PRIOR PRINTER'S NOS. 578, 2522 PRINTER'S NO. 2864
No. 538 Session of 1979
INTRODUCED BY MESSRS. L. E. SMITH, BRUNNER, POTT, BURD, NOYE,
STEWART, D. R. WRIGHT, PUNT, RAPPAPORT AND GRIECO,
MARCH 6, 1979
AS AMENDED ON THIRD CONSIDERATION, HOUSE OF REPRESENTATIVES,
FEBRUARY 6, 1980
AN ACT
1 Amending the act of October 28, 1966 (1st Sp.Sess., P.L.55,
2 No.7), entitled "An act defining, regulating and relating to
3 retail installment contracts for all goods and services
4 except certain motor vehicles and home improvements;
5 prescribing the requirements of such contracts and
6 limitations on the enforcement thereof; and providing
7 remedies and penalties," DEFINING "MEDICAL CARE PROVIDER," <--
8 providing for the preservation of consumers' claims and
9 defenses and further providing for service charges.
10 The General Assembly of the Commonwealth of Pennsylvania
11 hereby enacts as follows:
12 Section 1. Clause (h) of section 303, sections 402, 501, <--
13 806, 904 and clause (d) of section 905, SECTION 201, act of <--
14 October 28, 1966 (1st Sp.Sess., P.L.55, No.7), known as the
15 "Goods and Services Installment Sales Act," are amended and a <--
16 clause is added to section 303 IS AMENDED BY ADDING A CLAUSE to <--
17 read:
18 SECTION 201. UNLESS THE CONTEXT OR SUBJECT MATTER OTHERWISE <--
19 REQUIRES, THE DEFINITIONS GIVEN IN THIS ARTICLE GOVERN THE
20 CONSTRUCTION OF THIS ACT.
1 * * *
2 (17) "MEDICAL CARE PROVIDER" MEANS ANY LICENSED PHYSICIAN,
3 WHETHER PRACTICING PRIVATELY OR AS PART OF A GROUP MEDICAL
4 PRACTICE, CLINIC, HOSPITAL, INTERMEDIATE CARE FACILITY OR
5 SKILLED NURSING CARE FACILITY, WHICH PROVIDES MEDICAL SERVICES
6 OR SELLS DRUGS, DEVICES OR EQUIPMENT. ANY STAFF MEMBER OF A
7 PHYSICIAN, GROUP MEDICAL PRACTICE, CLINIC, HOSPITAL,
8 INTERMEDIATE CARE FACILITY, OR SKILLED NURSING CARE FACILITY
9 WHICH PROVIDES MEDICAL SERVICES OR SELLS DRUGS, DEVICES OR
10 EQUIPMENT.
11 SECTION 2. CLAUSE (H) OF SECTION 303, SECTIONS 402 AND 501
12 OF THE ACT ARE AMENDED AND A CLAUSE IS ADDED TO SECTION 303 TO
13 READ:
14 Section 303. Except as provided in Article VIII of this act,
15 a contract shall contain the following:
16 * * *
17 (h) The amount of the service charge, if any. [, and the
18 following statement in at least ten-point bold type: "The
19 service charge herein contained does not exceed the equivalent
20 of fifteen percent (15%) simple interest per annum on the unpaid
21 balance, except that a minimum service charge of seventy cents
22 (70¢) per month may be made."]
23 * * *
24 (k) The following provision in at least ten-point, boldface
25 type:
26 NOTICE
27 ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT
28 TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT
29 AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT
30 HERETO OR WITH THE PROCEEDS HEREOF, RECOVERY HEREUNDER BY
19790H0538B2864 - 2 -
1 THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR
2 HEREUNDER.
3 * * *
4 Section 402. No right of action or defense arising out of a
5 retail installment sale which the buyer has against the seller,
6 other than as provided in section 1202, and which would be cut
7 off by assignment, shall be cut off by assignment of the
8 contract to any third party whether or not he acquires the
9 contract in good faith and for value [unless the assignee gives
10 notice of the assignment to the buyer as provided in this
11 section, and within forty-five (45) days of the mailing of such
12 notice receives no written notice of the facts giving rise to
13 the claim or defense of the buyer. A notice of assignment shall
14 be in writing addressed to the buyer at the address shown on the
15 contract and shall: identify the contract; state the name of the
16 seller and buyer; describe the goods or services; state the time
17 balance and the number and amounts of the installments. The
18 notice of assignment shall contain the following warning to the
19 buyer:
20 "You have forty-five (45) days within which to notify us of
21 any claims or defenses which you may have against the seller. If
22 you have any complaints or objections to make, you should notify
23 us at this time"].
