I

104TH CONGRESS

1ST SESSION H. R. 2820

To amend the Consumer Credit Protection Act to assure meaningful disclosures of the terms of rental-purchase agreements, including disclosures

of all costs to consumers under such agreements, to provide certain

substantive rights to consumers under such agreements, and for other

purposes.

IN THE HOUSE OF REPRESENTATIVES

DECEMBER 20, 1995

Mr. WATTS of Oklahoma introduced the following bill; which was referred to

the Committee on Banking and Financial Services

A BILL

To amend the Consumer Credit Protection Act to assure

meaningful disclosures of the terms of rental-purchase

agreements, including disclosures of all costs to consumers under such agreements, to provide certain substantive

rights to consumers under such agreements, and for

other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Consumer Disclosure

5 and Rental Purchase Agreement Act’’.
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1 SEC. 2. FINDINGS AND PURPOSE.

2 (a) FINDINGS.—The Congress finds that a significant

3 number of consumers engage in rental-purchase trans4 actions. These transactions have taken place, in many in5 stances, without adequate disclosures and other protec6 tions to consumers.

7 (b) PURPOSE.—The purpose of the amendment to the

8 Consumer Credit Protection Act is—

9 (1) to assure meaningful disclosure of the terms

10 of rental-purchase agreements, including disclosures

11 of all costs to consumers under such agreements,

12 and

13 (2) to provide certain substantive rights to con14 sumers who enter into rental-purchase agreements.

15 SEC. 3. CONSUMER CREDIT PROTECTION ACT.

16 The Consumer Credit Protection Act is amended by

17 adding at the end the following:

18 ‘‘TITLE X—RENTAL PURCHASE

19 AGREEMENTS

20 ‘‘SEC. 1001. DEFINITIONS.

21 ‘‘For purposes of this title:

22 ‘‘(1) The term ‘advertisement’ means a com23 mercial message in any medium that promotes, di24 rectly or indirectly, a rental-purchase agreement.

25 ‘‘(2) The term ‘agricultural purpose’ includes—
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1 ‘‘(A) the production, harvest, exhibition,

2 marketing, transformation, processing, or man3 ufacture of agricultural products by a natural

4 person who cultivates plants or propagates or

5 nurtures agricultural products; and

6 ‘‘(B) the acquisition of farmlands, real

7 property with a farm residence, or personal

8 property and services used primarily in farm9 ing.

10 ‘‘(3) The term ‘Board’ means the Board of

11 Governors of the Federal Reserve System.

12 ‘‘(4) The term ‘consumer’ means a natural per13 son who is offered or enters into a rental-purchase

14 agreement.

15 ‘‘(5) The term ‘date of consummation’ means

16 the date on which a consumer becomes contractually

17 obligated under a rental-purchase agreement.

18 ‘‘(6) The term ‘merchant’ means a person who

19 provides the use of property through a rental-pur20 chase agreement in the ordinary course of business

21 and to whom a consumer’s initial obligation under

22 the agreement is payable.

23 ‘‘(7) The term ‘personal property’ means prop24 erty that is not real property under the laws of the

25 State where the property is located when it is made
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1 available under a rental-purchase agreement unless

2 otherwise stated.

3 ‘‘(8) The term ‘rental-purchase agreement’

4 means—

5 ‘‘(A) a contract between a consumer and a

6 merchant—

7 ‘‘(i) under which the merchant agrees

8 to provide the consumer the use of the per9 sonal property for an initial period of 4

10 months or less,

11 ‘‘(ii) that is automatically renewable

12 with each payment by the consumer, and

13 ‘‘(iii) that permits but does not obli14 gate the consumer to become the owner of

15 the property, and

16 ‘‘(B) does not include any credit sale as

17 defined in section 103(g).

18 ‘‘(9) The term ‘State’ means any State, the

19 District of Columbia, the Commonwealth of Puerto

20 Rico, and any territory or possession of the United

21 States.

22 ‘‘SEC. 1002. EXEMPTED TRANSACTIONS.

