TITLE 2. CREDIT
CHAPTER 1. RETAIL INSTALLMENT SALES
Article 10. Retail Installment Accounts
California Civil Code Section 1810-1810.12
1810. For the purposes of this article, a retail installment
account agreement shall be deemed to be accepted by the buyer if (1)
the buyer signs the agreement, including signing an application
containing the terms of the agreement, or (2) the account is used by
the buyer or a person who has been authorized by the buyer to use the
account, and the buyer has been notified in writing that the use of
the credit card will mean that the agreement has been accepted by the
buyer. The agreement shall not become effective unless and until
the buyer has been given or provided with the disclosures required
pursuant to Section 1810.1, and has accepted the agreement as
provided in this section. A subsequent change in any term of the
agreement shall not become effective until the seller has given
notice of the change and complies with the provisions of subdivision
(d) of Section 1810.3.
1810.1. Notwithstanding any other provisions of this article to the
contrary, before the first transaction is made on any retail
installment account, the seller shall disclose to the buyer in a
single written statement, which the buyer may retain, in terminology
consistent with the requirements of Section 1810.3, each of the
following items, to the extent applicable:
(a) The conditions under which a finance charge may be imposed,
including an explanation of the time period, if any, within which any
credit extended may be paid without incurring a finance charge.
(b) The method of determining the balance upon which a finance
charge may be imposed.
(c) The method of determining the amount of the finance charge,
including the method of determining any minimum, charge which may be
imposed as a finance charge.
(d) Where one or more periodic rates may be used to compute the
finance charge, each such rate, the range of balances to which it is
applicable, and the corresponding annual percentage rate determined
by multiplying the periodic rate by the number of periods in a year.
(e) The conditions under which any other charges may be imposed,
and the method by which they will be determined.
(f) The conditions under which the creditor may retain or acquire
any security interest in any property to secure the payment of any
credit extended on the account, and a description or identification
of the type of the interest or interests which may be so retained, or
(g) The minimum periodic payment required.
In addition to the penalties provided under Article 12.2
(commencing with Section 1812.6) of this chapter, until the seller
delivers the written statement required by this section, the buyer
shall be obligated to pay only the cash price of the goods or
1810.2. Subject to the other provisions of this article, the seller
or holder of a retail installment account may charge, receive and
collect a finance charge as disclosed to the buyer pursuant to
1810.3. (a) Except in the case of an account which the seller deems
to be uncollectible or with respect to which delinquency collection
procedures have been instituted, the seller of any retail installment
account shall mail or deliver to the buyer for each billing cycle at
the end of which there is an outstanding debit balance in excess of
one dollar ($1) in that account or with respect to which a finance
charge is imposed, a statement or statements which the buyer may
retain, setting forth in accordance with subdivision (c) each of the
following items to the extent applicable:
(1) The outstanding balance in the account at the beginning of the
billing cycle, using the term "previous balance."
(2) The amount and date of each extension of credit or the date
the extension of credit is debited to the account during the billing
cycle and, unless previously furnished, a brief identification of any
goods or services purchased or other extension of credit.
(3) The total amounts credited to the account during the billing
cycle for payments, using the term "payment," and for other credits,
including returns, rebates of finance charges, and adjustments, using
the term "credits," and unless previously furnished, a brief
identification of each of the items included in the other credits.
(4) The amount of any finance charge, using the term "finance
charge," debited to the account during the billing cycle, itemized
and identified to show the amounts, if any, due to the application of
periodic rates and the amount of any other charge included in the
finance charge, such as a minimum charge, using appropriate
(5) Each periodic rate, using the term "periodic rate" (or "rates"
), that may be used to compute the finance charge (whether or not
applied during the billing cycle), and the range of balances to which
it is applicable.
(6) The balance on which the finance charge was computed, and a
statement of how that balance was determined. If any balance is
determined without first deducting all credits during the billing
cycle, that fact and the amount of the credits shall also be
(7) The closing date of the billing cycle and the outstanding
balance in the account on that date, using the term "new balance,"
accompanied by the statement of the date by which, or the period, if
any, within which, payment must be made to avoid additional finance
(b) The seller shall mail or deliver the statements required by
subdivision (a) at least 14 days prior to any date or the end of any
time period required to be disclosed under paragraph (7) of
subdivision (a) in order for the consumer to avoid an additional
finance or other charge. A seller that fails to meet this
requirement shall not collect any finance or other charges imposed as
a result of the failure.