24 Section 501. (1) A seller may, in a retail installment
25 contract, contract for and, if so contracted for, the holder
26 thereof may charge, receive and collect a service charge [which
27 shall not exceed the following rates multiplied by the number of
28 months, including any fraction in excess of more than fifteen
29 days as one month, elapsing] measured for the period between the
30 date of such contract and the due date of the last installment[:
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1 (a) On the unpaid balance, two-thirds (2/3) of one percent
2 (1%).
3 (b) A service charge shall not exceed the equivalent of
4 fifteen percent (15%) simple interest per annum on the unpaid
5 balance.] and calculated for that period according to the
6 actuarial method of computation or by application of the United
7 States Rule at a rate which does not exceed the total EQUIVALENT <--
8 of the following:
9 (a) Eighteen percent (18%) simple interest per annum on that
10 part of the unpaid balances of the amount financed which is five
11 hundred dollars ($500) or less.
12 (b) Fifteen percent (15%) simple interest per annum on that
13 part of the unpaid balances of the amount financed which is more
14 than five hundred dollars ($500).
15 (C) FIFTEEN PERCENT (15%) SIMPLE INTEREST PER ANNUM ON THAT <--
16 PART OF THE BALANCE IF THE SELLER IS A MEDICAL CARE PROVIDER.
17 (D) NOTWITHSTANDING THE RATES PROVIDED FOR IN CLAUSES (A)
18 AND (B) OF THIS SUBSECTION, NO SELLER OR HOLDER OF A RETAIL
19 INSTALLMENT CONTRACT ENGAGED PRIMARILY IN THE BUSINESS OF
20 SELLING AT WHOLESALE OR RETAIL FUEL FOR MOTOR VEHICLES IN THE
21 UNITED STATES MAY CHARGE, RECEIVE AND COLLECT A SERVICE CHARGE
22 IN EXCESS OF FIFTEEN PERCENT (15%) SIMPLE INTEREST PER ANNUM, ON
23 THE UNPAID BALANCES.
24 (2) Subject to the classifications and differentiations that
25 the seller or holder may reasonably establish, the seller or
26 holder may make the same service charge on all amounts financed
27 within a specified range. A service charge so made does not
28 violate subsection (1) if:
29 (a) when applied to the median amount within each range it
30 does not exceed the maximum permitted by subsection (1); and
19790H0538B2864 - 4 -
1 (b) when applied to the lowest amount within each range it
2 does not produce a rate of service charge exceeding the rate
3 calculated according to subsection (1) by more than eight
4 percent (8%) of that rate.
5 [(c)] (3) A minimum service charge of seventy cents (70¢)
6 per month may be made for each month if the service charge so
7 computed is less than that amount; such minimum service charge
8 may be imposed for a minimum period of six months.
9 (4) No seller or holder shall divide or otherwise encourage
10 the buyer to become obligated at the same time on more than one
11 transaction for the purpose of obtaining a higher rate of
12 service charge than would otherwise be permitted under this act.
13 Multiple agreements which arise out of substantially the same
14 transaction shall be presumed to be in violation of this
15 section.
