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REFERENCE TITLE: motor vehicle title loans; prohibition |
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State of Arizona House of Representatives Fifty-fourth Legislature First Regular Session 2019
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HB 2214 |
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Introduced by Representatives Terán: Blanc, Gabaldón, Jermaine, Longdon, Rodriguez, Salman, Sierra
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AN ACT
amending sections 44‑281, 44‑286 and 44‑291, Arizona Revised Statutes; relating to motor vehicle title loans.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 44-281, Arizona Revised Statutes, is amended to read:
44-281. Definitions
In this article, unless the context otherwise requires:
1. "Administrator" means the superintendent of financial institutions.
2. "Cash sale price" means the price stated in a retail installment contract for which the seller would have sold to the buyer, and the buyer would have bought from the seller, the motor vehicle which that is the subject matter of the retail installment contract, if such sale had been a sale for cash instead of a retail installment transaction. The cash sale price may include charges for accessories and their installation and for delivery, and servicing, repairing or improving the motor vehicle, and for charges for other costs that are necessary or incidental to the transaction and that the seller furnishes or agrees to pay on behalf of the buyer, including taxes, assessor's fees, license fees and fees for filing, recording or otherwise perfecting or releasing a reserved title or lien, and may include a reasonable charge for the seller's services.
3. "Finance charge" means the amount agreed upon on between the buyer and the seller, as limited herein, which in determining the cost of the motor vehicle is added to the aggregate of the following: The cash sale price and the amount, if any, included for insurance and other benefits where a separate cost is assigned thereto.
4. "Holder" of a retail installment contract means the retail seller of the motor vehicle under or subject to the contract or, if the contract is purchased by a sales finance company or other assignee, the sales finance company or other assignee.
5. "Motor vehicle" means any self‑propelled device in or by which any person or property is or may be transported or drawn on a public highway, except:
(a) Devices that move upon on or are guided by a track or travel through the air.
(b) The following, if not designed primarily for highway transportation, but which that may incidentally be operated on a public highway:
(i) Tractors.
(ii) Buses.
(iii) Trucks.
(iv) Power shovels.
(v) Road machinery.
(vi) Agricultural machinery.
6. "Person" means an individual, partnership, association, trust, corporation, or other legal entity.
7. "Retail buyer" or "buyer" means a person who buys a motor vehicle from a retail seller, not for the purpose of resale, and who executes a retail installment contract in connection therewith.
8. "Retail installment contract" or "contract":
(a) Means an agreement, entered into in this state, pursuant to which the title to or a lien upon on the motor vehicle, which is the subject matter of a retail installment transaction, is retained or taken by a retail seller from a retail buyer as security for the buyer's obligation.
(b) Includes:
(i) a conditional sales contract and a contract for the bailment or leasing of a motor vehicle by which the bailee or lessee contracts to pay as compensation for its use a sum substantially equivalent to or in excess of its value and by which it is agreed that the bailee or lessee is bound to become, or has the option of becoming, the owner of the motor vehicle for no other or a nominal consideration upon on full compliance with the provisions of the contract.
(ii) A secondary motor vehicle finance transaction.
9. "Retail installment transaction" means any transaction evidenced by a retail installment contract entered into between a retail buyer and a retail seller wherein the retail buyer buys a motor vehicle from the retail seller at a cost payable in one or more deferred installments. The cash sale price of the motor vehicle, the amount included for insurance if a separate charge is made and the finance charge shall together constitute the cost of the motor vehicle.
10. "Retail seller" or "seller" means a person who sells a motor vehicle to a retail buyer for purposes other than resale under or subject to a retail installment contract. For the purposes of paragraph 12 of this section "seller" means a person who sells and retains the use of the motor vehicle.
11. "Sales finance company":
(a) Means a person engaged, in whole or in part, in the business of purchasing retail installment contracts from one or more retail sellers.
(b) Includes a person engaged, in whole or in part, in the business of creating or holding retail installment contracts that exceed a total aggregate outstanding indebtedness of fifty thousand dollars $50,000.
(c) Does not include:
(i) The pledgee of an aggregate number of retail installment contracts to secure a bona fide loan thereon.
(ii) A motor vehicle dealer who creates retail installment contracts and assigns the retail installment contracts to third party lenders or financial institutions.
12. "Secondary motor vehicle finance transaction":
(a) Means any contract that includes provisions for either:
(i) Obtaining a security interest in or lien on a motor vehicle other than in connection with the sale of that motor vehicle.
(ii) The sale or conditional sale of a motor vehicle and the seller's right to retain use of the motor vehicle after the sale or conditional sale.
(b) Includes any conditional sales contract or contract for the bailment or leasing of a motor vehicle in which the bailee or lessee agrees to pay for use of the motor vehicle and the bailee or lessee is required to become or has the option of becoming the owner of the vehicle for any or no compensation.
(c) Does not include any commercial transaction as defined in section 44‑291.
Sec. 2. Section 44-286, Arizona Revised Statutes, is amended to read:
44-286. Requirements and prohibitions as to retail installment contracts; secondary motor vehicle finance transactions prohibited
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 eight‑point type. The contract shall contain in a size equal to at least ten point 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 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 the buyer's 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 ten‑point bold type, and, if contained in the contract, shall appear directly above the buyer's signature.
C. A person, whether located in this state or in another state, may not make, offer or arrange a secondary motor vehicle finance transaction to or with an individual in this state. A transaction that is made in violation of this subsection is void as to principal and all charges, constitutes an unlawful practice under section 44-1522 and is subject to the enforcement procedures and all penalties under chapter 10, article 7 of this title.
Sec. 3. Section 44-291, Arizona Revised Statutes, is amended to read:
44-291. Computation of interest; prepayment rebate; additional charges; 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 that 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 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
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 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.
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. G. 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.