UPDATES & ANALYSIS

Roofing company’s 30-day grace period and 1.5% monthly default charge is not subject to Consumer Credit Code

by Rox Laird | January 29, 2025

A roofing contractor who granted its customer a 30-day grace period to pay for a roofing job along with 1.5% a month in interest for tardy payment did not grant credit and is not subject to the Iowa Consumer Credit Code, the Iowa Supreme Court held in a unanimous Jan. 24 decision.

“In analyzing other consumer transactions to determine whether there was a right to defer payment as required to establish an extension of credit,” Justice Dana Oxley wrote for the Court, “we have consistently concluded that a contract requiring full payment at the time of the relevant transaction is not an extension of credit, even when the contract provides for a delay in attempting to collect sums owed before imposing a penalty — i.e., a forbearance in collecting sums or a grace period.”

Lance and Tracy Lynn Degeneffe refused to pay Home Pride Contractors’ $13,164.37 roof-replacement bill, accusing the roofing company of being “storm chasers” who used a subcontractor to complete the roofing repairs rather than doing the work itself. After Home Pride unsuccessfully sought to collect payment, it ultimately sued the Degeneffes in Boone County District Court.

In response, the Degeneffes filed a separate suit in Boone County District Court against Home Pride accusing the roofing contractor of harassing and abusive collection efforts in violation of the Iowa Code Chapter 537, the Iowa Consumer Credit Code. The district court granted in part the Degeneffes’ motion for summary judgment, holding that Home Pride’s roofing contract is a consumer credit sale subject to the Consumer Credit Code.

The question before the Iowa Supreme Court in Home Pride’s interlocutory appeal from that decision is whether the roofer’s contract is a “consumer credit sale” as defined in Iowa Code section 537.1301(13)(a).

The Court focused specifically on two elements of that section: whether Home Pride granted credit to the Degeneffes and whether the interest charged was a finance charge. The Court said the answer in this case is “No” to both questions.

On the question of whether Home Pride granted credit to the Degeneffes, the Court agreed with Home Pride that it did not extend credit to the Degeneffes because the roofer’s contract required payment in full upon completion of the work. “Requiring payment in full is the converse of extending credit,” the Court said.

Using the Court’s principles for interpreting contracts as a guide, “we conclude that the roofing contract between Home Pride and the Degeneffes does not fit within the statutory definition of a ‘credit’ transaction,” the Court said. The fact that the contract provided for a 1.5% monthly default interest and collection costs if payment was not made within 30 days did not give the Degeneffes the “right to defer the payment during that time” but instead specified a penalty if they defaulted on the contract payment term.

Tags: Iowa Supreme Court 2024-25