23 ‘‘This title does not apply to rental-purchase agree24 ments primarily for business, commercial, or agricultural
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1 purposes, or those made with Government agencies or in2 strumentalities.

3 ‘‘SEC. 1003. GENERAL DISCLOSURE REQUIREMENTS.

4 ‘‘(a) IN GENERAL.—The merchant under a rental5 purchase agreement shall disclose to the consumer under

6 the agreement the information required by sections 1004,

7 1005, and 1006. In an agreement involving more than 1

8 merchant, only 1 merchant is required to make the disclo9 sures.

10 ‘‘(b) DISCLOSURE.—The disclosures required under

11 sections 1004 and 1005 and the agreement provisions re12 quired to be included under 1006 shall be made or in13 cluded—

14 ‘‘(1) at or before the date of consummation of

15 the rental-purchase agreement;

16 ‘‘(2) clearly and conspicuously in writing and in

17 a form that the consumer may keep; and

18 ‘‘(3) in a case of disclosures required under sec19 tion 1004, segregated from all other terms, data, or

20 information provided to the consumer.

21 ‘‘(c) INACCURACY.—If a disclosure required to be

22 made by a merchant to a consumer under section 1004

23 becomes inaccurate as the result of any mutual written

24 agreement between the merchant and such consumer oc25 curring after delivery of the required disclosure to such
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1 consumer under this title, the resulting inaccuracy is not

2 a violation of this title.

3 ‘‘SEC. 1004. RENTAL-PURCHASE DISCLOSURES.

4 ‘‘For each rental-purchase agreement, the merchant

5 shall disclose to the consumer, to the extent applicable,

6 under the agreement the following:

7 ‘‘(1) The amount of the first periodic payment

8 and the total amount of fees, taxes, or other charges

9 which may be required at or before the date of con10 summation of the agreement.

11 ‘‘(2) The amount and timing of rental pay12 ments.

13 ‘‘(3) The total number and the total dollar

14 amount of rental payments and other charges nec15 essary to acquire ownership of the property.

16 ‘‘(4) A statement that the consumer will not

17 own the property until the consumer has paid the

18 total dollar amount necessary to acquire ownership.

19 ‘‘(5) A disclosure that the total dollar amount

20 payments does not include certain other charges.

21 ‘‘(6) A statement that the consumer may be re22 sponsible for the fair market value of the property

23 if it is lost, stolen, damaged, or destroyed.

24 ‘‘(7) A statement indicating whether the prop25 erty is new or used, except a statement indicating
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1 that new property is used property is not a violation

2 of this title.

3 ‘‘(8) A statement of—

4 ‘‘(A) the manufacturer’s suggested retail

5 price, where applicable, or

6 ‘‘(B) the price for which the property is

7 available from the merchant in a cash sale.

8 ‘‘(9) A clear statement of the terms of the con9 sumer’s option to purchase.

10 ‘‘(10) A statement—

11 ‘‘(A) identifying the party responsible for

12 maintaining or servicing the property while it is

13 being rented;

14 ‘‘(B) describing the responsibility for main15 tenance or service; and

16 ‘‘(C) disclosing that if any part of a manu17 facturer’s express warranty covers the property

18 at the time the consumer acquires ownership of

19 the property, the warranty will be transferred

20 to the consumer if allowed by the terms of the

21 warranty.

22 ‘‘(11) The date of consummation of the trans23 action and the identities of the merchant and

24 consumer.

25 ‘‘(12) Late fees for past due rental charges.
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1 ‘‘SEC. 1005. POINT-OF-RENTAL DISCLOSURES.

2 ‘‘Each item of property displayed or offered in con3 nection with a rental-purchase agreement shall have af4 fixed to it a card, tag, or label that clearly and conspicu5 ously discloses only the following:

6 ‘‘(1) Whether the property is new or used.

7 ‘‘(2) The price of the property in a cash sale.

8 ‘‘(3) The amount of each rental payment.

9 ‘‘(4) The total number of rental payments nec10 essary to acquire ownership of the property.

11 ‘‘(5) The total dollar amount of rental pay12 ments necessary to acquire ownership of the prop13 erty.

