422.202 Additional charges.

(1) In addition to the finance charge permitted by this subchapter, a merchant may bargain for and receive any of the following additional charges in connection with a consumer credit transaction:

(a) Official fees and taxes.

(b) Charges or premiums for insurance against loss of or damage to property in which the creditor takes a security interest or to property leased under a motor vehicle consumer lease or against liability arising out of the ownership or use of property in which the creditor takes a security interest or of property leased under a motor vehicle consumer lease, if all of the following conditions are met:

1. A clear, conspicuous and specific statement in writing is furnished by the creditor to the customer setting forth the cost and term of the insurance if obtained from or through the merchant and stating that the customer may choose the person through which the insurance is to be obtained.

2. The creditor mails or delivers to the customer a notice of the customer's right to cancel the insurance obtained from or through the merchant in accordance with s. 424.304.

(c) Charges in real property transactions as provided in sub. (2).

(d) With respect to a consumer credit transaction which is other than one pursuant to an open-end credit plan and which is entered into on or after May 17, 1988, a charge not to exceed $15 for each check presented for payment to a creditor which is returned unsatisfied because the drawer does not have an account with the drawee, does not have sufficient funds in his or her account or does not have sufficient credit with the drawee.

(e) With respect to a motor vehicle consumer lease, any reasonable fee or charge that is conspicuously disclosed in writing to the prospective lessee before execution of the motor vehicle consumer lease, is agreed upon by the lessor and lessee and is not prohibited by chs. 421 to 427 and 429.

(2) With respect to a consumer credit transaction which involves a manufactured home transaction as defined in s. 138.056 (1) (bg) or the extension of credit secured by an interest in real property, the parties may agree to the payment by the customer of the following charges in addition to the finance charge, if they will be paid to persons not related to the merchant, are reasonable in amount, bona fide and not for the purpose of circumvention or evasion of this subchapter:

(a) Fees or premiums for title examination, title insurance or similar purpose;

(b) Fees for preparation of a deed, settlement statement or other documents;

(c) Fees for notarizing deeds and other documents;

(d) Appraisal fees; and

(e) Survey costs.

(2m) With respect to an open-end credit plan, regardless of when the plan was entered into:

(a) A creditor may charge, collect and receive other fees and charges, in addition to the finance charge authorized under s. 422.201, that are agreed upon by the creditor and the customer. These other fees and charges may include periodic membership fees, cash advance fees, charges for exceeding a designated credit limit, charges for late payments, charges for providing copies of documents and charges for the return of a dishonored check or other payment instrument.

(b) For purposes of 12 USC 85, 1463 (g), 1785 and 1831d, both the finance charge under s. 422.201 and charges permitted under par. (a) are interest and may be charged, collected and received as interest by a creditor.

(2s)

(a) A creditor may contract for and collect from the borrower, or include in the amount financed, any of the following:

1. Charges or premiums for consumer credit insurance, as defined in s. 424.201, consisting of consumer credit life insurance, credit accident and sickness insurance and credit unemployment insurance against loss of income of debtors resulting from either labor disputes or involuntary unemployment if all of the following conditions are met:

a. The insurance coverage is not required by the creditor and that fact is clearly and conspicuously disclosed in writing to the customer.

b. Any customer desiring the insurance coverage gives a specific, separately signed, affirmative written indication of the desire after receiving written disclosure of the cost and term of the insurance.

2. Charges or premiums for insurance other than insurance described in subds. 1., 3. and 4., subs. (1) (b) and (2) (a) and s. 421.301 (20) (f) if all of the following conditions are met:

a. The insurance coverage is not required by the creditor and that fact is clearly and conspicuously disclosed in writing to the customer.

b. Any customer desiring the insurance coverage gives a specific, separately signed, affirmative written indication of the desire after receiving written disclosure of the cost and term of the insurance.

c. The creditor mails or delivers to the customer a notice of the customer's right to cancel the insurance in accordance with s. 424.401.

