Rent-To-Own Consumer Credit Protection Act of 1993

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Rent-To-Own Consumer Credit 
Protection Act of 1993''.

SEC. 2. RENT-TO-OWN PROTECTION ACT.

    The Consumer Credit Protection Act (15 U.S.C. 1601 et seq.) is 
amended by adding at the end the following new title:

                  ``TITLE X--RENT-TO-OWN TRANSACTIONS

``Sec.
``1001. Short title.
``1002. Findings and purposes.
``1003. Definitions.
``1004. Application of State laws regarding fees, charges, guarantees, 
                            and warranties.
``1005. Application of Federal laws.
``1006. Disclosures on goods.
``1007. Prohibitions; enforcement.
``1008. Civil liability.
``1009. Regulations.
``1010. Relationship to other laws.
``Sec. 1001. Short title
    ``This title may be cited as the `Rent-To-Own Consumer Credit 
Protection Act'.
``Sec. 1002. Findings and purposes
    ``(a) Findings.--The Congress finds that--
            ``(1) the rent-to-own industry targets its products 
        primarily to low-income and minority neighborhoods;
            ``(2) the majority of rent-to-own customers enter into 
        rent-to-own contracts with the intention of owning the goods 
        for which they are contracting;
            ``(3) rent-to-own dealers often fail to disclose key terms 
        of rent-to-own contracts, and engage in unfair debt collection 
        practices; and
            ``(4) rent-to-own dealers do not provide customers with the 
        protections afforded purchasers in retail installment sales 
        under State and Federal laws, and often charge excessive fees 
        and interest rates.
    ``(b) Purposes.--The purposes of this title are--
            ``(1) to provide consumers in rent-to-own transactions the 
        range of protections provided under State and Federal laws to 
        individuals who acquire goods in other consumer credit sales;
            ``(2) to require rent-to-own contracts, and tags affixed to 
        items available for acquisition in rent-to-own transactions, to 
        disclose the material terms of those transactions; and
            ``(3) to prohibit rent-to-own dealers and collection agents 
        hired by such dealers from engaging in abusive collection 
        practices.
``Sec. 1003. Definitions
    ``As used in this title--
            ``(1) the term `cash price' means--
                    ``(A) with respect to any item of consumer goods--
                            ``(i) the bona fide retail price for the 
                        item as offered for sale by a seller to a 
                        consumer who pays the full price in one payment 
                        before taking possession of the item, as 
                        indicated by actual sales of such item; or
                            ``(ii) the average cash retail price of the 
                        item or a similar item in the community; and
                    ``(B) with respect to a service--
                            ``(i) the bona fide retail value of the 
                        service if provided independently to a 
                        consumer; or
                            ``(ii) the estimated bona fide retail value 
                        of the service;
            ``(2) the term `Commission' means the Federal Trade 
        Commission;
            ``(3) the term `consumer'--
                    ``(A) when used as an adjective, means for use by 
                an individual primarily for personal, family, or 
                household purposes; and
                    ``(B) when used as a noun, means an individual who 
                is the lessee or bailee under a rent-to-own contract;
            ``(4) the term `credit'--
                    ``(A) includes the right granted by a seller to a 
                consumer to obtain possession of an item of consumer 
                goods under a rent-to-own contract before payment of 
                the total amount that is required to be paid to acquire 
                ownership of the item; and
                    ``(B) is deemed to be a fixed sum equal to the 
                difference of--
                            ``(i) the total of payments for the item 
                        required to obtain ownership of the item under 
                        the contract; minus
                            ``(ii) the sum of--
                                    ``(I) the cash price;
                                    ``(II) any fees specifically 
                                allowable under State law, except 
                                finance charges, interest, or a time 
                                price differential; and
                                    ``(III) the termination fee under 
                                section 1004;
            ``(5) the term `organization' means a corporation, trust, 
        estate, partnership, cooperative, or association;
            ``(6) the term `person' means a natural person or an 
        organization;
            ``(7) the term `rent-to-own contract' means a contract in 
        the form of a terminable lease or bailment of an item of 
        consumer goods, under which--
                    ``(A) the consumer--
                            ``(i) has the right of possession and use 
                        of the item; and
                            ``(ii) has the option to renew the contract 
                        periodically by making payments specified in 
                        the contract; and
                    ``(B) the seller agrees, orally or in writing, to 
                transfer ownership of the item to the consumer upon the 
                fulfillment of all obligations of the consumer under 
                the contract for that transfer;
            ``(8) the term `rent-to-own transaction' means the lease or 
        bailment of an item of consumer goods under a rent-to-own 
        contract;
            ``(9) the term `seller' means--