(c) The disclosures required by subdivision (a) may be made on the
face of the periodic statement or on its reverse side. In addition,
the disclosures required by subdivision (a) may be made on the
periodic statement supplemented by separate statement forms if they
are enclosed together and delivered to the customer at the same time
and if all of the following conditions are met:
(1) The disclosures required by paragraph (1) of subdivision (a)
shall appear on the face of the periodic statement. If the amounts
and dates of the charges and credits required to be disclosed under
paragraphs (2) and (3) of subdivision (a) are not itemized on the
face or reverse side of the periodic statement, they shall be
disclosed on a separate statement or separate slips which shall
accompany the periodic statement and identify each charge and credit
and show the date and amount thereof. Identification of goods or
services purchased may be made on an accompanying slip or by symbol
relating to an identification list printed on the statement. If the
disclosures required under paragraph (4) of subdivision (a) are not
itemized on the face or reverse side of the periodic statement, they
shall be disclosed on a separate statement which shall accompany the
(2) The disclosures required by paragraph (5) of subdivision (a)
and a reference to the amounts required to be disclosed under
paragraphs (4) and (6) of subdivision (a), if not disclosed together
on the face or the reverse side of the periodic statement, shall
appear together on the face of a single supplemental statement which
shall accompany the periodic statement.
(3) The face of the periodic statement shall contain one of the
following notices, as applicable: "NOTICE: See reverse side for
important information" or "NOTICE: See accompanying statement(s) for
important information" or "NOTICE: See reverse side and
accompanying statement(s) for important information."
(4) The disclosures shall not be separated so as to confuse or
mislead the customer, or to obscure or detract attention from the
information required to be disclosed.
(d) If any change is to be made in terms of a retail installment
account previously disclosed to the buyer, the seller shall mail or
deliver to the buyer written disclosure of the proposed change not
less than 30 days prior to the effective date of the change or 30
days prior to the beginning of the billing cycle within which the
change will become effective, whichever is the earlier date. When
the change involves a reduction of any component of a finance charge
or other charge, the notice shall be sufficient if it appears on or
accompanies the periodic statements mailed or delivered to buyers
receiving periodic statements in the ordinary course of business.
When the change involves an increase in any component of a finance
charge, as defined in Section 1802.10, or involves a change in a
charge permitted by Section 1810.4 or a change in the attorney's fee
provision in the agreement pursuant to Section 1810.4, the change
shall be effective only with respect to purchases made on or after
the effective date of the change.
(e) (1) If any outstanding credit balance in excess of one dollar
($1) exists in a retail installment account, the seller shall mail or
deliver to the buyer at the end of the billing cycle in which the
credit balance is created either of the following:
(A) A cash refund in the amount of the outstanding credit.
(B) A statement setting forth the credit balance, and thereafter
shall mail or deliver to the buyer a statement setting forth the
credit balance no fewer than two additional times during the
six-month period following creation of the credit balance.
(2) If the credit balance exists for a period of 90 days, the
seller shall, at his or her option, do either of the following:
(A) Notify the buyer of his or her right to request and receive a
cash refund in the amount of the outstanding credit balance in two
successive statements covering, respectively, each of the two
successive billing cycles immediately following the 90-day period.
The notice is to be accomplished by a clear and conspicuous
disclosure on or enclosed with each of the two successive statements,
each of which shall be accompanied by a self-addressed return
envelope. The disclosure shall contain the following information and
may be in the following form:
"We owe you ____. Your credit balance will be refunded on
request. If you don't request a refund, six months from the first
appearance of a "credit balance" on your bill, your credit balance
will be refunded automatically.
"If your credit balance is $1.00 or less, it will not be refunded
unless requested, and after 6 months, it will not be credited against
"You may obtain a refund of your credit balance by mail by
presenting your statement at our store or by returning the top half
of your statement in the enclosed envelope."
If between the sending of the first notice and the sending of the
second notice required by this subparagraph, the outstanding credit
balance is refunded to the buyer or otherwise disposed of, the
sending of the second notice shall not be required.
