An Act amending the uniform consumer credit code; concerning closing costs; application of certain payments; amending K.S.A. 16a-1-301, 16a-2-401a and 16a-2-502 and re- pealing the existing sections.

Be it enacted by the Legislature of the State of Kansas:

New Section 1. If payment is received by the assignor of a consumer credit contract for the benefit of the assignee, the date of payment shall be deemed to be the day payment is received by the assignor.

Sec. 2. K.S.A. 16a-1-301 is hereby amended to read as follows: 16a- 1-301. In addition to definitions appearing in subsequent articles, in K.S.A. 16a-1-101 through 16a-9-102, and amendments thereto:

(1) ``Actuarial method'' means the method, defined by rules and reg- ulations adopted by the administrator, of allocating payments made on a debt between the amount financed and the finance charge pursuant to which a payment is applied first to the accumulated finance charge and the balance is applied to the unpaid amount financed.

(2) ``Administrator'' means the consumer credit commissioner ap- pointed pursuant to K.S.A. 16-403, and amendments thereto.

(3) ``Agreement'' means the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance.

(4) ``Amount financed'' means the total of the following items:

(a) In the case of a sale, the cash price of the goods, services, or interest in land, less the amount of any down payment whether made in cash or in property traded in, and the amount actually paid or to be paid by the seller pursuant to an agreement with the buyer to discharge a security interest in, a lien on, or a debt with respect to property traded in;

(b) in the case of a loan, the net amount paid to, receivable by, or paid or payable for the account of the debtor, plus the amount of any discount excluded from the finance charge (paragraph (b) of subsection (18) of section K.S.A. 16a-1-301); and

(c) in the case of a sale or loan, to the extent that payment is deferred and the amount is not otherwise included and is authorized and disclosed to the customer:

(i) Amounts actually paid or to be paid by the creditor for registration, certificate of title, or license fees, and

(ii) permitted additional charges (section K.S.A. 16a-2-501).

(5) ``Billing cycle'' means the time interval between periodic billing statement dates.

(6) ``Cash price'' of goods, services, or an interest in land means the price at which they are offered for sale by the seller to cash buyers in the ordinary course of business and may include (a) the cash price of acces- sories or services related to the sale, such as delivery, installation, alter- ations, modifications, and improvements, and (b) taxes to the extent im- posed on a cash sale of the goods, services, or interest in land. The cash price stated by the seller to the buyer in a disclosure statement is pre- sumed to be the cash price.

(7) ``Closing costs'' with respect to a debt secured by an interest in land includes:

(a) Fees or premiums for title examination, title insurance, or similar purposes including surveys;

(b) fees for preparation of a deed, settlement statement, or other documents;

(c) escrows for future payments of taxes and insurance;

(d) fees for notarizing deeds and other documents;

(e) appraisal fees; and

(f) fees for credit reports.

(a) The actual fees paid a public official or agency of the state or federal government, for filing, recording or releasing any instrument re- lating to the debt; and

(b) reasonable expenses incurred by the lender in connection with the making, closing, disbursing, extending, readjusting or renewing the debt which are payable to third parties not related to the lender, except that reasonable fees for an appraisal made by the lender or related party are permissible.

(8) ``Conspicuous'': A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. Whether a term or clause is conspicuous or not is for decision by the trier of fact.

(9) ``Consumer'' means the buyer, lessee, or debtor to whom credit is granted in a consumer credit transaction.

(10) ``Consumer credit sale'':

(a) Except as provided in paragraph (b), a ``consumer credit sale'' is a sale of goods, services, or an interest in land in which:

(i) Credit is granted either by a seller who regularly engages as a seller in credit transactions of the same kind or pursuant to a credit card other than a lender credit card,

(ii) the buyer is a person other than an organization,

(iii) the goods, services, or interest in land are purchased primarily for a personal, family or household purpose,

(iv) either the debt is by written agreement payable in installments or a finance charge is made, and

(v) with respect to a sale of goods or services, the amount financed does not exceed $25,000.

(b) A ``consumer credit sale'' does not include:

(i) A sale in which the seller allows the buyer to purchase goods or services pursuant to a lender credit card; or

(ii) unless the sale is made subject to K.S.A. 16a-1-101 through 16a-9- 102, and amendments thereto, by agreement (section K.S.A. 16a-1-109), a sale of an interest in land, other than sales governed by subsection (10)(b)(iii) of this section, if the finance charge does not exceed 12% per year calculated according to the actuarial method on the unpaid balances of the amount financed on the assumption that the debt will be paid according to the agreed terms and will not be paid before the end of the agreed term; or

(iii) a sale by contract for deed of real estate the interest rate of which is governed by subsection (b) or (h) of K.S.A. 16-207, and amendments thereto.