16 SECTION 3. THE ACT IS AMENDED BY ADDING A SECTION TO READ: <--
17 SECTION 501.1. (1) A SELLER MAY, IN A RETAIL INSTALLMENT
18 CONTRACT, CONTRACT FOR AND, IF SO CONTRACTED FOR, THE HOLDER
19 THEREOF MAY CHARGE, RECEIVE AND COLLECT A SERVICE CHARGE
20 MEASURED FOR THE PERIOD BETWEEN THE DATE OF SUCH CONTRACT AND
21 THE DUE DATE OF THE LAST INSTALLMENT AND CALCULATED FOR THAT
22 PERIOD ACCORDING TO THE ACTUARIAL METHOD OF COMPUTATION OR BY
23 APPLICATION OF THE UNITED STATES RULE AT A RATE WHICH DOES NOT
24 EXCEED FIFTEEN PERCENT (15%) SIMPLE INTEREST PER ANNUM ON THE
25 UNPAID BALANCES OF THE AMOUNT FINANCED.
26 (2) SUBJECT TO THE CLASSIFICATIONS AND DIFFERENTIATIONS THAT
27 THE SELLER OR HOLDER MAY REASONABLY ESTABLISH, THE SELLER OR
28 HOLDER MAY MAKE THE SAME SERVICE CHARGE ON ALL AMOUNTS FINANCED
29 WITHIN A SPECIFIED RANGE. A SERVICE CHARGE SO MADE DOES NOT
30 VIOLATE SUBSECTION (1) IF:
19790H0538B2864 - 5 -
1 (A) WHEN APPLIED TO THE MEDIAN AMOUNT WITHIN EACH RANGE IT
2 DOES NOT EXCEED THE MAXIMUM PERMITTED BY SUBSECTION (1); AND
3 (B) WHEN APPLIED TO THE LOWEST AMOUNT WITHIN EACH RANGE IT
4 DOES NOT PRODUCE A RATE OF SERVICE CHARGE EXCEEDING THE RATE
5 CALCULATED ACCORDING TO SUBSECTION (1) BY MORE THAN EIGHT
6 PERCENT (8%) OF THAT RATE.
7 (3) A MINIMUM SERVICE CHARGE OF SEVENTY CENTS (70¢) PER
8 MONTH MAY BE MADE FOR EACH MONTH IF THE SERVICE CHARGE SO
9 COMPUTED IS LESS THAN THAT AMOUNT; SUCH MINIMUM SERVICE CHARGE
10 MAY BE IMPOSED FOR A MINIMUM PERIOD OF SIX MONTHS.
11 (4) NO SELLER OR HOLDER SHALL DIVIDE OR OTHERWISE ENCOURAGE
12 THE BUYER TO BECOME OBLIGATED AT THE SAME TIME ON MORE THAN ONE
13 TRANSACTION FOR THE PURPOSE OF OBTAINING A HIGHER RATE OF
14 SERVICE CHARGE THAN WOULD OTHERWISE BE PERMITTED UNDER THIS ACT.
15 MULTIPLE AGREEMENTS WHICH ARISE OUT OF SUBSTANTIALLY THE SAME
16 TRANSACTION SHALL BE PRESUMED TO BE IN VIOLATION OF THIS
17 SECTION.
18 SECTION 4. SECTIONS 806 AND 904 OF THE ACT ARE AMENDED TO
19 READ:
20 Section 806. The minimum service charge as provided in
21 subsection [(b)] (3) of section 501 may be used but once in any
22 series of add-on transactions.
23 Section 904. (1) Subject to the other provisions of this
24 article the seller or holder of a retail installment account may
25 charge, receive and collect the service charge authorized by
26 this act. The service charge shall not exceed the following
27 rates computed on the outstanding balances from month to month:
28 [(a) On the outstanding balance, one and one-quarter percent
29 (1 1/4%) per month.]
30 (a) One and one-half percent (1 1/2%) per month on that part
19790H0538B2864 - 6 -
1 of the outstanding balances which is five hundred dollars ($500)
2 or less.
3 (b) One and one-quarter percent (1 1/4%) per month on that
4 part of the outstanding balances which is more than five hundred
5 dollars ($500).
6 (C) ON THE OUTSTANDING BALANCE, ONE AND ONE-QUARTER PERCENT <--
7 (1 1/4%) IF THE SELLER IS A MEDICAL CARE PROVIDER.
