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.