Clarifies permissible credit card interest rates. Defines "interest" to include credit card fees and charges.

A BILL FOR AN ACT

SECTION 1. Section 478-4, Hawaii Revised Statutes, is amended to read as follows:

"§478-4 Rate by written contract. (a) It shall in no case be deemed unlawful, with respect to any consumer credit transaction (except a credit card agreement) and any home business loan to stipulate by written contract, for any rate of simple interest not exceeding one per cent per month or twelve per cent a year or, in the event the creditor is a financial institution regulated under chapter 412 (other than a trust company or a credit union), for any rate of simple interest not exceeding two per cent per month or twenty-four per cent a year[; and it shall in no case be unlawful, with respect to any credit card agreement, to stipulate by written contract for any rate of simple interest not exceeding one and one-half per cent per month or eighteen per cent a year].

(b) As an alternative to the rate of interest specified in subsection (a), it shall be lawful with respect to any consumer credit transaction (except a credit card agreement) and any home business loan to stipulate by written contract for the payment and receipt of a finance charge in any form or forms at an annual percentage rate not to exceed twelve per cent, or twenty-four per cent in the event the creditor is a financial institution regulated under chapter 412 (other than a trust company or a credit union), together in either case with any other charges that are excluded or excludable from the determination of finance charge under the Truth in Lending Act[, and, with respect to any credit card agreement, to stipulate by written contract for the payment and receipt of a finance charge at an annual percentage rate not to exceed eighteen per cent, together with any other charges that are excluded or excludable from the determination of finance charge under the Truth in Lending Act]. The rates in this paragraph shall be available as alternative permissible rates for any of the credit transactions referred to, whether in fact or in law the Truth in Lending Act applies to the transaction, notwithstanding the advance, fixed, or variable manner in which interest or finance charge may be computed under the contract, and whether the contract uses the terms interest, annual percentage rate, finance charge or any combination of such terms. For rate computation purposes, with respect to any contract to which this paragraph may apply, the creditor conclusively shall be presumed to have given all disclosures in the manner, form, and at the time contemplated by the Truth in Lending Act, including those necessary to exclude any charges from the finance charge.

(c) With respect to any transaction other than a consumer credit transaction, a home business loan or a credit card agreement, it shall be lawful to stipulate by written contract for any rate of interest not otherwise prohibited by law.

(d) The rate limitations contained in subsections (a) and (b) of this section and section 478-11.5 shall not apply to any credit transaction authorized by, and entered into in accordance with the provisions of, articles 9 and 10 of chapter 412 or 476.

(e) With respect to a credit card agreement, it shall be lawful to stipulate by written contract any amount of interest authorized by section 478-11.5."

SECTION 2. Section 478-11.5, Hawaii Revised Statutes, is amended to read as follows:

"§478-11.5 Credit cards. (a) With regard to every credit card issuer wherever located and a customer who is a resident of this State and who is given the opportunity to enter into a credit card plan, every solicitation and application for the credit card plan shall set forth all of the following:

(b) With respect to any credit card agreement, it shall in no case be deemed unlawful to stipulate by written contract for any amount of interest, except that the simple interest numerical periodic rate shall not exceed eighteen per cent per year. Prior to charging any fee or charge that constitutes interest under this subsection, the credit card issuer shall disclose the fee or charge to the credit card holder.

As used in this subsection, "interest" means the simple interest numerical periodic rate and any other fee, charge, or payment, directly or indirectly charged or received as an incident to or a condition of an extension of credit under a credit card agreement, including, but not limited to:

SECTION 3. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval.