In the near future, we plan to introduce legislation amending the Motor Vehicle Sales Finance Act to permit greater flexibility in motor vehicle installment payment schedules while maintaining strong consumer disclosure protections.

Under current law, installment sale contracts generally must provide for substantially equal payment amounts over the life of the loan. While this structure has long been standard practice, it does not always reflect the financial realities faced by many consumers today. Workers in seasonal industries, commission-based professions, or occupations with fluctuating income streams may benefit from financing arrangements that allow for limited and clearly disclosed variations in scheduled payments throughout the loan term.
 
For some buyers, the alternative to a more flexible installment schedule may be a higher-cost financing product with greater risk. A recent Federal Reserve study found that subprime borrowers using buy-here-pay-here financing faced an average derived interest rate of approximately 25%, along with far more frequent weekly or biweekly payment schedules than borrowers using traditional auto financing.[1] This bill gives those consumers a safer, more transparent option when a lower initial payment can help make reliable vehicle ownership possible. 
 
This legislation would permit simple finance charge vehicle installment contracts to include scheduled payments that are not substantially equal, provided that:

• The scheduled payments fully amortize the principal amount financed;
• No scheduled payment exceeds more than 40% above any other scheduled payment; and
• Existing federal disclosure requirements under the federal Truth in Lending Act remain applicable regarding the timing and amount of each payment.

Additionally, for contracts involving a scheduled payment increase, the legislation would require holders to provide buyers with clear written notice at least 60 days prior to the scheduled payment increase. The notice must identify the current payment amount, the new payment amount, and the effective date of the change.

This legislation seeks to modernize Pennsylvania’s vehicle financing laws by allowing responsible flexibility in repayment structures while ensuring consumers receive clear and transparent disclosures before payment changes occur.
 
Please join us in co-sponsoring this legislation.