ASSEMBLY, No. 544

 

STATE OF NEW JERSEY

 

Introduced Pending Technical Review by Legislative Counsel

 

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

 

 

By Assemblywoman TURNER

 

 

An Act concerning certain credit card interest rates and amending P.L.1971, c.409.

 

    Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

    1. Section 17 of P.L.1971, c.409 (C.17:16C-44.1) is amended to read as follows:

    17. (a) Notwithstanding any other law to the contrary, a retail seller, sales finance company, banking institution or other holder may charge, receive and collect a time price differential in each billing period on obligations incurred pursuant to any retail charge account, which shall be determined as specified in the terms of the account, subject to the limitations provided herein. Such time price differential for each monthly billing period shall not exceed the amount resulting from applying the periodic [rates] rate provided herein to the [greater of the following amounts (including unpaid time price differentials):

    (i) The] average daily balance of the account for [such] the billing period[, or

    (ii) The balance of the account at the beginning or end of such billing period].

    The periodic rate [or rates] for any calendar quarter shall not exceed [an amount agreed to by the retail seller, sales finance company, banking institution, or other holder and the retail buyer] by more than four percentage points the underpayment rate for individuals, established pursuant to section 6621(a)(2) of the Internal Revenue Code, 26 U.S.C. §6621(a)(2), as that rate is published in the Table of Interest Rates--Underpayment and Overpayment of Taxes, in the Internal Revenue Bulletin, effective for the immediately preceding calendar quarter.

    The terms of the retail charge account may provide that the periodic rate used to determine the time price differential may be increased or may be decreased or both from time to time; provided, however, that no increase shall be effective unless: (1) at least [90 days prior to the effective date of the first such increase, or] 30 days prior to the effective date of any [subsequent] increase, a written notice has been mailed or delivered to the retail buyer that clearly and conspicuously describes such change and the indebtedness to which it applies and states that the incurrence by the retail buyer or another person authorized by him of any further indebtedness under the plan to which the agreement relates on or after the effective date of the increase specified in the notice shall constitute acceptance of the increase and[(b)](2) either the retail buyer agrees in writing to the increase or the retail buyer or another person authorized by him incurs such further indebtedness on or after the effective date of the increase stated in the notice. The provisions of this paragraph permitting an increase in the time price differential shall not apply in the case of an agreement which expressly prohibits changing of the time price differential or which provides limitations on changing of the time price differential which are more restrictive than the requirements of this paragraph. [If the] The terms of the retail charge account [provide] providing for the possibility of an increase or decrease, or both, in the periodic rate used to determine the time price differential[, that fact] shall be clearly described in plain language, in at least 8-point bold face type on the face of the written notice, and shall include information describing how the periodic rate is determined and where the underpayment rate for individuals is published.

    [Notwithstanding the foregoing limitation, if the terms of the account so provide, the time price differential may be computed on the median amount within a specified range. Such time price differential for each monthly billing period shall not exceed the amount resulting from applying the respective periodic rates specified above to the median amount within the specified range in which the greater of the amounts specified in (i) and (ii) is included; provided, subject to the classifications and differentiations as may reasonably be established by the retail seller, sales finance company, banking institution or other holder, the same time price differential is charged on all balances within the specified range and provided further that the time price differential determined by applying the respective periodic rates specified above to the median amount within the range does not exceed by more than 8% the amount of the time price differential determined by applying the respective periodic rates specified above to the lowest amount in the range.]

    (b) If the billing period is not monthly, the maximum periodic rate shall be that rate which bears the same relation to the respective periodic rates per month specified above as the number of days in the billing period bears to 30.

    (c) Notwithstanding the limitation provided in subsection (a) [above] of this section, for any monthly billing period in which a time price differential may be charged pursuant to the terms of the account a minimum time price differential of not more than $0.50 may be charged; if the billing period is not monthly, a minimum time price differential may be charged in such amount which bears the same relation to $0.50 as the number of days in the billing period bears to 30.

    (d) When calculating the amount of a time price differential for a billing period, the annual periodic rate established pursuant to subsection (a) of this section shall be applied to the average daily balance in that billing period with respect to the total indebtedness in the retail buyer's account.

(cf: P.L.1981, c.103, s.14)

 

    2. This act shall take effect on the first day of the first calendar quarter following the 120th day after enactment.

 

 

STATEMENT

 

    This bill establishes a ceiling on the periodic rate used to determine a time-price differential with respect to balances in retail charge accounts which are regulated pursuant to the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.). The ceiling would be 4% over the rate of interest required to be paid by individuals for underpayment of federal income tax as that rate is established pursuant to paragraph (2) of subsection (a) of section 6621 of the Internal Revenue Code, 26 U.S.C. §6621(a)(2) and published in the Internal Revenue Bulletin. This bill also provides that: an increase in the periodic rate would not be permitted until 30 days after a notice describing the increase has been sent to retail charge account customers. Holders of retail charge accounts are required to provide information on how the periodic rate is determined and where the federal rate for underpayment of federal income tax is published. The periodic rate as determined pursuant to this act would apply to the total average daily balance in a retail buyer's retail installment account, if any, during a billing period.

    The provisions of the bill would become effective on the first day of the first calendar quarter following the 120th day after enactment.

 

 

 

Imposes indexed cap on certain credit card interest rates.