NEWS: Last Friday, Gov. Tony Evers signed into law 2025 Wisconsin Act 105. The Act makes two changes of importance to Wisconsin credit unions and other lenders, effective Jan. 1, 2027: Expanding the coverage of the Wisconsin Consumer Act (WCA) and increasing the amount at which certain lawsuits must be brought in small claims courts.
Expanding WCA coverage
Act 105 expands the coverage of the WCA so that it will apply to larger loans than it now does.
Current law
Currently, Wis. Stats. §421.202 says that the WCA (Chaps. 421 to 427 of the state statutes) does not apply to consumer credit transactions in which the amount financed exceeds $25,000; motor vehicle consumer leases in which the total lease obligation exceeds $25,000; or other consumer transactions in which the cash price exceeds $25,000.
This material, from The League’s ii Release No. B001 – Scope of Lending Laws – explains the coverage rules and exceptions in more detail:
The WCA generally applies to any loan, lease, or credit sale (including refinancings, consolidations, deferrals and other modifications) made in Wisconsin for a personal, family, or household purpose unless any of the following three exceptions apply:
- The amount financed on closed-end credit exceeds $25,000. (For leases, this refers to the “total lease obligation.”) For open-end credit, the $25,000 threshold does not apply to any meaningful extent. Regulators believe that any open-end consumer-purpose loan is subject to the WCA, unless exception #2 or #3 applies.
- All borrowers are organizations.
- The loan is secured by a first mortgage (or equivalent security interest). An equivalent security interest includes a second mortgage when the credit union holds the first, or a land contract.
Some credit unions choose to use “consumer paper” (i.e., loan forms that address WCA restrictions, such as The League’s “Consumer Note” form (WCUL #82073)), even for loans of more than $25,000. This is allowable, and it may simplify internal processes for lenders. However, The League cautions that by using ‘consumer paper,” credit unions are essentially “opting in” to the WCA for loans that would otherwise be outside the scope of the WCA. That’s because the forms promise to give consumers WCA-required protections, such as requiring the credit union to send a Notice of Right to Cure before taking action to collect on a delinquent loan.
New law
The new law will raise the WCA jurisdictional amounts to $50,000, making more credit union consumer-purpose loans subject to the WCA. The other exceptions noted above are not being changed.
As amended, Wis. Stats. §421.202 will say that the WCA does not apply to “Consumer credit transactions in which the amount financed exceeds $25,000 $50,000, motor vehicle consumer leases in which the total lease obligation exceeds $25,000 $50,000, or other consumer transactions in which the cash price exceeds $25,000 $50,000.”
The League will work to update a variety of its ii Releases and forms to reflect this change. Watch for announcements as these updates are made.
Higher small claims dollar limit
The new law will increase the “jurisdictional limit” for certain small claims cases.
Current law
Currently, Wis. Stats. §799.01 says that with certain exceptions, small claims courts must be used for civil actions in which the amount claimed is $10,000 or less and for actions for replevin (i.e., repossession of collateral) in which the value of the property is $10,000 or less. Small claims use is mandatory for these cases; they cannot be brought in “large claims” court (i.e., ordinary circuit courts).
Regardless of these dollar limits, a WCA provision (Wis. Stats. §425.205(1)) requires lenders to use small claims courts for all cases involving repossession of consumer collateral or leased goods that are subject to the WCA. (An exception allows for self-help repossession, without going to court at all, for motor vehicles, as explained in The League’s ii Release No. B066.)
New law
The new law will raise these amounts to $15,000. This means that more repossession and other types of civil lawsuits by credit unions (and other creditors) will have to be brought in small claims courts. This process will remain “exclusive,” requiring credit unions to use small claims for these matters. (There are other jurisdictional limits for different kinds of small claims cases, such as for evictions, personal injury claims, etc., but they are not changing.)
It may be worth noting that under Wis. Stats. §799.06(2), non-attorneys may represent others in small claims court, at least in certain situations. For example, your employees can appear in court on the credit union’s behalf without an attorney. That is not changing. By increasing the jurisdictional limit, the new law will require credit unions to send more cases to small claims, where staff may be able to handle them without the cost of hiring an attorney.
Confusion about the effective date
Act 105 includes a confusing provision. The effective date portion of the Act simply says that it “first applies to actions commenced or claims made on … January 1, 2027.” The phrase “actions commenced” is used by lawyers to mean when a lawsuit is filed.
That provision makes sense when it comes to the amended small claims statutes. They will apply to lawsuits filed on or after Jan. 1, 2027.
But the Act’s effective date provision does not make sense when it comes to the WCA increase. The League and our outside counsel read Act 105 as expanding the scope of the WCA for all purposes, not just for small claims jurisdiction over repossession cases. So, does Act 105’s expansion of WCA coverage apply to consumer loans that are made on or after that date? The Act does not clearly say so.
The League will seek clarification on this issue and alert you if we learn more.
Compliance Roundtable – April 1 (Webinar)
Join a member of The League’s compliance team as they lead a discussion on the latest changes in regulations and need to know information to keep your credit union in compliance. You can find more information or register on our website.