HOUSE BILL No. 6540


     December 3, 2002, Introduced by Reps. Scranton and Lemmons and referred to the Committee on Insurance and Financial
Services.


        A bill to amend 1965 PA 332, entitled

   "Home improvement finance act,"

   by amending section 102 (MCL 445.1102), as amended by 1985

   PA 202, and by adding part 3A.

               THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

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             Sec. 102.  As used in this act, except where the context

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        clearly indicates otherwise:

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             (a) "Banking institution" means a bank, bank and trust com-

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        pany, trust company, savings bank, private bank, or a national

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        banking association, organized and doing business under the pro-

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        visions of any law of this state, or of any other state of the

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        United States, or under the provisions of any law of the United

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        States of America.

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             (b) "Cash price" means the cash sales price stated in a home

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        improvement installment contract, or the cash sales price of


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        goods and services that are the subject of a home improvement

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        charge sale, for which the contractor would sell or furnish to

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        the buyer and the buyer would buy or obtain from the contractor

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        the goods and services  which  THAT are the subject of the con-

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        tract or home improvement charge sale, if the sale were a sale

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        for cash, instead of a home improvement installment sale or home

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        improvement charge sale, and may include any taxes.

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             (c) "Collateral" means real or personal property subject to

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        a pledge, security interest, mortgage, encumbrance, judgment, or

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        other lien  which  THAT secures the performance of an obligation

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        of the buyer, or a surety or guarantor for the buyer, under a

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        home improvement installment contract or any extension, defer-

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        ment, renewal, or other revision.  thereof.

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             (d) "Down payment" means the amounts paid in money and in

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        goods to the home improvement contractor and allowances given by

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        the home improvement contractor to the buyer prior to or contem-

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        poraneous with the execution of a home improvement installment

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        contract.

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             (e) "Finance charge", "credit service charge", "service

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        charge", "time price differential", or a similar term means that

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        amount by which the time sale price exceeds the aggregate of the

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        cash price and the amounts, if any, included for insurance premi-

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        ums and official fees.

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             (f) "Financing agency" means a person, other than a home

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        improvement contractor, engaged, directly or indirectly, as prin-

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        cipal, agent, or broker in the business of purchasing, acquiring,

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        financing, soliciting, or arranging for the financing or



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        acquisition of home improvement installment contracts or home

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        improvement charge agreements or any obligation in connection

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        therewith.  It does not include a person to the extent that the

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        person makes bona fide commercial loans to contractors or financ-

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        ing agencies and takes assignments of, or an interest in, an

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        aggregation of  such  THE contracts only as security for  such

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        THE commercial loans under which, in the absence of default or

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        other bona fide breach of the loan contract, ownership of  such

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        THE contracts remains vested in the assignor and collection of

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        payments on  such  THE contracts is made by the assignor.

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             (g) "Goods" means chattels  which  THAT are furnished or

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        used in the modernization, rehabilitation, repair, alteration, or

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        improvement of real property, but not in the construction of new

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        homes.

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             (h) "Holder" means a person, including a contractor OR AN

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        ASSIGNEE, currently entitled to the rights of a contractor under

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        a home improvement installment contract or home improvement

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        charge agreement AND SUBJECT TO ALL THE RIGHTS AND DEFENSES THAT

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        A RETAIL BUYER MAY ASSERT AGAINST THE HOME IMPROVEMENT

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        CONTRACTOR.

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             (i) "Home improvement charge agreement" or "agreement" means

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        an instrument prescribing the terms of home improvement charge

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        sales, whether secured or unsecured,  which  THAT may be made

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        under the agreement  from time to time  and under the terms of

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        which a time price differential is to be computed in relation to

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        the buyer's unpaid balance.  from time to time.





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             (j) "Home improvement charge sale" means the sale of goods

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        and furnishing of services by a contractor to a retail buyer

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        pursuant to a home improvement charge agreement and as to which

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        sale the cash price is stated to be in excess of $300.00.

