44-6002

44-6002. Retail installment contracts; retail
charge account agreements; definitions

A. Under a retail installment contract, other than a retail charge account
agreement, a finance charge not to exceed a rate set by contract may be charged and
received. The finance charge may be computed either at the single annual percentage rate
using the actuarial method or it may be precomputed on the assumption that all payments
will be made in the amount and on the dates scheduled. If the finance charge is
precomputed, the fact that payments are made either before or after the date due does not
affect the amount of finance charge which the seller or holder may charge or receive. If
such precomputed contract balance is prepaid in full by cash, a new loan, refinancing or
otherwise, the seller or holder shall charge only for the finance charge which has been
earned and unpaid late or delinquency charges as of the date of prepayment and the buyer
shall receive a rebate of that portion of the precomputed finance charge which is the
difference between the total precomputed finance charges and the charges at the contract
finance charge rate computed on the unpaid principal balance based on the number of days
or months to maturity based on either a thirty day month - three hundred sixty day year
or daily three hundred sixty-five or three hundred sixty-six day year on the number of
days remaining to maturity. The amount of such rebate shall not be computed pursuant to
the method commonly known as the "rule of 78's". To simplify the calculation of earned
finance charge, it is permissible to assume that all payments were made as originally
scheduled or as otherwise mutually agreed.

B. It is permissible to calculate the finance charge on an annual basis of twelve
months of thirty days each, or on a daily basis if a day is counted either as 1/360th,
1/365th, or 1/366th of a year, as the purchaser and seller or holder may agree by
writing. The seller or holder may also charge a late payment or delinquency charge, in
addition to all finance charges permitted, on each installment not paid in full upon the
tenth day after its due date in an amount not to exceed five dollars on an installment of
twenty-five dollars or less and ten dollars on an installment greater than twenty-five
dollars.

C. A retail installment contract which otherwise conforms to the requirements of
this chapter may contain provisions which relate to additional goods and services
authorizing any of the following:

1. The seller may add subsequent purchases made by the buyer to the contract.

2. The total price of the goods or services covered by the contract may be
increased by the price of such additional goods or services.

3. The seller may increase proportionately all finance charges and installment
payments.

4. All terms and conditions of the contract may apply equally to such additional
goods or services.

5. The contract may provide for a consolidation of subsequent purchases with one or
more of the previous contracts or may provide for a series of sales transactions made
pursuant to an agreement providing for the addition of the principal balance, plus the
finance charge for the current sale, to an existing balance.

6. The goods purchased under the previous contract or contracts may be security for
the goods purchased under the subsequent contract, but only until such time as the total
of payments under the previous contract or contracts is fully paid.

D. Under a retail charge account agreement a rate of finance charge not to exceed
the maximum rate set by contract may be charged and received on an amount not in excess
of the greatest of any of the following:

1. The average daily balance in the account in the billing cycle period.

2. The balance in the account at the beginning of the billing cycle period, after
first deducting payments and credits received during the billing cycle period.

3. The median amount within a ten dollar range in which the balance as computed
under paragraph 1 or 2 of this subsection falls if the seller applies the same finance
charge to all such balances within such range.

E. As used in this section, month need not be a calendar month but may, instead, be
a regular billing cycle period. If the finance charge for the billing cycle period is
less than fifty cents, a minimum finance charge not in excess of fifty cents may be
charged for the period.

F. The seller or holder may also charge a late payment or delinquency charge, in
addition to all finance charges permitted, on each installment not paid in full upon the
tenth day after its due date in an amount not to exceed five dollars on an installment of
twenty-five dollars or less and ten dollars on an installment greater than twenty-five
dollars. As an alternative, if a seller or holder does not charge, collect or receive a
finance charge as permitted in this chapter, he is entitled to charge, collect and
receive a delinquency charge determined by applying any rate of interest to the
delinquent balance if such interest charge is provided for in the retail charge account
agreement.

G. Notwithstanding the late payment or delinquency charge provided in subsection B
or F, in a commercial transaction, the seller or holder may charge a late payment or
delinquency charge, in addition to all finance charges permitted, on each installment not
paid in full upon the tenth day after its due date in an amount of not more than five per
cent of the unpaid balance of the installment.

H. A seller or holder who receives a check, draft, negotiable order of withdrawal
or similar instrument which is drawn on a bank or other depository institution and which
is offered by a buyer in payment of an installment may, if the instrument is not paid or
is dishonored by the institution, charge and collect from the buyer a bad check charge in
the amount of either ten dollars or the actual charge made to the seller or holder by the
depository institution for the return of the unpaid or dishonored instrument, whichever
is greater.

I. A retail charge account agreement may also provide for the payment of court
costs and for reasonable attorneys' fees if it is referred for collection to an attorney
other than a salaried employee of the holder of the retail charge account agreement.

J. In this section:

1. "Actuarial method" means the method of allocating payments made on a debt
between the unpaid principal balance and the finance charge pursuant to which a payment
is applied first to the finance charge due and any remainder is subtracted from the
unpaid principal balance.

2. "Commercial transaction" means a transaction in which the goods or services are
intended by the borrower for use primarily for other than personal, family or household
purposes.