                    ``(A) a person--
                            ``(i) who regularly makes consumer goods 
                        available under rent-to-own contracts; and
                            ``(ii) to whom payments are payable under 
                        those contracts; and
                    ``(B) an assignee of such a person; and
            ``(10) the term `State' means any State, the Commonwealth 
        of Puerto Rico, the District of Columbia, and any territory or 
        possession of the United States.
``Sec. 1004. Application of State laws regarding fees, charges, 
              guarantees, and warranties
    ``(a) In General.--Subject to subsection (b), a seller in a rent-
to-own transaction may not take, receive, or assess any interest, 
finance charge, or other fee for the transaction that is in excess of 
the interest, fees, or finance charges that may be charged under the 
laws of the State in which the seller is located that--
            ``(1) establish a maximum rate or amount of interest, 
        finance charge, or time-price differential that may be charged 
        in connection with a credit sale or retail installment sale;
            ``(2) establish the types of fees and the maximum amount of 
        fees that a seller may charge in connection with a credit sale 
        or retail installment sale; or
            ``(3) establish the types of credit insurance and the 
        maximum amount of premiums that may be charged for credit 
        insurance in connection with a credit sale or a retail 
        installment sale.
    ``(b) Additional Termination Charges and Fees.--
            ``(1) Charges and fees authorized.--In addition to charges 
        and fees authorized under subsection (a), a seller in a rent-
        to-own transaction may charge--
                    ``(A) a termination fee in accordance with 
                paragraph (2), if in exchange the consumer is given the 
                right to terminate the rent-to-own contract for the 
                transaction at any time without regard to whether the 
                consumer has completed payment of the fee; and
                    ``(B) reasonable fees for recovery of the items 
                that are the subject of the contract and that are not 
                voluntarily returned to the seller upon the completion 
                or termination of the contract.
            ``(2) Termination fee.--A termination fee under paragraph 
        (1)(A)--
                    ``(A) shall not exceed 5 percent of the cash price 
                disclosed under the contract;
                    ``(B) shall be disclosed in the contract; and
                    ``(C) may be paid at the time the contract is 
                entered into or over the life of the contract; and
                    ``(D) shall be calculated as part of the finance 
                charge determined under section 106 of the Truth in 
                Lending Act.
            ``(3) Recovery fees.--A recovery fee under paragraph (1)(B) 
        shall be disclosed in the contract.
            ``(4) Effect of termination.--The termination of a rent-to-
        own contract by a consumer in accordance with a right of 
        termination given to the consumer in exchange for a termination 
        fee under subsection (a)(1) shall be deemed to satisfy the 
        consumer's obligations for all payments and fees due under the 
        contract, except for payments and fees under the contract that 
        were due prior to the date of termination.
    ``(c) Guarantees and Warranties.--All guarantees and warranties 
established or required under the laws of a State for goods sold 
pursuant to a consumer credit sale or retail installment sale shall 
apply to goods that are the subject of a rent-to-own transaction in the 
State.
``Sec. 1005. Application of Federal laws
    ``The following Federal laws apply to a rent-to-own transaction, as 
follows:
            ``(1) Truth in lending act.--The Truth in Lending Act 
        applies as it applies to consumer credit transactions other 
        than consumer credit transactions under an open end credit 
        plan.
            ``(2) Equal credit opportunity act.--The Equal Credit 
        Opportunity Act applies as it applies to credit transactions. 
        For purposes of this application--
                    ``(A) a consumer shall be treated as an applicant; 
                and
                    ``(B) a seller shall be treated as a creditor.
            ``(3) Fair debt collection practices act.--The Fair Debt 
        Collection Practices Act applies to the collection of overdue 
        payments arising from a rent-to-own transaction, unless the 
        payments are collected by any person specified in subparagraphs 
        (A) through (F) of section 803(6) of such Act. For purposes of 
        this application, overdue payments shall be treated as debt.
            ``(4) Fair credit reporting act.--The Fair Credit Reporting 
        Act applies as it applies to a credit transaction and to any 
        extension or denial of credit.
``Sec. 1006. Disclosures on goods
    ``A seller shall include on each item in the place of business of 
the seller that is available for purchase pursuant to a rent-to-own 
transaction--
            ``(1) the cash price of the item;
            ``(2) an itemization of services offered under a rent-to-
        own contract for the item, and the cash price of each service;
            ``(3) the annual percentage rate of the item under a rent-
        to-own contract, determined under section 107 of the Truth in 
        Lending Act;
            ``(4) the weekly, biweekly, monthly, or other incremental 
        payment applicable under the rent-to-own contract for the 
        transaction and the number of payments;
            ``(5) the total of payments required to be paid to acquire 
        ownership of the item under a rent-to-own contract for the 