(11) ``Consumer credit transaction'' means a consumer credit sale, consumer lease, or consumer loan or a modification thereof including a refinancing, consolidation, or deferral.

(12) ``Consumer lease'' means a lease of goods:

(a) Which a lessor regularly engaged in the business of leasing makes to a person, other than an organization, who takes under the lease pri- marily for a personal, family or household purpose;

(b) in which the amount payable under the lease does not exceed $25,000;

(c) which is for a term exceeding four months; and

(d) which is not made pursuant to a lender credit card.

(13) ``Consumer loan'':

(a) Except as provided in paragraph (b), a ``consumer loan'' is a loan made by a person regularly engaged in the business of making loans in which:

(i) The debtor is a person other than an organization;

(ii) the debt is incurred primarily for a personal, family or household purpose;

(iii) either the debt is payable in installments or a finance charge is made; and

(iv) either the amount financed does not exceed $25,000 or the debt is secured by an interest in land.

(b) Unless the loan is made subject to K.S.A. 16a-1-101 through 16a- 9-102, and amendments thereto, by agreement (section K.S.A. 16a-1- 109), a ``consumer loan'' does not include:

(i) A loan secured by a first real estate mortgage; or

(ii) a loan secured by a second or other subordinate mortgage if the second or other subordinate mortgage is granted to the same lender as the first mortgage; or

(iii) a loan made by a qualified plan, as defined in section 401 of the internal revenue code, to an individual participant in such plan or to a member of the family of such individual participant.

(14) ``Credit'' means the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.

(15) ``Credit card'' means any card, plate or other single credit device that may be used from time to time to obtain credit. Since this involves the possibility of repeated use of a single device, checks and similar in- struments that can be used only once to obtain a single credit extension are not credit cards.

(16) ``Creditor'' means a person who regularly extends credit in a consumer credit transaction which is payable by a written agreement in more than four installments or for which the payment of a finance charge is or may be required and is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by written agreement. In the case of credit extended pursuant to a credit card, the creditor is the card issuer and not another person honoring the credit card.

(17) ``Earnings'' means compensation paid or payable to an individual or for such individual's account for personal services rendered or to be rendered by such individual, whether denominated as wages, salary, com- mission, bonus, or otherwise, and includes periodic payments pursuant to a pension, retirement, or disability program.

(18) ``Finance charge'':

(a) ``Finance charge'' means the sum of:

(i) All charges payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or as a condition of the extension of credit, including any of the following types of charges which are applicable; interest or any amount payable under a point, discount or other system of charges, however denominated; time price differential, service, carrying or other charge, however denomi- nated; premium or other charge for any guarantee or insurance protecting the creditor against the consumer's default or other credit loss; and

(ii) charges incurred for investigating the collateral or credit-worthi- ness of the consumer.

(b) The term does not include:

(i) Charges as a result of default, additional charges (section K.S.A. 16a-2-501) or delinquency charges (section K.S.A. 16a-2-502), or

(ii) if a lender makes a loan to a debtor by purchasing or satisfying obligations of the debtor pursuant to a lender credit card and the purchase or satisfaction is made at less than the face amount of the obligation, the discount, or

(iii) closing costs as defined in K.S.A. 16a-1-301(7), and amendments thereto.

(19) ``Goods'' includes goods not in existence at the time the trans- action is entered into and merchandise certificates, but excludes money, chattel paper, documents of title, and instruments.

(20) Except as otherwise provided, ``lender'' includes an assignee of the lender's right to payment but use of the term does not in itself impose on an assignee any obligation of the lender with respect to events occur- ring before the assignment.

(21) ``Interest bearing'' means the finance charge on a consumer credit transaction is computed on the unpaid principal balances by the actuarial method.

(22) ``Lender credit card'' means a credit card issued by a supervised lender.

(23) ``Loan'':

(a) Except as provided in paragraph (b), a ``loan'' includes:

(i) The creation of debt by the lender's payment of or agreement to pay money to the debtor or to a third party for the account of the debtor;

(ii) the creation of debt either pursuant to a lender credit card or by a cash advance to a debtor pursuant to a credit card other than a lender credit card;

(iii) the creation of debt by a credit to an account with the lender upon which the debtor is entitled to draw immediately; and

(iv) the forbearance of debt arising from a loan.

