis. 2d 352, 06-1002.

425.105 Annotation A creditor’s failure to send a notice of default and right to cure letter is merely a failure to comply with a procedural requirement that warrants dismissal of the creditor’s action against the debtor. The failure does not disrupt the creditor’s right to payment from the debtor. Security Finance v. Kirsch, 2019 WI 42, 386 Wis. 2d 388, 926 N.W.2d 167, 17-1408.

425.105 Annotation Section 421.108 generally imposes the obligation of good faith on the performance or enforcement of duties that are defined in the Wisconsin Consumer Act. The particular duties defined in sub. (1) and s. 425.104 do not necessarily fall outside the ambit of the good faith doctrine. CreditBox.com, LLC v. Weathers, 2023 WI App 37, 408 Wis. 2d 715, 993 N.W.2d 802, 22-0746.

425.105 Annotation The requirement that a creditor provide a notice of right to cure default is a procedural hurdle creditors must clear in order to pursue their remedies. The appropriate remedy for a creditor’s failure to comply with this procedural requirement is dismissal of the creditor’s action. Beal v. Wyndham Vacation Resorts, Inc., 956 F. Supp. 2d 962 (2013).

425.105 Annotation 12 CFR 7.4008 (d) (4) and (8), which permits banks to make loans without regard to state laws dealing with term to maturity, including circumstances under which a loan may be called due and payable, does not preempt sub. (1), which states that a creditor may not accelerate the maturity of a consumer credit transactions unless the creditor provides notice and the opportunity to cure the default. Boerner v. LVNV Funding LLC, 358 F. Supp. 3d 767 (2019).

425.105 Annotation Debts that are “fully due” are distinguished from debts that involve “installment payments,” such as credit cards with minimum payments and a maximum credit amount. A right to cure default exists for installment payments. The debt in this case was a credit card debt with minimum payments and a credit limit, and the debtor was entitled to an opportunity to cure the default before any acceleration or collection commenced. The fact that the debt changed hands did not change that. A debt collector cannot step into a better position than its assignor where the consumer’s rights are concerned. Boerner v. LVNV Funding LLC, 358 F. Supp. 3d 767 (2019).

425.105 Annotation Section 425.104 establishes requirements regarding what information a right-to-cure notice must contain, and it is permissive in the sense that it does not obligate merchants to send such notices whenever a customer defaults. But this section lays out the requirements for merchants who wish to sue on a default, and sub. (1) makes providing notice a mandatory prerequisite to suit. Bahena v. Jefferson Capital Systems, LLC, 363 F. Supp. 3d 914 (2019). See also Boerner v. LVNV Funding LLC, 358 F. Supp. 3d 767 (2019).

425.106 425.106 Exempt property.

425.106(1) (1) Except to the extent that the merchant has a valid security interest which is permitted by chs. 421 to 427 and 429 or has a lien under ch. 779 in such property, or where the transaction is for medical or legal services and there has been no finance charge actually imposed, the following property of the customer shall be exempt from levy, execution, sale, and other similar process in satisfaction of a judgment for an obligation arising from a consumer credit transaction:

425.106(1)(a) (a) Unpaid earnings to the extent provided in s. 812.34.

425.106(1)(b) (b) Clothing of the customer or his or her dependents, and the following: dining table and chairs, refrigerator, heating stove, cooking stove, radio, beds and bedding, couch and chairs, cooking utensils and kitchenware and household goods as defined in 12 CFR 227.13 (d), 12 CFR 535.1 (g) or 16 CFR 444.1 (i) consisting of furniture, appliances, one television, linens, china, crockery and personal effects including wedding rings, except works of art, electronic entertainment equipment, antiques and jewelry, to the extent a nonpossessory security interest in these household goods is prohibited under 12 CFR 227.13 (d), 12 CFR 535.2 (a) (4) or 16 CFR 444.2 (a) (4);

425.106(1)(c) (c) Real property used as the principal residence of the customer or the customer’s dependents, to the extent that the fair market value of such property, less all amounts secured by mortgages and liens outstanding against it, is $15,000 or less; and

425.106(1)(d) (d) Earnings or other assets of the customer which are required to be paid by the customer as restitution under s. 973.20.

425.106(2) (2) With respect to process against marital property in satisfaction of a judgment for an obligation described under s. 766.55 (2) (b) arising from a consumer credit transaction, each spouse is entitled to and may claim the exemptions under sub. (1). Each spouse is entitled to one exemption under sub. (1) (c). That exemption is limited to the specified maximum dollar amount, which may be combined with the other spouse’s exemption in the same property or applied to different property included under the same exemption.

