422.421 Variable rate transaction.

574 words·~3 min read·/wi/chapter-422/422-421-3

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

(1)Definitions. In this section:

(a)“Approved index” means any relevant index approved by the administrator that is beyond the control of the creditor and is verifiable by the customer.

1. “Consummation” with respect to a variable rate transaction other than one pursuant to an open-end credit plan means the time at which a customer becomes contractually obligated on the variable rate transaction.

2. “Consummation” with respect to a variable rate transaction pursuant to an open-end credit plan means the time at which a creditor accepts a customer’s application and authorizes the customer’s participation in the plan or the time at which an amendment to an existing open-end credit plan is accepted by or becomes binding on the customer under sub.

(11)or s. 422.415 .

(c)“Variable rate transaction” means any open-end credit plan and any consumer credit transaction other than one pursuant to an open-end credit plan, the terms of which permit the rate of finance charge to be adjusted from time to time during the term of the plan or transaction other than by an adjustment under s. 422.415 , but does not include any consumer credit transaction the terms of which permit only the rates of finance charge that are initially numerically specified in any document evidencing the plan or transaction.

(2)Variable rate transactions permitted. Creditors may engage in variable rate transactions subject to the conditions and limitations of this section.

(3)Approved index adjustments.

(a)Adjustments in the rate of finance charge of a variable rate transaction that are based upon changes in an approved index shall be made in accordance with provisions set forth in the documents evidencing the variable rate transaction including provisions specifying all of the following:

1. The method of determining approved index values.

2. The relationship between approved index values and the rates of finance charge.

3. The method of implementing the adjustments.

4. The frequency of adjustments.

5. Any limits on the magnitude of adjustments.

6. Any minimum increments of adjustments.

7. The method of implementing any rounding of the rates of finance charge.

(b)The provisions under par.

(a)5. may specify limited magnitudes of decreases in the rate of finance charge if the provisions specify limited magnitudes of increases that are at least as restrictive.

(c)If a creditor fails at any time to increase the rate of finance charge to the extent permitted by the provisions under par.

(a), the creditor may not carry over and add any portion of the increase to any subsequent adjustment. Failure at any time to increase the rate of finance charge to the extent permitted by the provisions under par.

(a)does not affect in any way the creditor’s right to prospectively reestablish the relationship between approved index values and the rates of finance charge in accordance with the provisions under par.

(a).

(4)Other adjustments.

(a)Adjustments in the rate of finance charge of a variable rate transaction that are not based upon changes in an approved index shall be made in accordance with provisions set forth in the documents evidencing the variable rate transaction, including provisions specifying all of the following:

1. If based upon changes in an index other than an approved index, the method of determining index values.

2. If based upon changes in an index other than an approved index, the relationship between index values and the rates of finance charge.