8 (D) NOTWITHSTANDING THE RATES PROVIDED FOR IN CLAUSES (A)
9 AND (B) OF THIS SUBSECTION, NO SELLER OR HOLDER OF A RETAIL
10 INSTALLMENT ACCOUNT ENGAGED PRIMARILY IN THE BUSINESS OF SELLING
11 AT WHOLESALE OR RETAIL FUEL FOR MOTOR VEHICLES IN THE UNITED
12 STATES MAY CHARGE, RECEIVE AND COLLECT A SERVICE CHARGE IN
13 EXCESS OF ONE AND ONE-QUARTER PERCENT (1 1/4%) PER MONTH.
14 [(b)] (2) A minimum service charge of seventy cents (70¢)
15 per month may be made for each month if the service charge so
16 computed is less than that amount; such minimum service charge
17 may be imposed for a minimum period of six months.
18 [(c) The service charge may be computed on a schedule of
19 fixed amounts if as so computed it is applied to all amounts of
20 outstanding balances equal to the fixed amount minus a
21 differential of not more than five dollars ($5), provided that
22 it is also applied to all amounts of outstanding balances equal
23 to the fixed amount plus at least the same differential.]
24 (3) For purposes of computing service charges under
25 subsection (1), the service charge shall be deemed not in excess
26 of that permitted by this section if it is no greater than an
27 amount determined by applying the applicable rate to the
28 greatest of:
29 (a) the average daily balance of the account; or
30 (b) the unpaid balance of the account on the last day of the
19790H0538B2864 - 7 -
1 billing cycle calculated after first deducting all payments,
2 credits and refunds during the billing cycle; or
3 (c) the median amount within a specified range within which
4 the unpaid balance as calculated according to clauses (a) or (b)
5 is included. A charge may be made pursuant to this clause only
6 if the seller or holder, subject to classifications and
7 differentiations he may reasonably establish, makes the same
8 charge on all balances within the specified range and if the
9 percentage when applied to the median amount within the range
10 does not exceed the charge resulting from applying that
11 percentage to the lowest amount within the range by more than
12 eight percent (8%) of the charge on the median amount.
13 (d) (i) The "average daily balance" shall mean the sum of
14 the amounts unpaid each day during the billing period, divided
15 by the number of days during the billing period. The amount
16 unpaid on a day is determined by adding to the balance, if any,
17 outstanding as of the beginning of that day all purchases and
18 other debits and deducting all payments received and other
19 credits issued by the seller or holder as of that day. The term
20 "billing period" shall mean the time interval covered by a
21 periodic billing statement pursuant to section 905.
22 (ii) A billing period is considered to be "monthly" if the
23 last day of each billing period is on the same date of each
24 month or does not vary by more than four (4) days therefrom.
25 (iii) If the billing cycle is not monthly, the maximum
26 periodic rates are those percentages which bear the same
27 relation to the percentages specified in subsection (1) as the
28 number of days in the billing cycle bears to thirty (30).
29 (4) No seller or holder shall divide or otherwise encourage
30 the buyer to become obligated at the same time on more than one
19790H0538B2864 - 8 -
1 transaction for the purpose of obtaining a higher rate of
2 service charge than would otherwise be permitted under this act.
3 Multiple agreements which arise out of substantially the same
4 transaction shall be presumed to be in violation of this
5 section.
