Nevada has enacted a new law entitled the “Consumer Protection from the Accrual of Predatory Interest After Default Act,” which relates to consumer form contracts used in connection with retail installment transactions and the prejudgment and postjudgment interest and attorney fees that may be awarded by a court.
Signed into law on June 3 and applicable only to contracts entered into on or after Oct. 1, the Act adds a new chapter to Title 8 of the Nevada Revised Statutes, “Commercial Instruments and Transactions.”
The Act does not apply to a number of entities, including (but not limited to):
- banks;
- mortgage lenders, brokers, and bankers;
- those acting pursuant to Rev. Stat. Ann. Title 52, Ch. 604A, relating to deferred deposit loans, high-interest (payday) loans, title loans and check-cashing services;
- motor vehicle manufacturers or distributors or their affiliates or captive financial entities.
Those not excluded by the Act should be aware “retail installment transactions”[i] include “retail installment contracts”[ii] as well as “retail charge agreements.”[iii] Thus, the Act captures both closed-end and open-end retail installment transactions involving goods, services and in some instances leases.
The Act defines a “consumer form contract”[iv] and imposes a number of restrictions and requirements when the consumer form contract is entered into with a Nevada resident:
- Choice of law provisions in favor of the law of another state are void;
- Forum selection provisions in favor of a forum in another state are void;
- The contract, and any change of terms, must be signed by the consumer in writing or in conformance with the E-Sign Act;
- The contract may not contain:
- a hold harmless clause;
- a waiver of right to a jury trial, unless the consumer agrees to binding arbitration;
- an assignment of wages;
- an agreement not to assert any claim or defense;
- a waiver of any provision of Rev. Stat. Ann. Title 8, Ch. 97, “Retail Installment Sales of Goods and Services,” or any other consumer protection statute;
- a provision requiring that any resolution of a dispute be confidential, though this does not prohibit such an agreement made after the dispute arises.
Any provisions in a consumer form contract that are in violation of the Act are void and unenforceable.
Additionally, any contract that is entered into by a person who is required to be licensed but is not is void, and no obligee or assignee can collect, receive or retain any principal, finance charge or other fees in connection with the transaction. Licensing requirements and exemptions relating to installment loans are found in Nev. Rev. Stat. Ann. §§ 675.060 – 675.160.
Thus, purchasers of retail charge agreements and retail installment contracts that seek to collect directly or indirectly, or file proof of claims, should perform due diligence in determining: 1) whether the original seller was properly licensed; and 2) whether the contract conforms to the statutory requirements.
Regarding interest, when the plaintiff prevails in an action to collect a consumer debt arising from a consumer form contract, the interest must not be compounded.
Any prejudgment interest awarded must be the lesser of: 1) the accrued interest at the rate stated in the contract to the day the action was filed; or 2) 180 days of interest at the rate stated in the contract.
Postjudgment interest awarded must be the lesser of: 1) the rate of interest in the contract; or 2) a rate equal to the prime rate plus 2%.
With regard to attorney’s fees, a prevailing plaintiff may only collect such fees if authorized in the contract. If the contract states the fee as a specific percentage, it is enforceable up to 15% of the amount of the debt, excluding attorney’s fees and collection costs. If the contract provides for attorney’s fees but does not state a specific percentage, the fees are limited to the lesser of: 1) 15% of the amount of the debt, excluding attorney’s fees and collection costs; or 2) a reasonable rate multiplied by the amount of time expended.
On the other hand, no such limitations apply to a prevailing consumer who may be awarded “reasonable attorney’s fees” without consideration of the amount of the debt.
[i] “Retail installment transaction” means a transaction in which a retail buyer purchases goods or services from a retail seller pursuant to a retail installment contract or a retail charge agreement which may provide for a finance charge and under which the buyer agrees to pay the total of payments in one or more installments. Nev. Rev. Stat. Ann. § 97.115.
[ii] 1.) “Retail installment contract” or “contract” means a contract, other than a retail charge agreement or an instrument reflecting a sale made pursuant thereto, entered into or performed in this state for a retail installment transaction. 2.) The term includes a security agreement and a bailment contract or lease if the bailee or lessee contracts to pay as compensation for their use a sum substantially equivalent to or in excess of the value of the goods and if it is agreed that the bailee or lessee is bound to become or, without giving further substantial value, has the option of becoming the owner of the goods upon full compliance with the provisions of the bailment or lease. 3.) The term does not include a bailment or lease of a vehicle where the lessee becomes or may become the owner of the vehicle by payment to the lessor of an amount which is substantially equal to the residual value or the unamortized capitalized cost, if the payment is not nominal. Nev. Rev. Stat. Ann. § 97.105.
[iii] “Retail charge agreement,” means an agreement entered into or performed in this state prescribing the terms of retail installment transactions in which the buyer may pay, in installments, to a retail seller, the unpaid balance due in a retail installment transaction, whether or not a security interest in the goods sold is retained by the seller, and under the terms of which a finance charge is to be computed in relation to the buyer’s unpaid balance from time to time. Nev. Rev. Stat. Ann. § 97.095.
[iv] “Consumer form contract” means a retail charge agreement or a retail installment contract involving a retail installment transaction in writing between a retail seller and a consumer buyer, or a lease in writing between a lessor and a consumer lessee, involving the sale or lease of goods or services, including, without limitation, credit or financial services, primarily for personal, family or household purposes and which has either been drafted by the business or by a third party for use with more than one consumer, unless a second consumer is the spouse of the first consumer. Assembly Bill 477, Sec. 8, ¶ 1.