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             (k) "Home improvement contractor" or "contractor" means a

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        person who sells goods and services, or agrees to furnish or

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        render services, to a retail buyer pursuant to a home improvement

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        installment contract, or sells goods and services to a retail

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        buyer pursuant to a home improvement charge agreement, but not in

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        connection with construction of new homes.

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             (l) "Home improvement installment contract" or "contract"

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        means an agreement covering a home improvement installment sale,

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        whether contained in 1 or more documents, together with any

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        accompanying promissory note or other evidence of indebtedness,

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        pursuant to which the buyer promises to pay in installments all

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        or any part of the time sale price or prices of goods and serv-

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        ices, or services.  It does not include  such  an agree THAT DOES

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        ANY OF THE FOLLOWING:

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             (i)  Pertaining  PERTAINS to real property used for a com-

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        mercial or business purpose.

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             (ii)  Covering  COVERS the sale of goods by a person who

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         neither  DOES NOT directly  nor  OR indirectly 
    performs

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        PERFORM or  arranges  ARRANGE to perform any services in connec-

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        tion with the installation of or application of the goods.

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             (iii)  Covering  COVERS only an appliance designed to be

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        free-standing and not built into and permanently affixed as an

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        integral part of the structure  such as  INCLUDING, BUT NOT



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        LIMITED TO, a stove, freezer, refrigerator, air conditioner other

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        than one connected with a central heating system, hot water

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        heater, and  the like  ANY OTHER SIMILAR APPLIANCES.

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             (iv)  Covering  COVERS the sale of goods and the furnishing

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        of services or the furnishing of services  thereunder  for a cash

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        price  stated therein  of $300.00 or less.

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             (v)  If the  IS A loan THAT is contracted for or obtained

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        directly by the retail buyer from the lending institution,

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        person, or corporation.

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             (vi)  Which is  IS a home improvement charge agreement.

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             (m) "Home improvement installment sale" or "sale" means the

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        sale of goods and furnishing of services or the furnishing of

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        services by a contractor to a retail buyer pursuant to a home

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        improvement installment contract in which the cash price is

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        stated to be in excess of $300.00.

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             (N) "HOME IMPROVEMENT SUBCONTRACTOR" OR "SUBCONTRACTOR"

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        MEANS A PERSON WHO PURSUANT TO A CONTRACT BETWEEN HIMSELF OR HER-

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        SELF AND A PERSON OTHER THAN THE OWNER OR LESSEE OF THE REAL

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        PROPERTY PERFORMS ANY PART OF A CONTRACTOR'S CONTRACT OR AGREE-

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        MENT FOR AN IMPROVEMENT.

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             (O) "LENDER" MEANS A BANKING INSTITUTION, A FINANCING

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        AGENCY, OR A PERSON WHO, DIRECTLY OR INDIRECTLY, MAKES OR OFFERS

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        TO MAKE LOANS FOR THE MODERNIZATION, REHABILITATION, REPAIR,

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        ALTERATION, OR IMPROVEMENT OF REAL PROPERTY.

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             (P)  (n)  "Official fees" means the fees required by law to

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        be paid to the appropriate public officer for obtaining any

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        permit or filing or recording or releasing any judgment,



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        mortgage, or other lien or perfecting any security interest taken

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        or reserved as security in connection with a home improvement

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        installment contract.

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             (Q)  (o)  "Person" means an individual, partnership, associ-

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        ation, business corporation, banking institution, nonprofit cor-

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        poration, common law trust, joint stock company, or any other

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        group of individuals, however organized.

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             (R)  (p)  "Principal amount financed" means the cash price

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        of the goods and services  which  THAT are the subject  matter

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        of the home improvement installment sale minus the amount of the

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        buyer's down payment, plus the amounts, if any, included for

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        insurance and official fees.

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             (S)  (q)  "Retail buyer" or "buyer" means a person who buys

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        goods and services, or services from a contractor pursuant to a

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        home improvement installment contract, or goods and services from

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        a contractor pursuant to a home improvement charge agreement.

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             (T)  (r)  "Services" means work, labor, and services fur-

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        nished in connection with the installation or application of

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        goods.