        transaction, determined under regulations under the Truth in 
        Lending Act; and
            ``(6) specification of whether the item is new or used.
``Sec. 1007. Prohibitions; enforcement
    ``(a) Prohibitions.--A person who is a seller under a rent-to-own 
contract with a consumer shall not--
            ``(1) threaten or invoke criminal prosecution of a consumer 
        for any matter related to the contract, unless there is clear 
        and convincing evidence that the goods that are the subject of 
        the contract are being held by the consumer with an intent to 
        defraud the seller;
            ``(2) use threats or coercion to collect or attempt to 
        collect any amounts alleged to be due from the consumer;
            ``(3) engage in any conduct, the natural consequence of 
        which is to oppress, harass, or abuse any person in connection 
        with an attempt to collect amounts owed by the consumer under 
        the contract;
            ``(4) unreasonably publicize information to third parties 
        regarding amounts owed by the consumer;
            ``(5) make any fraudulent, deceptive, or misleading 
        representation to obtain information about the consumer or to 
        collect amounts owed by the consumer;
            ``(6) use any unconscionable means to collect or attempt to 
        collect a debt owed to the seller;
            ``(7) engage in any act or practice that is unfair or 
        deceptive in making, servicing, or collecting payment pursuant 
        to a rent-to-own contract;
            ``(8) advertise, announce, solicit, or otherwise represent 
        as free or available without charge (including by use of other 
        words of similar meaning) any service under the contract for 
        which the seller charges the consumer, including any service 
        for which a charge is collected by inclusion in the amount 
        required to be paid under the contract;
            ``(9) use, for purposes of complying with any State or 
        Federal law governing rent-to-own transactions (other than a 
        State or Federal tax law) any definition of the term `cash 
        price' other than the definition under section 1003(2); or
            ``(10) attempt to evade the provisions of this title by any 
        devise or subterfuge.
    ``(b) Enforcement.--
            ``(1) In general.--Compliance with the requirements under 
        this title shall be enforced by the Commission. All functions 
        and powers of the Commission under the Federal Trade Commission 
        Act shall be available to the Commission to enforce compliance 
        with this title by any person, irrespective of whether the 
        person is engaged in commerce or meets any other jurisdictional 
        tests in the Federal Trade Commission Act, including the power 
        to enforce the provisions of this title in the same manner as 
        if the violation had been a violation of a Commission trade 
        regulation rule.
            ``(2) Treatment of violations.--For the purpose of the 
        exercise by the Commission of its functions and powers under 
        the Federal Trade Commission Act, a violation of any 
        requirement or prohibition under this title is deemed to be an 
        unfair or deceptive act or practice in commerce in violation of 
        that Act.
``Sec. 1008. Civil liability
    ``(a) Liability for Failure to Properly Disclose Terms.--A seller 
who fails to comply with a requirement under section 1006 shall be 
liable to the consumer in an amount equal to the sum of--
            ``(1) actual damages sustained by the consumer as a result 
        of the failure;
            ``(2) $500 for each failure; and
            ``(3) all costs of the action and reasonable attorney fees, 
        as determined by the court.
    ``(b) Other Liability.--A seller who violates this title or fails 
to comply with any requirement imposed under this title, other than 
under section 1005, shall be liable to the consumer in an amount equal 
to the sum of--
            ``(1) actual damages sustained by the consumer as a result 
        of the violation;
            ``(2) $5,000 for each violation; and
            ``(3) all costs of the action and reasonable attorney fees, 
        as determined by the court.
    ``(c) Jurisdiction; Limitation.--
            ``(1) In general.--An action under this title may be 
        brought in any United States district court or in any other 
        court of competent jurisdiction, not later than 2 years after 
        the date of the violation or failure that is the subject of the 
        action.
            ``(2) Other actions.--The 2-year statute of limitations in 
        paragraph (1) shall not prohibit any person from asserting a 
        violation of this title as a defense in an action to collect 
        amounts alleged to be due from such person, if such action is 
        brought more than 2 years after the date of the occurrence of 
        the violation.
    ``(d) Remedies.--Nothing in this title shall be construed to limit 
any remedy otherwise available under State or Federal law.
``Sec. 1009. Regulations
    ``Not later than 6 months after the date of enactment of this 
title, the Commission shall issue such regulations as may be necessary 
to implement this title.
``Sec. 1010. Relationship to other laws
    ``(a) State Law.--This title does not annul, alter, affect, or 
exempt any person subject to the provisions of this title from 
complying with the laws of any State with respect to rent-to-own 
transactions, except to the extent that such laws are inconsistent with 
any provision of this title, and then only to the extent of the 
inconsistency.
    ``(b) Consumer Lease Provisions of Truth in Lending Act.--Chapter 5 
of the Truth in Lending Act, relating to consumer leases, shall not 
apply to a rent-to-own transaction to the extent application of that 
Act to the transaction is inconsistent with this title.''.

