I'm working on late fees and dealer paper and need input. The Fed Box on my Retail Installment Sales Contract - Simple Interest says "Late Charge: If a payment is late, Buyer will be charged a fee of $___ or 5% of the unpaid amount of the payment, whichever is greater" and the fine print on the same note says "greater of 5% of unpaid amount of payment or up to the amount set for delinquency charges by the Admin of the Oklahoma Department of Consumer Credit at the time the payment becomes delinquent. Buyer agrees that amount set by reule of the Admin. may increase to an amount greater than that disclosed in this Contract". Each Dealer may not put the same dollar amount in the blank. Some may put $16.50, $18.00, $18.50 and $19.00. When we purchase the dealer paper, can we default that charge to each customer to the same amount. Say 5% of unpaid payment or $19.00, whichever is greater? Can we put this in our letter to the customer at time of purchase?

As the buyer of that paper, you are obligated to whatever is stated in the note. It is a contract that the consumer agreed to in writing with the dealer. Any changes must be in writing and agreed to by the customer. You could ask the customer to agree to the change, but they are under no obligation to make a change to the contract. We have similar issues with dealer paper. You have to harp on the dealers a little without driving a wedge in your relationship.

Thanks for the help. I was afraid of that, but was really hoping that the fine print would allow otherwise. (Heavy sigh!). Again, thanks alot.

Quote:

---

or up to the amount set for delinquency charges by the Admin of the Oklahoma Department of Consumer Credit at the time the payment becomes delinquent

Can we put this in our letter to the customer at time of purchase?

---

You will need to check your state law. We have similar language on all our consumer loan notes that references the applicable IN Code. What this language allows, by contract, is if the state increases the amount of late charges that can be collected we can do a system change to increase our late charge. We do not exercise that option but it is there should we at a later date decide to.

So, if the above language (on your contract) is intended to allow you to collect the maximum allowable late charge under state law, then I would say that you could systematically change your late charge when the state increases the maximum. However, I do not think you could change it on a new contract - as mentioned you have contracted for this charge and there have been no state changes - therefore if you chose to initially contract for less than allowable then you're stuck with it until the state increases the maximum late charge that can be collected.

That is what I was thinking, but wanted to hear if from someone else. I will verify state law will not contradict. Thanks!