Chapter 0121 - 442R - H Ver of SB1244

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  House Engrossed Senate Bill
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  State of Arizona
  Senate
  Forty-fourth Legislature
  Second Regular Session
  2000
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        CHAPTER 121
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      SENATE BILL 1244
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AN ACT

AMENDING SECTIONS 44-281, 44-289 AND 44-291, ARIZONA REVISED STATUTES; RELATING TO MOTOR VEHICLE TIME SALES.

(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 banks.

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 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 necessary or incidental to the transaction which 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 seller's services in connection therewith.

3. "Dealer" means any person who in any year sells on a ~~non-cash~~ NONCASH basis three or more motor vehicles at retail.

4. "Finance charge" means the amount agreed upon 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.

5. "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.

6. "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 which move upon or are guided by a track or travel through the air.

(b) The following, if not designed primarily for highway transportation, but which may incidentally be operated on a public highway:

(i) Tractors.

(ii) Buses.

(iii) Trucks.

(iv) Power shovels.

(v) Road machinery.

(vi) Agricultural machinery.

7. "Person" means an individual, partnership, association, trust, corporation, or other legal entity.

8. "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.

9. "Retail installment contract" or "contract":

(a) Means an agreement, entered into in this state, pursuant to which the title to or a lien upon 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. ~~The term~~

(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 full compliance with the provisions of the contract.

(ii) A SECONDARY MOTOR VEHICLE FINANCE TRANSACTION.

10. "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.

11. "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 13 OF THIS SECTION "SELLER" MEANS A PERSON WHO SELLS AND RETAINS THE USE OF THE MOTOR VEHICLE.

12. "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. ~~The term also~~

(b) Includes a retail seller engaged, in whole or in part, in the business of creating and holding retail installment contracts which exceed a total aggregate outstanding indebtedness of twenty-five thousand dollars. ~~The term~~

(c) Does not include the pledgee of an aggregate number of retail installment contracts to secure a bona fide loan thereon.

13. "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.

Sec. 2. Section 44-289, Arizona Revised Statutes, is amended to read:

44-289. Delinquent contract; recovery; transfer fees; blank spaces in contract

A. If the contract or refinancing agreement so provides, the holder may, as to any delinquent contract, recover one or more of the following:

1. A reasonable amount for the holder's cost of collection.

2. Attorney's fees in a reasonable amount where such contract is referred for collection to an attorney not a salaried employee of the holder.

3. Court costs.

B. IN THE EVENT OF DEFAULT UNDER A CONTRACT, A LICENSEE SHALL COMPLY WITH ALL PROVISIONS OF TITLE 47, CHAPTER 9, ARTICLE 6, AND BE SUBJECT TO THE PENALTIES PRESCRIBED THEREIN. ALL SALES OF REPOSSESSED VEHICLES SHALL BE CONDUCTED IN A COMMERCIALLY REASONABLE MANNER.

B. C. As to each transfer of equity by a buyer or subsequent transferee, the holder of the contract shall be entitled to a transfer of equity fee not in excess of fifteen dollars. If the contract so provides, at the option of the holder, no such transfer of equity shall be valid against the holder without the written consent of the holder. No certificate of title shall be issued by the state of Arizona in the name of such transferee unless written consent of the holder accompanies the application for transfer of title.

C. D. No retail installment contract shall be signed by any party thereto when it contains blank spaces to be filled in after it has been signed except that, if delivery of the motor vehicle is not made at the time of the execution of the contract, the identifying numbers or marks of the motor vehicle or similar information and the due date of the first installment may be inserted in the contract after its execution. The buyer's written acknowledgment, conforming to the requirements of subsection B of section 44-286, of delivery of a copy of a contract shall be conclusive proof of such delivery, that the contract when signed, did not contain any blank spaces except as herein provided, and of compliance with this article in any action or proceeding by or against the holder of the contract.

Sec. 3. Section 44-291, Arizona Revised Statutes, is amended to read:

44-291. 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 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 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 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 upon the tenth day after its due date in an amount not to exceed five per cent of the unpaid balance of the installment or ten dollars, whichever is less.

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 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.

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 upon 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 upon all subsequent holders.

G. IF THE RETAIL INSTALLMENT CONTRACT IS A SECONDARY MOTOR VEHICLE FINANCE TRANSACTION, THE SELLER, BAILOR 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 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.

G. J. In 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.

APPROVED BY THE GOVERNOR APRIL 03, 2000.

FILED IN THE OFFICE OF THE SECRETARY OF STATE APRIL 04, 2000.