SEC. 3. RECOMMENDATIONS TO CONGRESS.

    Not later than 2 years after the date of enactment of this Act, the 
Federal Trade Commission shall submit to the Congress any 
recommendations for further legislative or administrative action with 
respect to the regulation of rent-to-own transactions.

SEC. 4. EFFECTIVE DATE.

    The provisions of this Act and the amendments made by this Act 
shall take effect on the date of enactment of this Act.

                                 

S 1566 IS----2

Summary: Rent-To-Own Consumer Credit Protection Act of 1993 - Amends the Consumer Credit Protection Act to prohibit a seller in a rent-to-own transaction from taking, receiving, or assessing any interest, finance charge, or other fee for the transaction in excess of that which may be charged under State law which establishes in connection with a credit or retail installment sale for the same or a similar item: (1) a maximum rate or amount of interest, finance charge, or time-price differential that may be charged. (2) the types and maximum amount of fees that a seller may charge. Or (3) the types of credit insurance and the maximum amount of premiums that can be charged for credit insurance. Sets forth requirements regarding: (1) termination, recovery, and other fees, (2) the effect of termination. And (3) guarantees and warranties. Makes the following Federal laws applicable to rent-to-own transactions: (1) the Truth in Lending Act, (2) the Equal Credit Opportunity Act, (3) the Fair Debt Collection Practices Act. And (4) the Fair Credit Reporting Act. Requires a seller to include the following information on each item in the seller's place of business that is available for purchase pursuant to a rent-to-own transaction: (1) the cash price. (2) an itemization of services offered and the price of each service, (3) the annual percentage rate, (4) any applicable periodic payment and the number of payments, (5) the total number of payments required to acquire ownership. And (6) whether the item is new or used. Requires a seller to provide such information to a consumer in writing at the time the parties enter into the contract. Prohibits a seller under a rent-to-own contract with a consumer from taking specified actions, such as using threats or coercion to collect amounts alleged due, or unreasonably disclosing information to third parties regarding amounts owed by the consumer. Makes compliance with the requirements of this Act enforceable by the Federal Trade Commission. Deems a violation of this Act to be an unfair or deceptive act or practice in violation of the Federal Trade Commission Act. Subjects sellers who violate the requirements of this Act to civil liability.