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
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
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
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
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
Except to the extent that the merchant has a valid security interest which is permitted by chs. 421
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:
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
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
Earnings or other assets of the customer which are required to be paid by the customer as restitution under s. 973.20
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.
Nothing in this section shall be construed to displace other provisions of law which afford additional or greater protection to the customer.
An order or process in violation of this section is void.
As to sub. (2), see notes in 1985 Wis. Act 37
, marital property trailer bill.
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.
Specific practices forbidden by the administrator in rules promulgated pursuant to s. 426.108
shall be presumed to be unconscionable.
Without limiting the scope of sub. (1)
, the court may consider, among other things, the following as pertinent to the issue of unconscionability:
That the practice unfairly takes advantage of the lack of knowledge, ability, experience or capacity of customers;
That those engaging in the practice know of the inability of customers to receive benefits properly anticipated from the goods or services involved;
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;
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;
That the terms of the transaction require customers to waive legal rights;
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;
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;
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
Definitions of unconscionability in statutes, regulations, rulings and decisions of legislative, administrative or judicial bodies.
Any charge or practice expressly permitted by chs. 421
is not in itself unconscionable but even though a practice or charge is authorized by chs. 421
, the totality of a creditor's conduct may show that such practice or charge is part of an unconscionable course of conduct.
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
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
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
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)
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
under sub. (1)
History: 1971 c. 239
; 1979 c. 89
A complaint by a merchant to enforce any cause of action arising from a consumer credit transaction shall include all of the following:
An identification of the consumer credit transaction.
A description of the collateral or leased goods, if any, which the merchant seeks to recover or has recovered.
A specification of the facts constituting the alleged default by the customer.
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.
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.
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)
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.
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.
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.
Upon the written request of the customer under sub. (1) (h)
, the merchant shall submit accurate copies to the court and the customer of writings evidencing the customer's obligation pursuant to an open-end credit plan upon which the merchant's claim is made and default judgment may not be entered for the merchant unless the merchant does so. The writings requirement under this subsection is satisfied if the merchant provides the customer with a copy of the billing statement referenced in sub. (1) (d) 1.
addressed to the customer reflecting the total outstanding balance on the customer's account at the time this billing statement was issued. If this billing statement is attached to the complaint, then the statement under sub. (1) (h)
is not required to be included in the complaint.
A default judgment may not be entered upon a complaint which fails to comply with this section.
For purposes of subchs. III
, a complaint that fails to comply with this section does not constitute a violation of chs. 421
, and shall not give rise to recovery of attorney fees under s. 425.308
, unless the customer establishes by a preponderance of the evidence that the failure to comply was willful or intentional.
A stated amount owed as of a specific date with a per diem interest figure is not a sufficient statement of “the figures necessary for computation of the amount" as required by sub. (1) (d). A complaint is not sufficient under this section because it meets the general rules of notice pleading. Household Finance Corp. v. Kohl, 173 Wis. 2d 798
, 496 N.W.2d 708
(Ct. App. 1993). See also Bank One v. Ofojebe, 2005 WI App 151
, 284 Wis. 2d 510
, 702 N.W.2d 456
A company that purchased an overdue credit card account and brought an action to collect the amount due on it was not a “creditor" within the meaning of s. 421.301 (16) and not subject to the pleading requirements of sub. (1). Rsidue, LLC v. Michaud, 2006 WI App 164
, 295 Wis. 2d 585
, 721 N.W.2d 718
Even if there was a failure to comply with the pleading requirements of this section, such a failure cannot deprive a small claims court of subject matter jurisdiction and cannot render a default judgment void. Mercado v. GE Money Bank, 2009 WI App 73
, 318 Wis. 2d 216
, 768 N.W.2d 53
No discharge from employment for garnishment. 425.110(1)(1)
No employer shall discharge an employee because a merchant has subjected or attempted to subject unpaid earnings of the employee to garnishment or like proceedings directed to the employer for the purpose of paying a judgment arising from a consumer credit transaction.
