Wis. Stat. § 425.105

Current through Acts 2023-2024, ch. 272

Section 425.105 - Cure of default

(1) A merchant may not accelerate the maturity of a consumer credit transaction, commence any action except as provided in s. 425.205(6), or demand or take possession of collateral or goods subject to a consumer lease other than by accepting a voluntary surrender thereof (s. 425.204), unless the merchant believes the customer to be in default (s. 425.103), and then only upon the expiration of 15 days after a notice is given pursuant to s. 425.104 if the customer has the right to cure under this section.

(2) Except as provided in subs. (3) and (3m), for 15 days after such notice is given, a customer may cure a default under a consumer credit transaction by tendering the amount of all unpaid installments due at the time of the tender, without acceleration, plus any unpaid delinquency or deferral charges, and by tendering performance necessary to cure any default other than nonpayment of amounts due. The act of curing a default restores to the customer the customer's rights under the agreement as though no default had occurred.

(3) A right to cure shall not exist if the following occurred twice during the preceding 12 months:

(a) The customer was in default on the same transaction or open-end credit plan;

(b) The creditor gave the customer notice of the right to cure such previous default in accordance with s. 425.104; and

(c) The customer cured the previous default.

(3m) A right to cure shall not exist with respect to a default specified under s. 425.103(2) (bm).

(4) With respect to consumer credit transactions in which the creditor has a security interest in, and possession of, instruments or documents, as each is defined in s. 409.102(1), which threaten to decline speedily in value, this section does not restrict the creditor's rights to dispose of such property pursuant to subch. VI of ch. 409 and the terms of the creditor's security agreement.

Wis. Stat. § 425.105

1971 c. 239; 1975 c. 407, 421; 1991 a. 316; 2001 a. 10; 2005 a. 110.

The s. 425.105(1) prohibition of suits except when notice is given pursuant to s. 425.104 imposes timing and content requirements for the notice. A notice that did not meet the timing requirements of ss. 425.103(2) (a) and 425.104(1) never gave notice "pursuant to s. 425.104." Thus suit was barred by s. 425.105(1). Indianhead Motors v. Brooks, 2006 WI App 266, 297 Wis. 2d 821, 726 Wis. 2d 352, 06-1002. A creditor's failure to send a notice of default and right to cure letter is merely a failure to comply with a procedural requirement that warrants dismissal of the creditor's action against the debtor. The failure does not disrupt the creditor's right to payment from the debtor. Security Finance v. Kirsch, 2019 WI 42, 386 Wis. 2d 388, 926 N.W.2d 167, 17-1408. The requirement that a creditor provide a notice of right to cure default is a procedural hurdle creditors must clear in order to pursue their remedies. The appropriate remedy for a creditor's failure to comply with this procedural requirement is dismissal of the creditor's action. Beal v. Wyndham Vacation Resorts, Inc., 956 F. Supp. 2d 962 (2013). 12 CFR 7.4008(d) (4) and (8), which permits banks to make loans without regard to state laws dealing with term to maturity, including circumstances under which a loan may be called due and payable, does not preempt sub. (1), which states that a creditor may not accelerate the maturity of a consumer credit transactions unless the creditor provides notice and the opportunity to cure the default. Boerner v. LVNV Funding LLC, 358 F. Supp. 3d 767 (2019). Debts that are "fully due" are distinguished from debts that involve "installment payments," such as credit cards with minimum payments and a maximum credit amount. A right to cure default exists for installment payments. The debt in this case was a credit card debt with minimum payments and a credit limit, and the debtor was entitled to an opportunity to cure the default before any acceleration or collection commenced. The fact that the debt changed hands did not change that. A debt collector cannot step into a better position than its assignor where the consumer's rights are concerned. Boerner v. LVNV Funding LLC, 358 F. Supp. 3d 767 (2019). Section 425.104 establishes requirements regarding what information a right-to-cure notice must contain, and it is permissive in the sense that it does not obligate merchants to send such notices whenever a customer defaults. But this section lays out the requirements for merchants who wish to sue on a default, and sub. (1) makes providing notice a mandatory prerequisite to suit. Bahena v. Jefferson Capital Systems, LLC, 363 F. Supp. 3d 914 (2019). See also Boerner v. LVNV Funding LLC, 358 F. Supp. 3d 767 (2019).