425.106(3) (3) Nothing in this section shall be construed to displace other provisions of law which afford additional or greater protection to the customer.

425.106(4) (4) An order or process in violation of this section is void.

425.106 History History: 1971 c. 239; 1973 c. 2, 3; 1979 c. 32 s. 92 (9); 1979 c. 89, 177, 221; 1983 a. 36; 1985 a. 37, 256; 1987 a. 398; 1991 a. 316; 1993 a. 80; 1995 a. 329.

425.106 Note NOTE: As to sub. (2), see notes in 1985 Wis. Act 37, marital property trailer bill.

425.107 425.107 Unconscionability.

425.107(1) (1) With respect to a consumer credit transaction, if the court as a matter of law finds that any aspect of the transaction, any conduct directed against the customer by a party to the transaction, or any result of the transaction is unconscionable, the court shall, in addition to the remedy and penalty authorized in sub. (5), either refuse to enforce the transaction against the customer, or so limit the application of any unconscionable aspect or conduct to avoid any unconscionable result.

425.107(2) (2) Specific practices forbidden by the administrator in rules promulgated pursuant to s. 426.108 shall be presumed to be unconscionable.

425.107(3) (3) Without limiting the scope of sub. (1), the court may consider, among other things, the following as pertinent to the issue of unconscionability:

425.107(3)(a) (a) That the practice unfairly takes advantage of the lack of knowledge, ability, experience or capacity of customers;

425.107(3)(b) (b) That those engaging in the practice know of the inability of customers to receive benefits properly anticipated from the goods or services involved;

425.107(3)(c) (c) That there exists a gross disparity between the price of goods or services and their value as measured by the price at which similar goods or services are readily obtainable by other customers, or by other tests of true value;

425.107(3)(d) (d) That the practice may enable merchants to take advantage of the inability of customers reasonably to protect their interests by reason of physical or mental infirmities, illiteracy or inability to understand the language of the agreement, ignorance or lack of education or similar factors;

425.107(3)(e) (e) That the terms of the transaction require customers to waive legal rights;

425.107(3)(f) (f) That the terms of the transaction require customers to unreasonably jeopardize money or property beyond the money or property immediately at issue in the transaction;

425.107(3)(g) (g) That the natural effect of the practice would reasonably cause or aid in causing customers to misunderstand the true nature of the transaction or their rights and duties thereunder;

425.107(3)(h) (h) That the writing purporting to evidence the obligation of the customer in the transaction contains terms or provisions or authorizes practices prohibited by law; and

425.107(3)(i) (i) Definitions of unconscionability in statutes, regulations, rulings and decisions of legislative, administrative or judicial bodies.

425.107(4) (4) Any charge or practice expressly permitted by chs. 421 to 427 and 429 is not in itself unconscionable but even though a practice or charge is authorized by chs. 421 to 427 and 429, the totality of a creditor’s conduct may show that such practice or charge is part of an unconscionable course of conduct.

425.107(5) (5) In addition to the protections afforded in sub. (1), the customer shall be entitled upon a finding of unconscionability to recover from the creditor or the person responsible for the unconscionable conduct a remedy and penalty in accordance with s. 425.303.

425.107 History History: 1971 c. 239; 1979 c. 89; 1995 a. 329.

425.107 Annotation When a lender was promptly informed that a borrower had a valid disability insurance claim that would cover payments, it was an unconscionable practice to include an unpaid monthly charge that would be covered by the disability insurance in computing the unpaid balance for purposes of establishing default. Bank One Milwaukee, N.A. v. Harris, 209 Wis. 2d 412, 563 N.W.2d 543 (Ct. App. 1997), 96-0903.

425.107 Annotation The scope language of s. 425.102 bars a customer from bringing a claim of unconscionability under this section except in response to “actions or other proceedings brought by a creditor.” Discussing whether a nonjudicial repossession pursuant to s. 425.206 (1) (d) is such an action or other proceeding. Duncan v. Asset Recovery Specialists, Inc., 2022 WI 1, 400 Wis. 2d 1, 968 N.W.2d 661, 19-1365.

