§ 404. Credit service charge limitation. 1. A seller may, in a retail
instalment contract or obligation, contract for and, if so contracted
for, the holder thereof may charge, receive and collect a credit service
charge computed on the principal balance of the contract or obligation
from the date thereof to and including the date when the final
instalment is payable, at the rate or rates agreed to by the buyer.

2. Except as provided in subdivision three of this section, such
credit service charge shall be computed on the principal balance on
contracts or obligations payable in successive monthly instalments
substantially equal in amount for a period of one year. On contracts or
obligations providing for instalments extending for a period less than
or greater than one year, the credit service charge shall be computed
proportionately.

3. When a retail instalment contract or obligation provides for
unequal or irregular instalments, the credit service charge shall be at
the effective rate provided for in subdivision one of this section,
having due regard for the schedule of instalments.

4. As an alternative to the credit service charge provided for above,
a seller may, in a retail instalment contract or obligation, contract
for and, if so contracted for, the holder may charge, receive and
collect a credit service charge calculated on the unpaid principal
balances of the contract for the time each is outstanding, according to
a generally accepted actuarial method at rates that may vary from time
to time and in accordance with the provisions of the contract or
obligation. On any contract or obligation with a variable rate credit
service charge made pursuant to this subdivision, each rate shall be
determined at regular intervals as set forth in the contract or
obligation and in accordance with such regulations as the superintendent
of financial services shall prescribe but said rate shall not vary more
often than once in any three month period and shall be based on a
published index that is (a) readily available, (b) independently
verifiable, (c) beyond the control of the holder, and (d) approved by
the superintendent.

The superintendent of financial services shall adopt regulations with
respect to retail installment contracts or obligations that provide for
a variable rate of credit service charge, including but not limited to:
(a) providing for disclosure to the buyer by the holder of the
circumstances under which the rate may increase, any limitations on the
increase, the effect of an increase and an example of the payment terms
that would result from an increase; (b) providing for disclosure to the
buyer by the holder of a history of the fluctuations of the index over a
reasonable period of time; and (c) providing for notice to the buyer
from the holder prior to any rate increase or change in the terms of
payment.

5. The credit service charge shall be inclusive of all charges
incident to investigating and making the contract or obligation, and for
the extension of the credit provided for in the contract or obligation,
and no fee, expense or other charge whatsoever shall be taken, received,
reserved or contracted for except as otherwise provided in this article.