(1) Any customer who cancels insurance or a service contract under s. 424.304 or 424.401 shall receive one of the following: (a) A credit against the balance of the customer’s obligation or account in the amount of the insurance premiums or service contract charges plus that portion of the finance charge attributable to the insurance premiums or service contract charges. (b) A payment in the amount of the full amount of the insurance premiums or service contract charges, which amount shall continue to be part of the customer’s obligation, if the creditor offers and the customer elects this option. (2) With respect to the application of a credit under sub. (1) (a) to a customer’s obligation for a consumer credit transaction other than one pursuant to an open-end credit plan, a merchant shall do one of the following: (a) If the obligation is for a consumer credit transaction other than a precomputed consumer loan, apply the credit in one of the following ways: 1. First against the final installment due on the customer’s obligation and then to the preceding installments in the reverse order in which they are due. 2. Against the balance of the customer’s obligation and proportionately reduce the amount of each remaining installment. (b) If the obligation is for a precomputed consumer loan, apply the credit against the balance of the customer’s obligation, compute and apply a refund of the finance charge, less the portion included in the credit, in the manner described in s. 422.209 (2) as of the date of the loan or the nearest scheduled installment due date, and thereafter charge interest at a rate not to exceed the annual percentage rate of finance charge which was disclosed to the customer when the loan was made. (3) If a credit under sub. (1) (a) is applied to a precomputed consumer loan, the finance charge resulting after application of the credit shall be the finance charge for the precomputed consumer loan, but the cancellation shall not otherwise alter the customer’s obligation for the precomputed consumer loan. (4) A contract between an insurer and a creditor may not provide for a refund to the creditor upon cancellation by a customer under s. 424.304 or 424.401 in an amount less than the amount of the insurance premiums that the creditor must credit to the customer’s account or pay to the customer under sub. (1). (5) A violation of this section is subject to s. 425.303.
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