425.107 Annotation When a creditor files a lawsuit against a debtor to enforce a loan agreement, that triggers the potential for an unconscionability counterclaim. The fact that the creditor moves for voluntary dismissal of its claim before the debtor brings the unconscionability counterclaim does not prevent the debtor from pursuing it. Section 425.102 does not require dismissal of the counterclaim. CreditBox.com, LLC v. Weathers, 2023 WI App 37, 408 Wis. 2d 715, 993 N.W.2d 802, 22-0746.

425.107 Annotation This section provides a defense to an action brought by a creditor and does not constitute an affirmative claim for relief. Gable v. Universal Acceptance Corp. (WI), 338 F. Supp. 3d 943 (2018). But see CreditBox.com, LLC v. Weathers, 2023 WI App 37, 408 Wis. 2d 715, 993 N.W.2d 802, 22-0746.

425.108 425.108 Extortionate extensions of credit.

425.108(1) (1) If it is the understanding of the creditor and the customer during any time that an extension of credit is outstanding, that delay in making repayment could result in the use of violence to cause harm to the person or property of any person, the extension of credit shall be unenforceable in accordance with s. 425.305 and the customer shall additionally recover triple the penalty provided in s. 425.304 (1).

425.108(2) (2) If it is shown that an extension of credit was made at an annual rate exceeding that permitted by or referred to in s. 422.201 on maximum charges and that the creditor had a reputation for the use or threat of use of violence to cause harm to the person or property of any person to collect extensions of credit or to punish the nonrepayment thereof, it shall be presumed that the extension of credit was a violation under chs. 421 to 427 under sub. (1).

425.108 History History: 1971 c. 239; 1979 c. 89.

425.109 425.109 Pleadings.

425.109(1) (1) A complaint by a merchant to enforce any cause of action arising from a consumer credit transaction shall include all of the following:

425.109(1)(a) (a) An identification of the consumer credit transaction.

425.109(1)(b) (b) A description of the collateral or leased goods, if any, which the merchant seeks to recover or has recovered.

425.109(1)(c) (c) A specification of the facts constituting the alleged default by the customer.

425.109(1)(d) (d)

425.109(1)(d)1. 1. If the consumer credit transaction is pursuant to an open-end credit plan, the actual or estimated amount of U.S. dollars or of a named foreign currency that the merchant alleges he or she is entitled to recover and the figures necessary for computation of the amount alleged to be due to the merchant on a date certain after the customer’s default. Figures necessary for computation shall mean the amount reflected on a billing statement addressed to the customer and a breakdown of all charges, interest, and payments, including any amount received from the sale of any collateral, occurring after this date certain. This paragraph does not require a specific itemization, but the breakdown shall identify separately the amount due on a date certain, the total of all charges occurring after this date certain, the total of all interest occurring after this date certain, and the total of all payments occurring after this date certain.

425.109(1)(d)2. 2. If the consumer credit transaction is other than one pursuant to an open-end credit plan, the actual or estimated amount of U.S. dollars or of a named foreign currency alleged to be due to the merchant on a date certain after the customer’s default, and a breakdown of all charges, interest, and payments, including any amount received from the sale of any collateral, occurring after this date certain. This paragraph does not require a specific itemization, but the breakdown shall identify separately the amount due on a date certain, the total of all charges occurring after this date certain, the total of all interest occurring after this date certain, and the total of all payments occurring after this date certain.

425.109(1)(e) (e) Except in an action to recover goods subject to a consumer lease, a statement that the customer has the right to redeem any collateral as provided in s. 425.208 (1) (intro.) and the actual or estimated amount of U.S. dollars or of a named foreign currency required for redemption, itemized in accordance with s. 425.208 (1) (a) to (d).

425.109(1)(f) (f) Except in an action to recover goods subject to a consumer lease, the estimated amount of U.S. dollars or of a named foreign currency of any deficiency claim which may be available to the merchant following the disposition of any collateral recovered subject to the limitations of s. 425.209 or which the merchant seeks to recover and which the merchant intends to assert subject to the limitations of s. 425.210 if the customer fails to redeem the collateral.

425.109(1)(g) (g) If the customer still has the right to cure a default under s. 425.105 pursuant to a notice given under s. 425.104, the total payment or other performance necessary to cure the alleged default and the exact date by which it must be made.

425.109(1)(h) (h) Subject to sub. (2) and s. 425.205 (4), an accurate copy of the writings, if any, evidencing the transaction, except that with respect to claims arising under open-end credit plans, a statement that the merchant will submit accurate copies of the writings evidencing the customer’s obligation to the court and the customer upon receipt of the customer’s written request therefor on or before the return date or the date on which the customer’s answer is due.