A retail installment contract allows a buyer to purchase goods or services and pay for them over time. These agreements are frequently used for significant purchases, such as appliances, furniture, or motor vehicles. In New Jersey, these contracts are regulated to ensure fairness and transparency for consumers.
What is a New Jersey Retail Installment Contract?
A New Jersey retail installment contract is a legally binding agreement governed by the state’s Retail Installment Sales Act (RISA). This law, found in N.J.S.A. 17:16C-1, applies to the sale of goods or services for personal use where the buyer pays the price in two or more installments. 1Justia Law. New Jersey Revised Statutes Section 17:16C-1 (2024) – Definitions It covers a wide range of items, including motor vehicles, home improvements, and consumer goods. A New Jersey Supreme Court decision clarified that RISA also applies to service contracts, such as gym memberships, even if they do not include a separate financing charge.
The main parties are the retail buyer (the consumer) and the retail seller (the business). Often, a third-party finance company becomes involved when the seller transfers the contract to them, and the buyer then makes payments directly to that company. RISA is designed to protect consumers by regulating the terms and conduct of all parties in these transactions.
Mandatory Disclosures in New Jersey Retail Installment Contracts
New Jersey’s RISA mandates that specific information be clearly provided in the written contract before the buyer signs. The contract must state the cash price of the item, detail the amount of any down payment, and show the resulting unpaid cash price balance.
The financial terms must be broken down with precision. The contract is required to list:
- The total finance charge as a specific dollar amount.
- The finance charge expressed as an Annual Percentage Rate (APR).
- A complete payment schedule showing the number of payments, the amount of each payment, and their due dates.
- The “total of payments,” which is the sum of the unpaid balance and the entire finance charge.
The contract must also contain a clear description of the goods or services purchased, and if the item serves as collateral, this security interest must be disclosed. The agreement must specify the conditions and amounts for late fees. It must also detail the buyer’s right to prepay the debt and explain any potential prepayment penalties, which are capped by law. The maximum penalty is $20.00 for contracts of $2,000.00 or less, 1% of the loan amount for contracts up to $5,000.00, and $100.00 for contracts over $5,000.00.
Your Key Rights as a Buyer in New Jersey
As a buyer, you are entitled to receive a complete copy of the contract at the time of signing, with all terms filled in. This provides you with a full and accurate record of the agreement.
A significant protection is the right to prepay your debt at any time before it is due. When you prepay in full, you are entitled to a credit for any unearned portion of the finance charge, which reduces your total cost.
The federal FTC Holder Rule also provides protection. This rule ensures that if the seller assigns your contract to a finance company, you retain the right to assert the same legal claims and defenses against the finance company that you could have asserted against the original seller.2Electronic Code of Federal Regulations. 16 CFR Part 433 — Preservation of Consumers’ Claims and Defenses
Prohibited Seller Practices Under New Jersey Law
The Retail Installment Sales Act forbids sellers from engaging in certain practices. A primary prohibition prevents a seller from having a buyer sign a contract that contains blank spaces for any provisions.3Justia Law. New Jersey Revised Statutes Section 17:16C-22 (2024) – Contents of retail installment contract; blank spaces All terms must be present and agreed upon at the moment of signing.
Sellers are also barred from including certain clauses in the contract. For example, a contract cannot contain a provision that allows the seller to arbitrarily accelerate the debt, meaning they cannot demand the entire balance be paid immediately without a reasonable cause, such as a missed payment.4Justia Law. New Jersey Revised Statutes Section 17:16C-35 (2024) – Prohibited contract provisions; acceleration clause The law also prohibits sellers from taking a wage assignment as security for the payments before a default has occurred.5Justia Law. New Jersey Revised Statutes Section 17:16C-39 (2024) – Assignment of salary, wages, commissions or other compensation for services
Additionally, while a seller can require you to have insurance on the purchased goods, they cannot force you to buy that insurance from a specific agent or broker. Any contract terms that are deemed legally “unconscionable,” or so one-sided that they are fundamentally unfair, are also prohibited.
Consequences of Default and Dispute Resolution
Failing to make payments on a retail installment contract can lead to serious consequences. If you default, the seller or finance company can begin charging late fees. The law allows a delinquency charge of no more than $10, provided the default has continued for at least 10 days. A fee not to exceed $20 may also be charged for a returned check.
The lender may exercise an acceleration clause, making the entire outstanding balance due immediately. If the purchased item was used as collateral, the creditor has the right to repossess the property under rules governed by the Uniform Commercial Code, N.J.S.A. 12A:9-601.6Justia Law. New Jersey Revised Statutes Section 12A:9-601 (2024) – Rights after default; judicial enforcement; consignor or buyer of accounts, chattel paper, payment intangibles, or promissory notes. Defaulting will also be reported to credit bureaus, which can negatively affect your credit score. The creditor may then pursue a lawsuit to collect the remaining debt, which could result in a court judgment and wage garnishment.
If you believe your rights have been violated or a dispute arises, you have several options:
- Contact the seller or finance company directly to try to resolve the issue.
- File a formal complaint with the New Jersey Division of Consumer Affairs.
- Seek help from Legal Services of New Jersey or consult with a private attorney.
- File a case in small claims court for smaller monetary disputes.