(B) Refund to the buyer the outstanding credit balance at any time
after the credit balance is created in the buyer's account and prior
to the date by which the first notice of the outstanding balance
would have been sent had the seller elected to proceed under
(f) (1) If a retail installment account with an outstanding credit
balance in excess of one dollar ($1) which has been determined to be
correct by the seller is dormant for a period of 180 days after the
credit balance is created in the buyer's account, the seller shall
mail or deliver a refund in the amount of the outstanding credit
balance to the buyer at the buyer's last known address.
(2) If any refund is returned to the seller with a notification to
the effect that the addressee is not located at the address to which
it was sent, the seller shall make one remailing of the refund with
an address correction request, and shall mail the refund to the
corrected address, if it is obtained.
(3) If the refund reflecting an outstanding credit balance in
excess of twenty-five dollars ($25) is again returned, the seller
shall reinstate the full amount of the outstanding credit balance on
the buyer's account to be retained and credited against future
purchases for one year from the date on which the remailed refund was
returned. The seller may continue to attempt to obtain a current
mailing address for the buyer by whatever means the seller deems
appropriate. Except as provided in subdivision (g), the seller shall
not be required to take any further action with respect to sending
any statement of the credit balance or otherwise with respect to the
credit balance, unless the buyer of the account thereafter requests a
refund of the credit balance, in which event the seller shall either
make the refund or provide a written explanation as provided in
paragraph (5) of this subdivision.
(4) If a remailed refund reflecting an outstanding credit balance
of twenty-five dollars ($25) or less is again returned, the seller,
except as provided in subdivision (g), shall not be required to take
any further action with respect to sending any statement of the
credit balance to the buyer or otherwise with respect to the credit
balance, unless the buyer of the account thereafter requests a refund
of the credit balance, in which event the seller shall either make
the refund or provide a written explanation as provided in paragraph
(5) of this subdivision.
(5) If a buyer requests, in person or by mail, a refund of a
credit balance in any amount which has been reflected at any time on
the buyer's account, the seller shall, within 30 days of receipt of
the request, either refund the amount requested, or furnish the
customer with a written explanation, with supporting documentation
when available, of the reasons for refusing to refund the amount
(6) If a buyer, in writing, requests a seller to retain an
outstanding credit balance on his or her account, the seller shall
not be required to give notification as otherwise required by
subdivisions (e) and (f).
(g) If an outstanding credit balance remains unrefundable for
three years from the date it was created in the buyer's account, then
the amount of the buyer's outstanding credit balance shall escheat
to the state as property included within Section 1520 of the Code of
Civil Procedure. Those funds shall be paid or delivered to the
Controller, and may thereafter be claimed, as specified in Chapter 7
(commencing with Section 1500) of Title 10 of Part 4 of the Code of
(h) For the purposes of this section, an outstanding credit
balance is created at the end of the billing cycle in which the
credit balance is first recorded on a buyer's account and is created
anew at the end of the billing cycle in which the recorded amount of
an existing credit balance is changed because of the buyer's use of
his or her account.
1810.4. The finance charge shall include all charges incident to
investigating and making the retail installment account. No fee,
expense, delinquency, collection, or other charge whatsoever shall be
taken, received, reserved, or contracted by the seller or holder of
a retail installment account except as provided in this section. A
seller may, however, in an agreement which is accepted by the buyer
and of which a copy is given or furnished to the buyer provide for
the payment of attorney's fees and costs in conformity with Article
11 (commencing with Section 1811.1). Any subsequent change in any
term of the agreement shall not become effective until the seller has
given notice of the change and complies with the provisions of
subdivision (d) of Section 1810.3. When credit cards are issued in
connection with a retail installment account, the seller, either in
the agreement or after giving the notice required by subdivision (d)
of Section 1810.3, may require the payment of an annual fee of not
more than fifteen dollars ($15) for membership in the credit card
plan, which fee shall not be deemed a finance charge or interest for
any purpose of the law.
The seller or holder of a retail installment account may charge
and collect a fee not to exceed fifteen dollars ($15) for the return
by a depository institution of a dishonored check, negotiable order
of withdrawal, or share draft issued in connection with the retail
installment account. The fee is not included in charges as defined
in this chapter or in determining the applicable charges which may be
made under this chapter.