14 ‘‘SEC. 1006. AGREEMENT PROVISIONS.

15 ‘‘(a) IN GENERAL.—Each rental-purchase agreement

16 shall—

17 ‘‘(1) provide a statement of any obligation of

18 the consumer and the merchant under the agree19 ment to repair any defect or malfunction of the

20 property covered by the agreement, and any limita21 tion of those obligations;

22 ‘‘(2) provide that the consumer may terminate

23 the agreement without penalty by voluntarily surren24 dering or returning the property covered by the

25 agreement upon expiration of any rental term; and
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1 ‘‘(3) contain a provision for reinstatement of

2 the agreement, which at a minimum—

3 ‘‘(A) permits a consumer who fails to make

4 a timely rental renewal payment to reinstate

5 the agreement, without losing any rights or op6 tions which exist under the agreement, by the

7 payment of all past due rental charges and any

8 late fee, within 7 business days after the re9 newal date if the consumer pays monthly, or

10 within 3 business days after the renewal date if

11 the consumer pays more frequently than month12 ly;

13 ‘‘(B) if the consumer returns or voluntarily

14 surrenders the property covered by the agree15 ment, other than through judicial process, dur16 ing the applicable reinstatement period set forth

17 in subparagraph (A), permits the consumer to

18 reinstate the agreement during a period of at

19 least 30 days after the date of the return or

20 surrender of the property by the payment of all

21 past due rental charges, and any applicable re22 delivery, repair, or late fees; and

23 ‘‘(C) if the consumer has paid 60 percent

24 or more of the total dollar amount of payments

25 necessary to acquire ownership of the property
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1 under the agreement and returns or voluntarily

2 surrenders the property, other than through ju3 dicial process, during the applicable reinstate4 ment period set forth in subparagraph (A), per5 mits the consumer to reinstate the agreement

6 during a period of at least 90 days after the

7 date of the return of the property by the pay8 ment of all past due rental charges and any ap9 plicable redelivery, repair, or late fees.

10 ‘‘(b) CONSTRUCTION.—Subsection (a) shall not be

11 construed to prevent a merchant from attempting to re12 possess property during the reinstatement period pursuant

13 to subsection (a)(3)(A), but such a repossession does not

14 affect the consumer’s right to reinstate. Upon reinstate15 ment, the merchant shall provide the consumer with the

16 same property, if available; if it is not available the mer17 chant shall substitute property of comparable quality and

18 condition.

19 ‘‘SEC. 1007. PROHIBITED INCLUSION.

20 ‘‘A rental-purchase agreement may not contain—

21 ‘‘(1) a confession of judgment;

22 ‘‘(2) a negotiable instrument;

23 ‘‘(3) a security interest or any other claim of a

24 property interest in any goods, except those goods
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1 the use of which is provided by the merchant pursu2 ant to the agreement;

3 ‘‘(4) a wage assignment; or

4 ‘‘(5) a waiver by the consumer of a claim de5 fense.

6 ‘‘SEC. 1008. RECEIPTS AND ACCOUNTS.

7 ‘‘A merchant shall provide the consumer a written re8 ceipt for each payment made by cash, check, or money

9 order, the date, the total number of rental payments made,

10 and the total number of payments necessary to acquire

11 ownership of the property.

12 ‘‘SEC. 1009. RENEGOTIATIONS AND EXTENSIONS.

13 ‘‘A renegotiation of a rental-purchase agreement is

14 deemed to be a new agreement for purposes of this title,

15 requiring new disclosures under section 1004. A renegoti16 ation shall be considered to occur when an existing rental

17 purchase agreement is satisfied and replaced by a new

18 agreement undertaken by the same merchant. Events such

19 as the following shall not be treated as renegotiations:

20 ‘‘(1) The addition or return of property in a

21 multiple-item agreement or the substitution of prop22 erty, if in either case the average payment allocable

23 to a payment period is not changed by more than 25

24 percent.
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1 ‘‘(2) A deferral or extension of one or more

2 periodic payments, or portions of a periodic pay3 ment.