If an employer violates this section, an employee shall recover back wages and be reinstated, if the employee files an action for such relief within 90 days of the employee's discharge.
History: 1971 c. 239
Levy before judgment. 425.111(1)(1)
Prior to entry of judgment in an action subject to this subchapter, no process, other than a restraining order to protect collateral (s. 425.207
), shall issue with respect to amounts that are owing or are claimed to be owing or may be owing to the customer by any 3rd person, whether by way of attachment, garnishment or other process.
With respect to property of the customer other than that described in sub. (1)
, process may issue in accordance with ch. 811
to establish a lien, except that such process shall not be effective to take, or to divest the customer of possession of, the property until final judgment is entered.
If the court finds that the creditor probably will recover on the action, and that the customer is acting, or is about to act, with respect to property of the customer upon which a lien has been established under sub. (2)
, in a manner which substantially impairs the creditor's prospects for satisfying the judgment against such property (s. 811.03
), the court may issue an order restraining the customer from so acting with respect to that property until final judgment is entered.
History: 1971 c. 239
; 1973 c. 2
; Sup. Ct. Order, 67 Wis. 2d 585, 776 (1975).
Legislative Council Note, 1973: Clarifies applicability of this subsection. Section 425.111 (1) refers to property of the customer subject to garnishment, and prescribes limitations on creditors' actions in relation to it. Sub. (2) refers to other property of the customer; however, the language struck by this amendment appears to make sub. (2) refer back to the same property dealt with by sub. (1), so it is deleted. [Bill 355-A]
Stay of execution.
At the time of or at any time after the entry of a judgment in favor of a creditor against a customer in an action arising from a consumer transaction, the court, for cause and upon motion of a party or on its own motion, may stay enforcement of the judgment by order upon just and equitable conditions, and continue, modify or revoke the order as the interests of justice may require.
History: 1971 c. 239
No merchant shall cause or permit a warrant against the person of a customer to issue under ch. 816
with respect to a claim arising from a consumer credit transaction. Any process issued in violation of this section is void.
History: 1971 c. 239
; Sup. Ct. Order, 67 Wis. 2d 585, 776 (1975).
See also s. DFI-WCA 1.66
, Wis. adm. code.
If this section were to be interpreted to remove a court's power to issue a body attachment for one who chooses to ignore its orders, the interpretation would cause the statute to be unconstitutional as a violation of the principle of separation of powers. Smith v. Burns, 65 Wis. 2d 638
, 223 N.W.2d 562
ENFORCEMENT OF SECURITY INTERESTS IN COLLATERAL
This subchapter applies to the enforcement by a creditor of security interests in collateral.
History: 1971 c. 239
For purposes of this chapter:
“Collateral" means goods subject to a security interest in favor of a merchant which secures a customer's obligations under a consumer credit transaction.
Enforcement of merchant's rights in collateral and leased goods. 425.203(1)(1)
At any time after default (s. 425.103
) and the expiration of the period for cure of default (s. 425.105
), if applicable, a merchant may commence an action to recover collateral or goods subject to a consumer lease pursuant to s. 425.205
, or reduce the claim to a judgment by any available judicial procedure.
In any action for a judgment under sub. (1)
other than an action pursuant to s. 425.205
, the judgment may provide for the right to possession of the collateral or leased goods by the merchant and for a deficiency, if the merchant would not be precluded from a deficiency judgment under s. 425.209
had the merchant initially proceeded against the collateral and if the judgment includes a finding that the merchant has the right to possession of any collateral securing the consumer credit transaction or goods subject to a consumer lease. Upon determining such judgment under this subsection the merchant shall have the right to:
Have execution issue to require the sheriff in the county where the collateral or leased goods may be to take the same from the defendant and deliver it to the plaintiff; or
Immediately exercise the right to nonjudicial recovery of the collateral or leased goods, subject to s. 425.206