(b) A ``loan'' does not include the payment or agreement to pay money to a third party for the account of a debtor if the debt of the debtor arises from a sale or lease and results from use of either a credit card issued by a person primarily in the business of selling or leasing goods or services or any other credit card which may be used for the purchase of goods or services and which is not a lender credit card.

(24) ``Merchandise certificate'' means a writing issued by a seller not redeemable in cash and usable in its face amount in lieu of cash in exchange for goods or services.

(25) ``Official fees'' means:

(a) Fees and charges prescribed by law which actually are or will be paid to public officials for determining the existence of or for perfecting, releasing, or satisfying a security interest related to a consumer credit sale, consumer lease, or consumer loan; or

(b) premiums payable for insurance in lieu of perfecting a security interest otherwise required by the creditor in connection with the sale, lease, or loan, if the premium does not exceed the fees and charges de- scribed in paragraph (a) which would otherwise be payable.

(26) ``Open end credit'' means an arrangement pursuant to which:

(a) A creditor may permit a consumer, from time to time, to purchase goods or services on credit from the creditor or pursuant to a credit card, or to obtain loans from the creditor or pursuant to a credit card;

(b) the unpaid balance of amounts financed and the finance and other appropriate charges are debited to an account;

(c) the finance charge, if made, is computed on the outstanding un- paid balances of the consumer's account from time to time; and

(d) the consumer has the privilege of paying the balances in install- ments.

(27) ``Organization'' means a corporation, government or govern- mental subdivision or agency, trust, estate, partnership, cooperative, or association.

(28) ``Payable in installments'' means that payment is required or per- mitted by agreement to be made in (a) two or more periodic payments, excluding a down payment, with respect to a debt arising from a consumer credit sale pursuant to which a finance charge is made, (b) four or more periodic payments, excluding a down payment, with respect to a debt arising from a consumer credit sale pursuant to which no finance charge is made, or (c) two or more periodic payments with respect to a debt arising from a consumer loan. If any periodic payment other than the down payment under an agreement requiring or permitting two or more periodic payments is more than twice the amount of any other periodic payment, excluding the down payment, the consumer credit transaction is ``payable in installments.''

(29) ``Person'' includes a natural person or an individual, and an organization.

(30) ``Person related to'' with respect to an individual means (a) the spouse of the individual, (b) a brother, brother-in-law, sister, sister-in-law of the individual, (c) an ancestor or lineal descendant of the individual or the individual's spouse, and (d) any other relative, by blood, adoption or marriage, of the individual or such individual's spouse who shares the same home with the individual. ``Person related to'' with respect to an organization means (a) a person directly or indirectly controlling, con- trolled by or under common control with the organization, (b) an officer or director of the organization or a person performing similar functions with respect to the organization or to a person related to the organization, (c) the spouse of a person related to the organization, and (d) a relative by blood, adoption or marriage of a person related to the organization who shares the same home with such person.

(31) ``Presumed'' or ``presumption'' means that the trier of fact must find the existence of the fact presumed unless and until evidence is in- troduced which would support a finding of its nonexistence.

(32) ``Principal'' means the total of the amount financed and the pre- paid finance charges as authorized by subsection (9) of K.S.A. 16a-2-401, and amendments thereto.

(33) ``Sale of goods'' includes any agreement in the form of a bailment or lease of goods if the bailee or lessee agrees to pay as compensation for use a sum substantially equivalent to or in excess of the aggregate value of the goods involved and it is agreed that the bailee or lessee will become, or for no other or a nominal consideration has the option to become, the owner of the goods upon full compliance with such bailee's or lessee's obligations under the agreements.

(34) ``Sale of an interest in land'' includes a lease in which the lessee has an option to purchase the interest and all or a substantial part of the rental or other payments previously made by the lessee are applied to the purchase price.

(35) ``Sale of services'' means furnishing or agreeing to furnish serv- ices and includes making arrangements to have services furnished by an- other.

(36) ``Seller'': Except as otherwise provided, ``seller'' includes an as- signee of the seller's right to payment but use of the term does not in itself impose on an assignee any obligation of the seller with respect to events occurring before the assignment.

(37) ``Services'' includes (a) work, labor, and other personal services, (b) privileges with respect to transportation, hotel and restaurant accom- modations, education, entertainment, recreation, physical culture, hos- pital accommodations, funerals, cemetery accommodations, and the like, and (c) insurance.

(38) ``Supervised financial organization'' means a person, other than an insurance company or other organization primarily engaged in an in- surance business:

(a) Organized, chartered, or holding an authorization certificate un- der the laws of this state or of the United States which authorize the person to make loans and to receive deposits, including a savings, share, certificate or deposit account; and

(b) subject to supervision by an official or agency of this state or of the United States.

