Opinion ID: 2606317
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Heading: 1992 legislation deregulating service charges under risa

Text: Prior to 1992 legislation deregulating service charges under RISA, the act limited the maximum service charges under a retail installment contract to a rate tied to 26-week treasury bill rates. In contrast to that floating rate, the maximum service charge which could be set under a revolving charge agreement or a lender credit card agreement was 18 percent per year. Former RCW 63.14.130. In 1992, the Legislature eliminated the differential in service charges allowable under the financing agreements covered by RISA and provided that the service charge shall not exceed the schedule or rate agreed to by contract and disclosed under RCW 63.14.120(1). Laws of 1992, ch. 193, § 1(2); RCW 63.14.130. Each of the agreements at issue here set an 18 percent service charge rate which was disclosed in writing as required by RCW 63.14.120(1). The trial court held that the 1992 legislation did not apply to service charges paid before its effective date, April 2, 1992, but did apply on and after that date. GE Capital argues that the 1992 deregulation applies retroactively, precluding Plaintiffs' claims based upon excess service charges. GE Capital maintains the 1992 legislation repealed the maximum rates set in RCW 63.14.130, and as a result any contracted-for rate lawful under the new legislation is valid even if the transaction violated the law when entered into. We agree. An amendatory act constitutes a repeal of the amended act to the extent the two acts are inconsistent. Seattle-King County Council of Camp Fire v. State, 105 Wash.2d 55, 63, 711 P.2d 300 (1985). Absent a saving clause, [a] repealing act terminates all rights dependent upon the repealed statute and all proceedings based on it. Seattle Rendering Works, Inc. v. Darling-Delaware Co., 104 Wash.2d 15, 19, 701 P.2d 502 (1985) (citing Lau v. Nelson, 89 Wash.2d 772, 575 P.2d 719, overruled in part on other grounds in Roberts v. Johnson, 91 Wash.2d 182, 588 P.2d 201 (1978)); Hansen v. West Coast Wholesale Drug Co., 47 Wash.2d 825, 289 P.2d 718 (1955). However, repeal of a statute does not destroy vested rights or rights of a common law nature embodied in the repealed statute. Lau, 89 Wash.2d at 774, 575 P.2d 719; Seattle Rendering Works, 104 Wash.2d at 19, 701 P.2d 502. Repealing acts can divest parties of causes of action. See, e.g., Seattle Rendering Works, 104 Wash.2d 15, 701 Pd 502 (repeal of Unfair Practices Act before trial court entered judgment voided judgment as no cause of action for belowcost pricing existed at common law); Hansen v.West Coast Wholesale Drug Co., 47 Wash.2d 825, 289 P.2d 718 (repeal of statute on which plaintiff based cause of action without saving clause during pendency of personal injury and wrongful death action divested plaintiff of right of action where action existed only by virtue of repealed statute). As to interest rates specifically, `[t]here is no vested right in a usury law and it may be repealed or changed so as to affect causes of action or defenses in pending suits.' Sparkman & McLean Co. v. Govan Inv. Trust, 78 Wash.2d 584, 587, 478 P.2d 232 (1970) (quoting White Motor Co. v. Reynolds, 179 Neb. 91, 136 N.W.2d 437, 438 (1965)). Numerous courts have reached the same conclusion. E.g., Ewell v. Daggs, 108 U.S. 143, 2 S.Ct. 408, 27 L.Ed. 682 (1883); American Sav. Life Ins. Co. v. Financial Affairs Management Co., 20 Ariz.App. 479, 513 P.2d 1362 (1973) (borrower has no vested right to statutory privilege to avoid paying interest the borrower previously agreed to pay); Orden v. Crawshaw Mortgage & Inv. Co., 109 Cal. App.3d 141, 167 Cal.Rptr. 62 (1980) (rule giving retroactivity to statutes repealing usury laws is an application of the well established principle that no person has a vested right in an unenforced statutory penalty or forfeiture); Ward v. Hudco Loan Co., 254 Ga. 294, 328 S.E.2d 729 (1985); Sweeney v. Citicorp Person-to-Person Fin. Ctr., Inc., 157 Ill.App.3d 47, 109 Ill.Dec. 472, 510 N.E.2d 93 (1987) (usury statutes are in derogation of common law and a restriction on freedom to contract; no constitutionally vested right to defense of usury; repeal of law limiting rate of interest merely allows what was the original obligation of the parties to be enforced); L.E. Marlowe & Sons, Ltd v. Farrier, 159 Mich.App. 194, 406 N.W.2d 273 (1987); First Fed Sav. & Loan Ass'n v. Guildner, 295 N.W.2d 501 (Minn.1980) (usury laws are penal in nature; repeal presumed retroactive; no vested right in privilege created by usury statute to avoid voluntarily assumed obligations); Farmland Enter., Inc. v. Schueman, 212 Neb. 342, 322 N.W.2d 665 (1982) (repeal of statutory prohibition against usury releases any penalties imposed and validates the contract; repeal of a statute before a penalty is enforced is not a deprivation of vested rights); Klein v. Wolf Run Resort, Inc., 163 Vt. 506, 659 A.2d 1153 (1995). Under this state's case law concerning the effect of repealing legislation, and particularly in light of Sparkman, which is consistent with the majority view on the issue, the deregulation of service charges under RISA applies retroactively. There is no vested right in ceilings on the rate of interest; former RCW 63.14.130's ceilings did not reflect common law rights, and deregulation does not affect the underlying contractual obligations. Plaintiffs contend, however, that the court declined to apply the 1992 legislation retroactively in Zachman, 120 Wash.2d 304, 841 P.2d 27. The 1992 legislation was enacted after oral argument in Zachman, but before the decision was filed. In a footnote the court said that the 1992 legislation did not affect its analysis because we apply the statute previously applicable. Id. at 307 n. 3, 841 P.2d 27. However, the court clearly did not address the issue or arguments like those presented here, and we do not find Zachman controlling. Plaintiffs also contend that nothing in the 1992 legislation indicates retroactive application was intended. Instead, the Legislature's use of the word shall ([t]he service charge ... shall not exceed the schedule or rate agreed to by contract) indicates prospective application. RCW 63.14.130(2). Under the case law discussed above concerning repealing statutes and repeal of usury laws particularly, express retroactivity language is not required for the legislation to operate retroactively. Further, the use of shall indicates a mandatory directive and not prospective application. Finally, Plaintiffs seek to confine Sparkman to its facts. The legal principle in Sparkman applies here, however, because former RCW 63.14.130 was effectively a usury law. We hold that the 1992 legislation deregulating service charge rates under RISA applies retroactively. This holding disposes of the numerous other issues related to Plaintiffs' claims based upon allegedly excessive service charges.