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             (U)  (s)  "Time balance" means the sum of the principal

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        amount financed and the finance charge.

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             (V)  (t)  "Time sale price" means the total of the cash

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        price of the goods and services or services, the finance charge,

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        and the amounts, if any, included for insurance premiums and

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        official fees.







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                                     PART 3A

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             SEC. 1325.  (1) BEFORE A LENDER MAKES PARTIAL OR FULL PAY-

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        MENTS TO A HOME IMPROVEMENT CONTRACTOR, THE LENDER MUST RECEIVE

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        REASONABLE ASSURANCE, THROUGH RELEASES OR OTHER CERTIFICATIONS,

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        FROM ALL SUBCONTRACTORS THAT HAVE WORKED ON THE RESIDENCE UP TO

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        THE TIME OF THAT SCHEDULED PAYMENT, THAT NO CLAIM OR LIEN HAS

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        BEEN OR WILL BE PLACED ON THE PROPERTY FOR THAT PORTION OF THE

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        WORK FOR WHICH THE PAYMENT IS MADE.

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             (2) PROCEEDS OF A LOAN PURSUANT TO A HOME IMPROVEMENT CHARGE

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        AGREEMENT, HOME IMPROVEMENT CHARGE SALE, HOME IMPROVEMENT

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        INSTALLMENT CONTRACT, OR HOME IMPROVEMENT INSTALLMENT SALE SHALL

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        BE DISBURSED ONLY TO 1 OF THE FOLLOWING:

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             (A) THE BUYER.

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             (B) THE BUYER AND CONTRACTOR JOINTLY.

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             (C) A BONA FIDE ESCROW AGENT OF THE LENDER.

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             (3) PRIOR TO PAYING MORE THAN 70% OF THE FULL PRICE CON-

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        TRACTED FOR UNDER THE HOME IMPROVEMENT CHARGE AGREEMENT, HOME

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        IMPROVEMENT CHARGE SALE, HOME IMPROVEMENT INSTALLMENT CONTRACT,

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        OR HOME IMPROVEMENT INSTALLMENT SALE, THE LENDER SHALL OBTAIN AN

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        INSPECTION OF THE STATUS AND CONDITION OF THE IMPROVEMENTS MADE

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        TO THE REAL PROPERTY FROM AN INDEPENDENT INSPECTOR WHO SHALL PRO-

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        VIDE A CERTIFICATE THAT CONTAINS THE FOLLOWING:

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             (A) A VERIFIED STATEMENT THAT THE INSPECTOR HAS INSPECTED

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        THE PROPERTY AND THAT THE HOME IMPROVEMENTS ARE SATISFACTORILY

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        COMPLETED IN ACCORDANCE WITH ACCEPTED INDUSTRY STANDARDS.

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             (B) A VERIFIED STATEMENT SHOWING THAT THE INSPECTOR HAS

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        INSPECTED THE PROPERTY AND THAT THE HOME IMPROVEMENTS COMPLY WITH



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        ALL APPLICABLE HOUSING OR BUILDING CODES REQUIRED BY STATE OR

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        LOCAL LAW.

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             (4) IF THE PAYMENT OF MORE THAN 70% OF THE CASH PRICE IS

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        MADE BY A LENDER TO A CONTRACTOR OR BROKER PURSUANT TO A HOME

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        IMPROVEMENT CHARGE AGREEMENT, HOME IMPROVEMENT CHARGE SALE, HOME

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        IMPROVEMENT INSTALLMENT CONTRACT, OR HOME IMPROVEMENT INSTALLMENT

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        SALE WITHOUT THE LENDER HAVING FULLY COMPLIED WITH THE REQUIRE-

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        MENTS OF THIS SECTION, THE RETAIL BUYER HAS A COMPLETE DEFENSE

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        FOR NONPAYMENT OF THAT HOME IMPROVEMENT CHARGE AGREEMENT, HOME

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        IMPROVEMENT CHARGE SALE, HOME IMPROVEMENT INSTALLMENT CONTRACT,

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        OR HOME IMPROVEMENT INSTALLMENT SALE.


































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