(39) ``Supervised lender'' means a person authorized to make or take assignments of supervised loans, either under a license issued by the ad- ministrator (section K.S.A. 16a-2-301) or as a supervised financial organ- ization (section K.S.A. 16a-1-301 (38)).

(40) ``Supervised loan'' means a consumer loan, including a loan made pursuant to open end credit, in which the rate of the finance charge, calculated according to the actuarial method, exceeds 12% per year.

(41) ``Written agreement'' means an agreement such as a promissory note, contract or lease that is evidence of the indebtedness. A letter that merely confirms an oral agreement does not constitute a written agree- ment for purposes of this subsection.

(42) ``Written administrative interpretation'' means any written com- munication from the consumer credit commissioner which is the official interpretation as so stated in said written communication by the consumer credit commissioner of the Kansas uniform consumer credit code and rules and regulations pertaining thereto.

Sec. 3. K.S.A. 16a-2-401a is hereby amended to read as follows: 16a- 2-401a. The dollar amounts of $300 and $1,000 in subsection (2) of K.S.A. 16a-2-401, and amendments thereto, are subject to change pursuant to the provisions on adjustment of dollar amounts as follows:

(1) From time to time the dollar amounts designated in this section as subject to change shall change, as provided in this section, according to and to the extent of changes in the consumer price index for all urban wage earners and clerical workers consumers: U.S. city average, all items, 1967 = 100, compiled by the bureau of labor statistics, United States department of labor, and hereafter referred to as the index.

(2) The designated dollar amounts shall change on July 1 of each even-numbered year if the percentage of change, calculated to the nearest whole percentage point, between the index at the end of the year in which the change in the designated dollar amount last changed is 10% or more, except that:

(a) The portion of the percentage change in the index in excess of a multiple of 10% shall be disregarded and the dollar amounts shall change only in multiples of 10% of the amounts currently in effect and adjusted to the nearest $5 increment; and

(b) the dollar amounts shall not change if the amounts required by this section are those currently in effect pursuant to this act as a result of earlier application of this section.

(3) If the index is revised, the percentage of change pursuant to this section shall be calculated on the basis of the revised index. If a revision of the index changes the reference base index, a revised reference base index shall be determined by multiplying the reference base index then applicable by the rebasing factor furnished by the bureau of labor statis- tics. If the index is superseded, the index referred to in this section is the one represented by the bureau of labor statistics as reflecting most ac- curately changes in the purchasing power of the dollar for consumers.

(4) The administrator shall adopt rules and regulations announcing:

(a) On or before April 30 of each year in which dollar amounts are to change, the changes in dollar amounts required by subsection (2); and

(b) promptly after the changes occur, changes in the index required by subsection (3) including, if applicable, the numerical equivalent of the reference base index under a revised reference base index and the des- ignation or title of any index superseding the index.

(5) A person does not violate this act with respect to a transaction otherwise complying with the uniform consumer credit code if such per- son relies on dollar amounts either determined according to subsection (2) or appearing in the last rule and regulation of the administrator an- nouncing the then current dollar amounts.

Sec. 4. K.S.A. 16a-2-502 is hereby amended to read as follows: 16a- 2-502. (1) The parties to a consumer credit transaction may contract for a delinquency charge on any installment not paid in full within 10 days after its scheduled or deferred due date in an amount not exceeding 5% of the unpaid amount of the installment or $25, whichever is less.

(2) As an alternative to the delinquency charge set forth in subsection (1), the parties to a consumer credit transaction may contract for a delin- quency charge not to exceed $10 on any installment not paid in full within 10 days after its scheduled or deferred due date, except that if the sched- uled payment amount is $25 or less, the maximum delinquency charge shall be $5.

(3) A delinquency charge under subsection (2) may be collected only once on an installment however long it remains in default. A delinquency charge may be collected at the time it accrues or at any time thereafter.

(4) No delinquency charge may be collected on an installment which is paid in full within 10 days after its scheduled or deferred installment due date even though an earlier maturing installment or a delinquency charge on an earlier installment may not have been paid in full.

(5) For delinquency charge purposes, a payment made prior to the due date of the next installment payment shall be applied to the previous installment. For all other purposes, payments are applied to installments in the order in which they fall due.

Sec. 5. K.S.A. 16a-1-301, 16a-2-401a and 16a-2-502 are hereby re- pealed.

Sec. 6. This act shall take effect and be in force from and after its publication in the statute book.

Approved April 14, 1996.