3. Charges or fees for future service contracts or motor club service contracts if all of the following conditions are met:

a. Membership is not required as a condition of the extension of credit.

b. The term of the membership does not exceed one year or the creditor mails or delivers to the customer a notice of the customer's right to cancel the contract or membership in accordance with s. 424.401.

4. Charges or fees for mechanical breakdown, extended warranty or maintenance service contracts or insurance if purchase of the contract or insurance is not required as a condition of the extension of credit.

5. Other charges not constituting finance charges as approved by written opinion of the administrator or not disapproved under s. 426.104 (4) (b).

(b)

1. Notwithstanding par. (a), in a consumer credit transaction other than one pursuant to an open-end credit plan, a creditor may sell and finance the products described in par. (a) 2., 3. and 4. without regard to the limitations contained in those subdivisions or in s. 424.301 (1) to (3) if the transaction is solely to purchase the products described in par. (a) 2., 3. and 4. and if the transaction is not evidenced by a credit contract that is signed by the customer on the same day as a contract evidencing any other consumer credit transaction with the creditor.

2. Notwithstanding par. (a), in a consumer credit transaction pursuant to an open-end credit plan, a creditor may sell and finance the products described in par. (a) 2., 3. and 4. without regard to the limitations contained in those subdivisions or in s. 424.301 if the transaction is solely to purchase the products described in par. (a) 2., 3. and 4. and if the transaction is not evidenced by a credit document that is signed by the customer on the same day as the document evidencing consummation of the open-end credit plan.

(3)

(a) For purposes of chs. 421 to 427, any charge not authorized by this section shall be considered part of the finance charge. An additional charge authorized by this section but assessed in a manner inconsistent with this section is not part of the finance charge unless, except with respect to the charges under sub. (1), the creditor requires the charge as an incident to or a condition of the extension of credit.

(b) Except as otherwise provided in chs. 421 to 427, assessing an additional charge which is not authorized by this section and which is not included by the creditor as part of the finance charge, or which is authorized by this section but assessed in a manner inconsistent with this section, is a violation subject to s. 425.304.

(c) A merchant may not, in the same transaction, be subject to the penalty in s. 138.09 (9) (b), 218.0161 or 425.305 and the penalty in s. 425.304, based on the assessment of the same additional charges.

History: 1971 c. 239; 1973 c. 3; 1975 c. 362, 371, 372, 375, 407, 422; 1979 c. 89; 1981 c. 45, 314; 1983 a. 389; 1985 a. 29, 256; 1987 a. 399; 1993 a. 71, 150; 1995 a. 328, 329; 1997 a. 252; 1999 a. 31; 2007 a. 11.

Legislative Council Note, 1973: [As to sub. (1) (c)] Allows creditors to treat so-called “mortgage redemption insurance" as an additional charge. This is insurance written on long-term obligations, such as mortgages, which would not qualify as credit insurance, as that term is defined, because of its longer term. The effect of this amendment is to allow premiums for such insurance to be treated as additional charges, similar to insurance defined as “credit insurance", as long as the amount and term does not exceed the outstanding balance and term of the indebtedness.

[As to sub. (2) (b) (intro.)] Broadens the range of real estate transactions in which specified additional charges may be made. As the section reads prior to the above amendment, only the creditor holding a first mortgage or equivalent security interest may pass on these incidental charges, which include such items as title examination or title insurance fees, and fees for deed preparation, notarizing documents and appraisals to the extent that they are customarily borne by the customer in a cash transaction. The problem which arises from this approach is that these costs are incurred by other creditors in real estate transactions, but these creditors are unable to treat them in the same manner as the first mortgage; i.e., pass them on to the customer. The change made by this section is designed to insure equal treatment of purchase money creditors, regardless of the priority of their security interest, creditors refinancing a first mortgage and creditors financing substantial improvements of real property. [Bill 432-A]