HB2585 - 521R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 44-286, Arizona Revised Statutes, is amended to read:

START_STATUTE44-286. Requirements and prohibitions as to retail installment contracts; secondary motor vehicle finance transaction

A. A retail installment contract shall be in writing, shall be signed by both the buyer and the seller and shall be completed as to all essential provisions prior to before the signing of the contract by the buyer. The printed portion of the contract, other than instructions for completion, shall be in at least eight‑point type. The contract shall contain in a size equal to at least ten‑point bold type both:

1. A specific statement that liability insurance coverage for bodily injury and property damage caused to others is not included, if that is the case. ; and

2. The following notice: "Notice to the buyer: 1. Do not sign this contract before you read it or if it contains any blank spaces. 2. You are entitled to an exact copy of the contract you sign."

B. The seller shall deliver to the buyer, or mail to him the buyer at his the buyer's address shown on the contract, a copy of the contract signed by the seller. Until the seller does so, a buyer who has not received delivery of the motor vehicle shall have the right to rescind his agreement and to receive a refund of all payments made and return of all goods traded in to the seller on account of or in contemplation of the contract, or if the goods cannot be returned, the value thereof. Any acknowledgment by the buyer of delivery of a copy of the contract shall be in a size equal to at least ten‑point bold type, and, if contained in the contract, shall appear directly above the buyer's signature.

C. A person may not enter into a secondary motor vehicle finance transaction for a motor vehicle that is encumbered or subject to any lien. A person may not take additional security or guaranty as a condition to entering into a secondary motor vehicle finance transaction. Any secondary motor vehicle finance transaction that is made in violation of this subsection is void as to principal and all charges. An act or practice in violation of this subsection is an unlawful practice under section 44-1522 and is subject to enforcement and penalties under chapter 10, article 7 of this title. END_STATUTE

Sec. 2. Section 44-291, Arizona Revised Statutes, is amended to read:

START_STATUTE44-291. Computation of interest; prepayment rebate; additional charges; secondary motor vehicle finance transaction; definitions

A. Except as provided in subsections G and H of this section, under a retail installment contract it is lawful to charge and receive interest not to exceed the maximum rate set by contract.

B. The finance charge may be computed either at a 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 the 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 that has been earned and unpaid late payment 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 that is the difference between the total precomputed finance charges and the charges at the contract finance charge 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 final maturity, except that the number of days shall be the same as that used in calculating the finance charge as prescribed in subsection C of this section. The amount of such that 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.

C. It is permissible to calculate a finance charge on an annual basis of twelve months of thirty days each, or on a daily basis if a day is counted as 1/360th, 1/365th, or 1/366th of a year, as the buyer 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 on the tenth day after its due date in an amount not to exceed five per cent percent of the unpaid balance of the installment.

D. In addition to the cash sale price of the vehicle, the seller may charge for any insurance premiums incurred in connection with the retail installment transaction.

E. Notwithstanding the late payment or delinquency charge provided in subsection C of this section, 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 on the tenth day after its due date in an amount of not more than five per cent percent of the unpaid balance of the installment.

F. Any sales finance company may purchase or acquire or agree to purchase or acquire from any seller any contract on such terms and conditions as may be agreed on between them. Filing of the assignment notice to the buyer of the assignment and any requirement that the holder maintain dominion over the payments or the motor vehicle if repossessed is not necessary to the validity of a written assignment of a contract as against creditors, subsequent purchasers, pledgees, mortgagees and lien claimants of the seller. Unless the buyer has notice of the assignment of his contract, payment under the contract made by the buyer to the last known holder of such contract is binding on all subsequent holders.

G. If the retail installment contract is a secondary motor vehicle finance transaction, the seller, bailor, lender or lessor shall determine the annual secondary motor vehicle finance rate and all charges relating to the sale, conditional sale, bailment or lease and repurchase of the vehicle. The seller, bailor, lender or lessor shall calculate the annual secondary motor vehicle finance rate by multiplying the monthly secondary motor vehicle finance rate by twelve. A retail installment contract that is a secondary motor vehicle finance transaction is subject to a maximum finance charge of not more than thirty‑six percent a year. For the purposes of this subsection, "finance charge" includes all interest, charges for ancillary products that are sold in connection with the secondary motor vehicle finance transaction and any other charges that are incidental to the extension of credit. the following maximum finance rates on a secondary motor vehicle finance contract in the original principal amount of:

1. Five hundred dollars or less, a monthly finance rate of seventeen per cent.

2. More than five hundred dollars but not more than two thousand five hundred dollars, a monthly finance rate of fifteen per cent.

3. More than two thousand five hundred dollars but not more than five thousand dollars, a monthly finance rate of thirteen per cent.

4. More than five thousand dollars, a monthly finance rate of ten per cent.

H. Except as the result of an accidental or bona fide error, if the licensee charges, contracts for or receives any amount in excess of the finance charges and other fees expressly permitted by this chapter, the secondary motor vehicle transaction is voidable void and the licensee has no right to collect or receive any principal, finance charges or other fees in connection with that secondary motor vehicle finance transaction. Any secondary motor vehicle finance transaction that is made by a person who is located in this state or another state and who is required to be licensed pursuant to this chapter but who is not licensed is void, and the person has no right to collect, receive or retain any principal, finance charges or other fees in connection with that secondary motor vehicle finance transaction. An act or practice that results in a secondary motor vehicle finance transaction being void under this subsection is an unlawful practice under section 44‑1522 and is subject to enforcement and penalties under chapter 10, article 7 of this title.

I. Section 44‑287, subsection B does not apply to a secondary motor vehicle finance transaction if the contract complies with the disclosure requirements prescribed in federal law. The seller shall conspicuously disclose in the contract the annual secondary motor vehicle finance rate.

J. For the purposes of 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 motor vehicle is intended by the borrower for use primarily for other than personal, family or household purposes. END_STATUTE