1810.5. If the cost of any insurance is to be separately charged to
the buyer, there shall be an agreement to this effect, signed by
both the buyer and the seller, a copy of which shall be given or
furnished to the buyer. Such agreement shall state whether the
insurance is to be procured by the buyer or the seller or holder. If
the insurance is to be procured by the seller or holder, the seller
or holder shall comply with the provisions of Section 1803.5.
1810.6. Nothing in this article prohibits the execution of an
agreement between a buyer and seller whereby the seller retains a
security interest in goods sold to the buyer until full payment
therefor has been made. For purposes of release of the security
interests, in the case of goods or services purchased on different
dates, the first purchased shall be deemed first paid for, and in the
case of goods or services purchased on the same date, the lowest
priced shall be deemed first paid for, and all amounts allocated to
payment of these goods or services shall be applied to accomplish
that result. However, any downpayment on a specific purchase shall be
deemed to be allocated in its entirety to such purchase.
1810.7. No retail installment account shall require or entail the
execution of any note or series of notes by the buyer which when
separately negotiated will cut off as to third parties any right of
action or defense which the buyer may have against the seller.
1810.8. The provisions of Sections 1806.1 and 1806.4 shall be
applicable to retail installment accounts.
1810.10. (a) Notwithstanding the provision of any contract to the
contrary, except as provided in subdivision (b) or (c), no retail
seller shall assess any finance charge against the outstanding
balance for goods purchased under a retail installment account until
the goods are in the buyer's possession.
(b) A finance charge may be assessed against the outstanding
balance for such undelivered goods, as follows:
(1) From the date when such goods are available for pickup by the
buyer and the buyer is notified of their availability, or
(2) From the date of purchase, when such goods are delivered or
available for pickup by the buyer within 10 days of the date of
(c) In the case of a home improvement contract as defined in
Section 7151.2 of the Business and Professions Code, a finance charge
may be assessed against the amount financed from the approximate
date of commencement of the work as set forth in the home improvement
1810.11. The buyer may request, not more frequently than once a
year, that the seller inform the buyer of the total amount of finance
charges assessed on the account during the preceding calendar year
and the seller shall provide that information to the buyer within 30
days of receiving the request, without charge.
If the buyer's request for the information is made in writing, the
seller shall provide the information in writing, provided, however,
that if the seller is required to furnish the buyer with a periodic
billing or periodic statement of account or furnishes the billing or
statement of account, the requested statement of finance charges may
be furnished along with the periodic billing or periodic statement of
"Seller," for the purposes of this section, means a person engaged
in the business of selling goods or furnishing services to retail
buyers whose annual sales pursuant to retail installment accounts in
California have exceeded one hundred fifty million dollars
($150,000,000) in the seller's last two consecutive years.
1810.12. (a) Notwithstanding Section 1810.4, a seller or holder of
a retail installment account may, subject to subdivision (d) of
Section 1810.3, provide that for each installment in default the
buyer shall pay a delinquency charge not in excess of one of the
(1) For a period in default of not less than 10 days, an amount
not in excess of ten dollars ($10).
(2) For a period in default of not less than 15 days, an amount
not in excess of fifteen dollars ($15).
(b) Only one delinquency charge may be collected on any
installment regardless of the period during which it remains in
default. No delinquency charge shall be imposed for any default of
payment on any payment due prior to the mailing or delivery to the
buyer of the written disclosure concerning the delinquency charge
provided by the seller or holder of a retail installment account
pursuant to subdivision (d) of Section 1810.3. Payments timely
received by the seller under a written extension or deferral
agreement shall not be subject to any delinquency charge. The
agreement may also provide for payment of any actual and reasonable
costs of collection occasioned by removal of the goods from the state
without written permission of the holder, or by the failure of the
buyer to notify the holder of any change of residence, or by the
failure of the buyer to communicate with the holder for a period of
45 days after any default in making payments due under the agreement.
(c) Notwithstanding subdivision (b) of Section 1810.3, the seller
or holder of a retail installment account shall provide a minimum of
20 days between the monthly billing date and the date upon which the
minimum payment is due, exclusive of the applicable grace period
provided in subdivision (a).
California Credit Laws Menu