6 SECTION 5. THE ACT IS AMENDED BY ADDING A SECTION TO READ: <--
7 SECTION 904.1. (1) SUBJECT TO THE OTHER PROVISIONS OF THIS
8 ARTICLE THE SELLER OR HOLDER OF A RETAIL INSTALLMENT ACCOUNT MAY
9 CHARGE, RECEIVE AND COLLECT THE SERVICE CHARGE AUTHORIZED BY
10 THIS ACT. THE SERVICE CHARGE SHALL NOT EXCEED THE FOLLOWING RATE
11 COMPUTED ON THE OUTSTANDING BALANCES FROM MONTH TO MONTH, ONE
12 AND ONE-QUARTER PERCENT (1 1/4%) PER MONTH ON THE OUTSTANDING
13 BALANCES.
14 (2) A MINIMUM SERVICE CHARGE OF SEVENTY CENTS (70¢) PER
15 MONTH MAY BE MADE FOR EACH MONTH IF THE SERVICE CHARGE SO
16 COMPUTED IS LESS THAN THAT AMOUNT; SUCH MINIMUM SERVICE CHARGE
17 MAY BE IMPOSED FOR A MINIMUM PERIOD OF SIX MONTHS.
18 (3) FOR PURPOSES OF COMPUTING SERVICE CHARGES UNDER
19 SUBSECTION (1), THE SERVICE CHARGE SHALL BE DEEMED NOT IN EXCESS
20 OF THAT PERMITTED BY THIS SECTION IF IT IS NO GREATER THAN AN
21 AMOUNT DETERMINED BY APPLYING THE APPLICABLE RATE TO THE
22 GREATEST OF:
23 (A) THE AVERAGE DAILY BALANCE OF THE ACCOUNT; OR
24 (B) THE UNPAID BALANCE OF THE ACCOUNT ON THE LAST DAY OF THE
25 BILLING CYCLE CALCULATED AFTER FIRST DEDUCTING ALL PAYMENTS,
26 CREDITS AND REFUNDS DURING THE BILLING CYCLE; OR
27 (C) THE MEDIAN AMOUNT WITHIN A SPECIFIED RANGE WITHIN WHICH
28 THE UNPAID BALANCE AS CALCULATED ACCORDING TO CLAUSES (A) OR (B)
29 IS INCLUDED. A CHARGE MAY BE MADE PURSUANT TO THIS CLAUSE ONLY
30 IF THE SELLER OR HOLDER, SUBJECT TO CLASSIFICATIONS AND
19790H0538B2864 - 9 -
1 DIFFERENTIATIONS HE MAY REASONABLY ESTABLISH, MAKES THE SAME
2 CHARGE ON ALL BALANCES WITHIN THE SPECIFIED RANGE AND IF THE
3 PERCENTAGE WHEN APPLIED TO THE MEDIAN AMOUNT WITHIN THE RANGE
4 DOES NOT EXCEED THE CHARGE RESULTING FROM APPLYING THAT
5 PERCENTAGE TO THE LOWEST AMOUNT WITHIN THE RANGE BY MORE THAN
6 EIGHT PERCENT (8%) OF THE CHARGE ON THE MEDIAN AMOUNT.
7 (D) (I) THE "AVERAGE DAILY BALANCE" SHALL MEAN THE SUM OF
8 THE AMOUNTS UNPAID EACH DAY DURING THE BILLING PERIOD, DIVIDED
9 BY THE NUMBER OF DAYS DURING THE BILLING PERIOD. THE AMOUNT
10 UNPAID ON A DAY IS DETERMINED BY ADDING TO THE BALANCE, IF ANY,
11 OUTSTANDING AS OF THE BEGINNING OF THAT DAY ALL PURCHASES AND
12 OTHER DEBITS AND DEDUCTING ALL PAYMENTS RECEIVED AND OTHER
13 CREDITS ISSUED BY THE SELLER OR HOLDER AS OF THAT DAY. THE TERM
14 "BILLING PERIOD" SHALL MEAN THE TIME INTERVAL COVERED BY A
15 PERIODIC BILLING STATEMENT PURSUANT TO SECTION 905.
16 (II) A BILLING PERIOD IS CONSIDERED TO BE "MONTHLY" IF THE
17 LAST DAY OF EACH BILLING PERIOD IS ON THE SAME DATE OF EACH
18 MONTH OR DOES NOT VARY BY MORE THAN FOUR (4) DAYS THEREFROM.
19 (III) IF THE BILLING CYCLE IS NOT MONTHLY, THE MAXIMUM
20 PERIODIC RATES ARE THOSE PERCENTAGES WHICH BEAR THE SAME
21 RELATION TO THE PERCENTAGES SPECIFIED IN SUBSECTION (1) AS THE
22 NUMBER OF DAYS IN THE BILLING CYCLE BEARS TO THIRTY (30).
23 (4) NO SELLER OR HOLDER SHALL DIVIDE OR OTHERWISE ENCOURAGE
24 THE BUYER TO BECOME OBLIGATED AT THE SAME TIME ON MORE THAN ONE
25 TRANSACTION FOR THE PURPOSE OF OBTAINING A HIGHER RATE OF
26 SERVICE CHARGE THAN WOULD OTHERWISE BE PERMITTED UNDER THIS ACT.
27 MULTIPLE AGREEMENTS WHICH ARISE OUT OF SUBSTANTIALLY THE SAME
28 TRANSACTION SHALL BE PRESUMED TO BE IN VIOLATION OF THIS
29 SECTION.
30 SECTION 6. CLAUSE (D) OF SECTION 905 OF THE ACT IS AMENDED
19790H0538B2864 - 10 -
1 TO READ:
2 Section 905. The seller or holder of a retail installment
3 account shall promptly provide the buyer with a statement as of
4 the end of each monthly period (which need not be a calendar
5 month) setting forth the following:
