Legislative 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.
New 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]
Interlocking loans. 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)
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.
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:
The lender is a person related to the seller or lessor;
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;
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;
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;
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
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.
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.
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
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.
History: 1971 c. 239
; 1991 a. 316
The 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
Preservation of Consumer Defenses in Interlocking Loans and Credit Card Transactions—Recent Statutes, Policies, and a Proposal. Littlefield. 1973 WLR 471.
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.
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
History: 1971 c. 239
; 1973 c. 2
; 1991 a. 316
See also ss. DFI-WCA 1.36
, Wis. adm. code.
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
or performance by the other party or parties to the transaction shall create no presumption that the facts recited in such statements are true.
History: 1971 c. 239
; 1979 c. 89
Except as provided in subs. (2)
, with respect to a consumer credit transaction no term of a writing may provide for the payment by the customer of attorney fees.
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:
Such fees are payable to a licensed attorney who is not an employee of the creditor; and
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.
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:
The fees are payable to a licensed attorney who is not an employee of the licensed lender.
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.
Taking or arranging for the customer to sign an instrument in violation of this section is subject to s. 425.304
Legislative 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]
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.
History: 1971 c. 239
; 1997 a. 302
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
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:
Expenses of taking and holding the collateral if paid to persons not related to the creditor.
Travel and transportation expenses of the creditor or the creditor's employees in taking possession of the collateral.
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:
Expenses for cleaning and restoring the appearance of the collateral, not to exceed $100.
Expenses for repair of damage to the collateral if covered by insurance, not to exceed the lesser of any deductible amount or $250.
Expenses for mechanical repairs to the collateral, not to exceed $200.
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.
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:
The satisfaction of indebtedness secured by the security interest under which the disposition of the collateral is made.
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)
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
Multiple agreements which arise out of substantially the same transaction shall be presumed to be in violation of this section.
History: 1971 c. 239
; 1979 c. 89
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.
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:
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.
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.
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.
No term of a writing executed by the customer shall constitute authorization for a creditor to unilaterally make changes in the terms of the credit plan, which are otherwise prohibited by this section.
Notice of termination of liability. 422.4155(1)(1)
In an open-end credit plan in which more than one person may be obligated for extensions of credit, any person may terminate his or her liability for future extensions of credit under the plan by giving written notice to the creditor of the person's termination of liability. The person's liability for future extensions of credit under the plan shall continue as to loans extended to, or purchases made by, any other person under the plan for 15 business days after the creditor's receipt of the termination notice. The terminating person's liability may not exceed the greater of the requested and contracted for credit limit under the plan or the balance outstanding under the plan on the receipt of the termination notice plus $500.
Notwithstanding sub. (1)
, a person remains liable for loans extended to, or purchases made by, the person after giving the termination notice.
History: 1981 c. 45
Referral transactions prohibited. 422.416(1)(1)
With respect to a consumer transaction no merchant shall give or offer to give a rebate or discount or otherwise pay or offer to pay value to the customer as an inducement for a consumer transaction in consideration of the customer's giving to the creditor the names of prospective customers, or otherwise aiding the creditor in entering into a transaction with another customer or, without being limited by any of the foregoing, performing any other act or the occurrence of any other event, if the earning of the rebate, discount or other value is contingent upon the occurrence of an event subsequent to the time the customer enters into the agreement.
History: 1971 c. 239
; 1991 a. 316
Restrictions on security interests. 422.417(1)(1)
With respect to a consumer credit sale a seller may take a security interest only in:
Goods upon which the property sold is installed or to which it is annexed, or goods upon which the services sold are performed, if the obligation secured is $500 or more;
Real property to which the property sold is affixed, or which is maintained, repaired or improved as a result of the sale of the property or services, if the obligation secured is $1,000 or more; and
Goods of the consumer which were the subject of a prior transaction with the seller which is consolidated (s. 422.206
) with the consumer credit sale, or if the consumer credit sale is made pursuant to an open-end credit plan, goods previously purchased by the consumer pursuant to the plan, subject however to s. 422.418