4 ‘‘(3) A reduction in charges in the agreement.

5 ‘‘(4) An agreement involving a court proceed6 ing.

7 ‘‘(5) Any other event described in regulations

8 prescribed by the Board.

9 ‘‘SEC. 1010. RENTAL-PURCHASE ADVERTISING.

10 ‘‘(a) ADVERTISEMENTS.—If an advertisement refers

11 to or states the amount of any payment or the right to

12 acquire ownership, the merchant that makes the advertise13 ment shall also clearly and conspicuously state in the ad14 vertisement the following items:

15 ‘‘(1) The transaction advertised is to occur

16 under a rental-purchase agreement.

17 ‘‘(2) The total number and total dollar amount

18 of rental payments necessary to acquire ownership

19 under the agreement.

20 ‘‘(3) The consumer acquires no ownership

21 rights in the property if the total dollar amount of

22 rental payments necessary to acquire ownership is

23 not paid.

24 ‘‘(b) LIABILITY.—The owner or personnel of any me25 dium in which an advertisement appears or through which
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1 it is disseminated shall not be liable for a violation of sub2 section (a).

3 ‘‘(c) CONSTRUCTION.—Subsection (a) does not apply

4 to an advertisement which—

5 ‘‘(1) is published in the yellow pages of a tele6 phone directory or in any similar directory of busi7 nesses, or

8 ‘‘(2) is displayed in the merchant’s place of

9 business.

10 ‘‘SEC. 1011. CIVIL LIABILITY.

11 ‘‘(a) LIABILITY AMOUNT.—Except as otherwise pro12 vided in this title, a merchant who willfully violates this

13 title with respect to a consumer is liable to the consumer

14 in an amount equal to the following:

15 ‘‘(1) In an action by an individual consumer,

16 the sum of—

17 ‘‘(A) actual damages sustained by the

18 consumer as a result of the violation; and

19 ‘‘(B) Not less than $100.

20 ‘‘(2) In a class action, the amount the court de21 termines to be appropriate with no minimum recov22 ery as to each member. The total recovery in any

23 class action or series of class actions arising out of

24 the same violation shall not be more than the lesser
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1 of $500,000 or 1 percent of the net worth of the

2 merchant.

3 ‘‘(b) STATUTE OF LIMITATIONS.—

4 ‘‘(1) ACTIONS IN UNITED STATES CONSTITU5 TION.—An action under this section may be brought

6 in any United States district court of competent ju7 risdiction, but not later than one year of the date of

8 the occurrence of the violation.

9 ‘‘(2) CONSTRUCTION.—This subsection does not

10 bar a consumer from asserting a violation of this

11 title in an action to collect a debt brought more than

12 one year after the date of the occurrence of the vio13 lation as a matter of defense by recoupment or set

14 off, except as otherwise provided by State law.

15 ‘‘(c) OFFSET.—

16 ‘‘(1) LIMITATION.—A consumer may not take

17 any action to offset any amount for which a mer18 chant is potentially liable under subsection (a)

19 against any amount owed by the consumer, unless

20 the amount of the merchant’s liability has been de21 termined by judgment of a court of competent juris22 diction in an action in which the merchant was a

23 party.

24 ‘‘(2) CONSTRUCTION.—This subsection does not

25 bar a consumer who is in default on the obligation
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1 from asserting a violation of this title as an original

2 action, or as a defense of counterclaim to an action

3 brought by the merchant to collect amounts owed by

4 the consumer.

5 ‘‘SEC. 1012. DEFENSES.

6 ‘‘A merchant is not liable—

7 ‘‘(1) under section 1011 for a violation of the

8 requirements of section 1004 if within 15 days after

9 first having knowledge of the violation, and before

10 an action under section 1011 is filed or written no11 tice of the violation is received from the consumer,

12 the merchant notifies the consumer of the violation

13 and makes whatever adjustments in the account are

14 necessary to assure that the consumer will not be re15 quired to pay an amount in excess of the amounts

16 actually disclosed;

17 ‘‘(2) under this title for any act done or omitted

18 good faith in conformity with any rule, regulation,

19 interpretation, or approval promulgated by the

20 Board or by an official duly authorized by the

21 Board; or

22 ‘‘(3) under this title for a violation if the mer23 chant establishes, and at the time of the violation is

24 implementing, procedures reasonably calculated to

25 prevent the violation.
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1 Paragraph (2) applies even if, after the act or omission

2 has occurred, the rule, regulation, interpretation, or ap3 proval is amended, rescinded, or determined by judicial or

4 other authority to be invalid for any reason.

