CONTRACTS ‑- SALES ‑- INTEREST ‑- SERVICE CHARGE ‑- LEGALITY OF VARIABLE RATE SERVICE CHARGE UNDER WASHINGTON RETAIL INSTALLMENT SALES ACT
So long as the maximum rate does not exceed that which is permitted by RCW 63.14.130(1) in those instances where that statute applies, the Washington Retail Installment Sales Act, as codified in chapter 63.14 RCW, does not prohibit a retail seller from imposing a variable rate of service charge in a retail installment contract for the purchase of a manufactured home.
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September 23, 1982
Honorable Bruce Addison
State Representative, 34th District
4509 S. W. Holgate
Seattle, Washington 98116
Cite as: AGO 1982 No. 12
By letter previously acknowledged you requested our opinion on a question which we paraphrase as follows:
Does the Washington Retail Installment Sales Act, as codified in chapter 63.14 RCW, prohibit a retail seller from imposing a variable rate of service charge on a retail installment contract for the purchase of a manufactured home?
We answer the foregoing question in the negative subject to the caveat set forth in our analysis below.
The Washington Retail Installment Sales Act regulates the terms and conditions of,interalia, retail installment contracts for the sale of personal property‑-such as a manufactured home prior to its assembly and placement on a lot or parcel of land. Among the provisions of that act is RCW 63.14.130(1) which provides as follows:
"(1) The service charge, in retail installment contract, shall not exceed the highest of the following:
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"(a) A rate on outstanding unpaid balances which exceeds six percentage points above the average, rounded to the nearest one‑quarter of one percent, of the equivalent coupon issue yields (as published by the Federal Reserve Bank of San Francisco) of the bill rates for twenty-six week treasury bills for the last market auctions conducted during February, May, August and November of the year prior to the year in which the retail installment contract is executed; or
"(b) Ten dollars." (Emphasis supplied)
A service charge which is, for any given period covered by the contract, equal to or less than the statutory ceiling is, therefore, permissible insofar as the Retail Installment Sales Act is concerned. And, in turn, so long as the maximum rate does not exceed the limit thus set forth in RCW 63.14.130(1),supra (in those instances where that section of the law applies), there is nothing further to be found in the act which would otherwise preclude a seller from imposing a variable rate of service charge.
We also note the following provision of RCW 63.14.151, codifying § 9, chapter 77, Laws of 1981:
"Any retail installment contract or retail charge agreement which complies with the disclosure requirements of Title I of the federal consumer protection act (82 Stat. 146, 15 U.S.C. 1601) which is also known as the truth in lending act, as of the date upon which said retail installment contract or revolving charge agreement is executed, shall be deemed to comply with the disclosure provisions of chapter 63.14 RCW."
With that section of the law in mind we have reviewed the federal legislation (also known as the Truth in Lending Act) to which reference is thus made as well as the administrative regulations which have been promulgated thereunder. And what we have found, basically, is that the subject federal regulations not only contemplate the possibility of, but specifically provide a procedure for disclosing, a variable rate finance charge arrangement. See in particular the disclosure provisions contained in § 226.18(f), Appendix H-4 and Appendix H-14 of Federal Regulation Z the use of which, in accordance with RCW 63.14.151,supra, would be deemed to be in compliance with the Washington Retail Installment Sales Act.
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Therefore, subject to the caveat that the maximum rate may not exceed that which is permitted by RCW 63.14.130(1),supra, we answer your question in the negative;i.e., the Washington Retail Installment Sales Act, as codified in chapter 63.14 RCW, does not prohibit a retail seller from imposing a variable rate of service charge in a retail installment contract for the purchase of a manufactured home.
We trust that the foregoing will be of assistance to you.
Very truly yours,
KENNETH O. EIKENBERRY
Assistant Attorney General