6 * * *
7 (d) The amount of the service charge. [, and the following
8 statement: The service charge herein contained does not exceed
9 the equivalent of fifteen percent (15%) simple interest per
10 annum on the unpaid balance except that a minimum service charge
11 of seventy cents (70¢) per month may be made.]
12 * * *
13 Section 2 7. The act is amended by adding a section to read: <--
14 Section 912. Consistent with the provisions of this act, a
15 seller or holder may change the terms of a retail installment
16 account with a buyer, including the rate of the service charge,
17 whether or not the change is provided for in the existing
18 agreement containing the terms of the account, by providing the
19 buyer with a notice of the change in terms to the extent
20 required and in the manner specified by the Truth in Lending
21 Act, Title I of the Federal Consumer Credit Protection Act of
22 May 29, 1968 (Public Law 90-321) and the regulations issued
23 pursuant thereto by the Board of Governors of the Federal
24 Reserve System (Regulation Z), as such act and regulations may
25 from time to time be amended, and such change in terms shall
26 apply to purchases made twenty (20) days or more after the
27 mailing of such notice.
28 SECTION 8. SECTIONS 501 AND 904 OF THE ACT ARE REPEALED. <--
29 Section 3 9. (a) This act shall take effect on the first <--
30 day of the month following three full months after the date of
19790H0538B2864 - 11 -
1 enactment and shall be applicable on such effective date except
2 as provided in subsection (b) SUBSECTIONS (B) AND (D). <--
3 (b) The provisions of section 501(1)(a) and 904(1)(a)
4 insofar as they provide increases in service charges shall be
5 implemented in three stages as follows:
6 (1) Section 501(a).
7 (i) For the period beginning on the effective date of
8 this amendatory act and terminating one year thereafter, the
9 rate of simple interest per annum allowed shall be sixteen
10 percent (16%).
11 (ii) For the period beginning at the end of the period
12 specified in subclause (i) and terminating one year
13 thereafter, the rate of simple interest per annum allowed
14 shall be seventeen percent (17%).
15 (iii) For the period beginning at the end of the period
16 specified in subclause (ii) and thereafter, the rate of
17 simple interest allowed shall be eighteen percent (18%).
18 (2) Section 904(1)(a).
19 (i) For the period beginning on the effective date of
20 this amendatory act and terminating one year thereafter, the
21 rate of interest per month allowed shall be one and one-third
22 percent (1 1/3%).
23 (ii) For the period beginning at the end of the period
24 specified in subclause (i) and terminating one year
25 thereafter, the rate of interest per month allowed shall be
26 one and forty-one and two-thirds one hundredths percent (1 41
27 2/3/100%).
28 (iii) For the period beginning at the end of the period
29 specified in subclause (ii) and thereafter, the rate of
30 interest per month allowed shall be one and one-half percent
19790H0538B2864 - 12 -
1 (1 1/2%).
2 (c) During the implementing period described in subsection
3 (b), the provisions of sections 912 shall be applicable to the
4 change in the rates of interest authorized in said subsection
5 (b).
6 (D) SECTION 8 OF THIS AMENDATORY ACT SHALL TAKE EFFECT FOUR <--
7 YEARS AFTER THE EFFECTIVE DATE OF THIS ACT.
8 (E) THE PROVISIONS OF SECTIONS 501.1 AND 904.1 OF THE ACT
9 SHALL TAKE EFFECT FOUR YEARS AFTER THE EFFECTIVE DATE OF THIS
10 ACT.
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