5 ‘‘SEC. 1013. LIABILITY OF ASSIGNEES.

6 ‘‘(a) ASSIGNEES.—For purposes of sections 1011 and

7 1012 and this section, the term ‘‘merchant’’ includes an

8 assignee of a merchant. However, an action under section

9 1011 for a violation of this title may be brought against

10 an assignee only if the violation is apparent on the face

11 of the rental-purchase agreement to which it relates. A

12 violation apparent in the face of a rental purchase agree13 ment includes a disclosure that can be determined to be

14 incomplete or inaccurate from the face of the agreement.

15 An assignee has no liability in a case in which the assign16 ment is involuntary.

17 ‘‘(b) CONSUMER ACKNOWLEDGMENT.—In an action

18 by or against an assignee, the consumer’s written acknowl19 edgment of receipt of a disclosure shall be conclusive proof

20 that the disclosure was made, if the assignee had no

21 knowledge that the disclosure had not been made when

22 the assignee acquired the rental-purchase agreement to

23 which it relates.
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1 ‘‘SEC. 1014. REGULATIONS AND ENFORCEMENT.

2 ‘‘(a) IN GENERAL.—The Board shall issue regula3 tions to carry out the purposes of this title, to prevent

4 its circumvention, and to facilitate compliance with its re5 quirements. The regulations may contain classification

6 and differentiations and may provide for adjustments and

7 exceptions for any class of transaction.

8 ‘‘(b) MODELS.—The Board shall publish model dis9 closure forms and clauses to facilitate compliance with the

10 disclosure requirements of this title and to aid consumers

11 in understanding transactions under rental-purchase

12 agreements. In designing forms, the Board shall consider

13 the use by merchants of data processing or similar auto14 mated equipment. Use of the models shall be optional. A

15 merchant who properly uses the model disclosure forms

16 shall be deemed to be in compliance with the disclosure

17 requirements.

18 ‘‘(c) EFFECTIVE DATE OF REGULATIONS.—Any reg19 ulation issued by the Board, or any amendment or inter20 pretation thereof, shall not be effective before the October

21 1 that follows the date of promulgation by at least 6

22 months. The Board may at its discretion lengthen that

23 period of time to permit merchants to adjust their forms

24 to accommodate new requirements. The Board may also

25 shorten that period of time, notwithstanding the first sen26 tence, if it makes a specific finding that such action is
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1 necessary to comply with the findings of a court or to pre2 vent unfair or deceptive practices. In any case, merchants

3 may comply with any newly promulgated disclosure re4 quirement prior to its effective date.

5 ‘‘(d) ENFORCEMENT.—The Board shall enforce the

6 requirements of this title. The authority of section 108

7 shall apply with respect to the Board’s enforcement of

8 such requirements.

9 ‘‘SEC. 1015. RELATION TO STATE LAWS.

10 ‘‘This title does not annul, alter, affect, or exempt

11 any person subject to this title from complying with the

12 laws of any State with respect to a matter covered by this

13 title, except to the extent that those laws—

14 ‘‘(1) are inconsistent with this title;

15 ‘‘(2) provide a lesser degree of protection for

16 consumers; or

17 ‘‘(3) attempt to regulate rental-purchase trans18 actions as a credit, retail, conditional, or installment

19 sale.

20 ‘‘SEC. 1016. EFFECT ON GOVERNMENT AGENCIES.

21 ‘‘No civil liability or criminal penalty under this title

22 may be imposed on the United States or any of its depart23 ments or agencies, any State or political subdivision, or

24 any agency of a State or political subdivision.’’.

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