Retail Installment SalesRestrictions on Retail Installment Contracts

Section § 1804.1

Explanation

This law outlines certain things that cannot be included in contracts or obligations. It prevents clauses that stop buyers from claiming or defending against sellers, accelerating debt if the buyer hasn't defaulted, or misusing power of attorney. Buyers can't give up their right to sue for illegal actions during payment collection or repossession. The seller can't start legal action in another county and must not take a security interest in a senior's primary residence for home improvements. Also, a contract can't charge the buyer for canceling it, and sellers need to avoid making buyers sign away claims, rights, or give unwanted advantages.

No contract or obligation shall contain any provision by which:
(a)CA Civil Law Code § 1804.1(a) The buyer agrees not to assert against a seller a claim or defense arising out of the sale or agrees not to assert against an assignee such a claim or defense other than as provided in Section 1804.2.
(b)CA Civil Law Code § 1804.1(b) In the absence of the buyer’s default in the performance of any of his or her obligations, the holder may accelerate the maturity of any part or all of the amount owing thereunder.
(c)CA Civil Law Code § 1804.1(c) A power of attorney is given to confess judgment in this state, or an assignment of wages is given; provided, that nothing herein contained shall prohibit the giving of an assignment of wages contained in a separate instrument, executed pursuant to Section 300 of the Labor Code.
(d)CA Civil Law Code § 1804.1(d) The seller or holder of the contract or other person acting on his or her behalf is given authority to enter upon the buyer’s premises unlawfully or to commit any breach of the peace in the repossession of goods.
(e)CA Civil Law Code § 1804.1(e) The buyer waives any right of action against the seller or holder of the contract or other person acting on his or her behalf, for any illegal act committed in the collection of payments under the contract or in the repossession of goods.
(f)CA Civil Law Code § 1804.1(f) The buyer executes a power of attorney appointing the seller or holder of the contract, or other person acting on his or her behalf, as the buyer’s agent in collection of payments under the contract or in the repossession of goods.
(g)CA Civil Law Code § 1804.1(g) The buyer relieves the seller from liability for any legal remedies which the buyer may have against the seller under the contract or any separate instrument executed in connection therewith.
(h)CA Civil Law Code § 1804.1(h) The buyer agrees to the payment of any charge by reason of the exercise of his or her right to rescind or void the contract.
(i)CA Civil Law Code § 1804.1(i) The seller or holder of the contract is given the right to commence an action on a contract under the provisions of this chapter in a county other than the county in which the contract was in fact signed by the buyer, the county in which the buyer resides at the commencement of the action, the county in which the buyer resided at the time that the contract was entered into, or in the county in which the goods purchased pursuant to the contract have been so affixed to real property as to become a part of such real property.
(j)CA Civil Law Code § 1804.1(j) The seller takes a security interest, other than a mechanics’ lien, in the buyer’s real property which is the buyer’s primary residence where the buyer is a person who is 65 years of age or older and the contract is for a home improvement, as defined in Section 7151.2 of the Business and Professions Code.
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Section § 1804.2

Explanation

If a seller transfers their rights in a sale to someone else, called the assignee, the assignee inherits any complaints or defenses the buyer had against the seller because of the sale. However, the assignee's responsibility can't exceed the amount of money the buyer owes them. If the assignee ends up having to deal with these issues, they can seek compensation from the original seller.

(a)CA Civil Law Code § 1804.2(a) An assignee of the seller’s rights is subject to all equities and defenses of the buyer against the seller arising out of the sale, notwithstanding an agreement to the contrary, but the assignee’s liability may not exceed the amount of the debt owing to the assignee at the time of the assignment.
(b)CA Civil Law Code § 1804.2(b) The assignee shall have recourse against the seller to the extent of any liability incurred by the assignee pursuant to this section regardless of whether the assignment was with or without recourse.
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Section § 1804.3

Explanation

This law says that contracts, other than service contracts, can't include a claim on items that you've already fully paid for or haven't been sold yet. If a contract involves goods and wrongly includes a claim on real estate unless the goods are supposed to be attached to the property, it goes against the rules and may lead to penalties. These rules have been in place since October 1, 1982.

(a)CA Civil Law Code § 1804.3(a) No contract other than one for services shall provide for a security interest in any goods theretofore fully paid for or which have not been sold by the seller.
(b)CA Civil Law Code § 1804.3(b) Any contract for goods which provides for a security interest in real property where the primary goods sold are not to be attached to the real property shall be a violation of this chapter and subject to the penalties set forth in Article 12.2 (commencing with Section 1812.6).
(c)CA Civil Law Code § 1804.3(c) This section shall become operative October 1, 1982.
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Section § 1804.4

Explanation

In California, if a contract includes a part that goes against the rules of this specific chapter, that part won't be enforceable. However, the rest of the contract will still be valid and can be enforced.

Any provision in a contract which is prohibited by this chapter shall be void but shall not otherwise affect the validity of the contract.
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