§ 404 — Credit service charge limitation

§ 404. Credit service charge limitation. 1. A seller may, in a retail\ninstalment contract or obligation, contract for and, if so contracted\nfor, the holder thereof may charge, receive and collect a credit service\ncharge computed on the principal balance of the contract or obligation\nfrom the date thereof to and including the date when the final\ninstalment is payable, at the rate or rates agreed to by the buyer.\n 2. Except as provided in subdivision three of this section, such\ncredit service charge shall be computed on the principal balance on\ncontracts or obligations payable in successive monthly instalments\nsubstantially equal in amount for a period of one year. On contracts or\nobligations providing for instalments extending for a period less than\nor greater than one year, the credit service charge shall be computed\nproportionately.\n 3. When a retail instalment contract or obligation provides for\nunequal or irregular instalments, the credit service charge shall be at\nthe effective rate provided for in subdivision one of this section,\nhaving due regard for the schedule of instalments.\n 4. As an alternative to the credit service charge provided for above,\na seller may, in a retail instalment contract or obligation, contract\nfor and, if so contracted for, the holder may charge, receive and\ncollect a credit service charge calculated on the unpaid principal\nbalances of the contract for the time each is outstanding, according to\na generally accepted actuarial method at rates that may vary from time\nto time and in accordance with the provisions of the contract or\nobligation. On any contract or obligation with a variable rate credit\nservice charge made pursuant to this subdivision, each rate shall be\ndetermined at regular intervals as set forth in the contract or\nobligation and in accordance with such regulations as the superintendent\nof financial services shall prescribe but said rate shall not vary more\noften than once in any three month period and shall be based on a\npublished index that is (a) readily available, (b) independently\nverifiable, (c) beyond the control of the holder, and (d) approved by\nthe superintendent.\n The superintendent of financial services shall adopt regulations with\nrespect to retail installment contracts or obligations that provide for\na variable rate of credit service charge, including but not limited to:\n(a) providing for disclosure to the buyer by the holder of the\ncircumstances under which the rate may increase, any limitations on the\nincrease, the effect of an increase and an example of the payment terms\nthat would result from an increase; (b) providing for disclosure to the\nbuyer by the holder of a history of the fluctuations of the index over a\nreasonable period of time; and (c) providing for notice to the buyer\nfrom the holder prior to any rate increase or change in the terms of\npayment.\n 5. The credit service charge shall be inclusive of all charges\nincident to investigating and making the contract or obligation, and for\nthe extension of the credit provided for in the contract or obligation,\nand no fee, expense or other charge whatsoever shall be taken, received,\nreserved or contracted for except as otherwise provided in this article.\n