I

104TH CONGRESS

2D SESSION H. R. 3003

To establish requirements applicable to rent-to-own transactions.

IN THE HOUSE OF REPRESENTATIVES

MARCH 5, 1996

Mr. GONZALEZ introduced the following bill; which was referred to the

Committee on Banking and Financial Services

A BILL

To establish requirements applicable to rent-to-own

transactions.

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 ‘‘Rent-To-Own Reform

5 Act of 1996’’.

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

7 The Consumer Credit Protection Act (15 U.S.C.

8 1601 et seq.) is amended by adding at the end the follow9 ing new title:
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1 ‘‘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 to rent-to-own transactions.

‘‘1005. Application of Federal laws to rent-to-own transactions.

‘‘1006. Disclosures.

‘‘1007. Prohibitions and enforcement.

‘‘1008. Civil liability.

‘‘1009. Application of this title.

‘‘1010. Regulations.

‘‘1011. Relationship to other laws.

2 ‘‘§ 1001. Short title

3 ‘‘This title may be cited as the ‘Rent-to-Own Protec4 tion Act’.

5 ‘‘§ 1002. Findings and purposes

6 ‘‘(a) FINDINGS.—The Congress finds the following:

7 ‘‘(1) The rent-to-own industry targets its prod8 ucts primarily to low income and minority neighbor9 hoods.

10 ‘‘(2) The majority of rent-to-own customers

11 enter into rent-to-own contracts with the intention of

12 owning the goods for which they are contracting.

13 ‘‘(3) Rent-to-own dealers often fail to disclose

14 key terms of rent-to-own contracts, and engage in

15 unfair collection practices.

16 ‘‘(4) Of primary significance, rent-to-own deal17 ers do not provide customers with the protections af18 forded purchasers in retail installment sales under
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1 State and Federal laws, and often charge excessive

2 fees and interest rates.

3 ‘‘(b) PURPOSES.—The purposes of this title are the

4 following:

5 ‘‘(1) Provide consumers in rent-to-own trans6 actions the range of protections provided under

7 State and Federal laws to individuals that acquire

8 goods in other consumer credit sales, while recogniz9 ing and preserving consumers’ unilateral right to

10 terminate.

11 ‘‘(2) Require rent-to-own contracts, and tags

12 affixed to items available for acquisition in rent-to13 own transactions, to disclose material terms of those

14 transactions.

15 ‘‘(3) Prohibit rent-to-own dealers and collection

16 agents hired by those dealers from engaging in abu17 sive collection practices.

18 ‘‘§ 1003. Definitions

19 ‘‘In this title:

20 ‘‘(1) The term ‘Board’ means the Board of

21 Governors of the Federal Reserve System.

22 ‘‘(2) The term ‘cash price’ means—

23 ‘‘(A) the bona fide retail price for an item

24 or service in sales by a seller to consumers who
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1 pay the full price in one payment, respec2 tively—

3 ‘‘(i) before taking possession of the

4 item, or

5 ‘‘(ii) for receipt of the service other

6 than in a rent-to-own transaction,

7 as indicated by actual sales of such item or

8 service by the seller; and

9 ‘‘(B) in the case of a seller that does not

10 regularly engage in such sales of the item or

11 service, respectively—

12 ‘‘(i) the average cash retail price of

13 the item or a similar item in the commu14 nity; or

15 ‘‘(ii) the estimated bona fide retail

16 value of the service.

17 ‘‘(3) The term ‘consumer’—

18 ‘‘(A) when used as an adjective, means for

19 use by an individual primarily for personal,

20 family, or household purposes; and

21 ‘‘(B) when used as a noun, means an indi22 vidual who is the lessee or bailee under a rent23 to-own contract.

24 ‘‘(4) The term ‘credit’—
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1 ‘‘(A) includes the right granted by a seller

2 to a consumer to obtain possession of an item

3 of consumer goods under a rent-to-own contract

4 before payment of the total amount that is re5 quired to be paid to acquire ownership of the

6 item; and

7 ‘‘(B) is deemed to be a fixed sum equal

8 to—

9 ‘‘(i) the total of payments for the item

10 required to obtain ownership of the item

11 under the contract; minus

12 ‘‘(ii) the sum of (I) the cash price,

13 (II) any fees specifically allowable under

14 State law, except finance charges, interest,

15 or a time price differential, and (III) the

16 termination fee under section 1004.

17 ‘‘(5) The term ‘rent-to-own contract’ means a

18 contract in the form of a terminable lease or bail19 ment of an item of consumer goods, under which—

20 ‘‘(A) a consumer—

21 ‘‘(i) has the right of possession and

22 use of the item; and

23 ‘‘(ii) has the option to renew the con24 tract periodically by making payments

25 specified in the contract; and
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1 ‘‘(B) a seller agrees, in writing or orally, to

2 transfer ownership of the item to the consumer

3 upon the fulfillment of all obligations of the

4 consumer under the contract for that transfer.

5 ‘‘(6) The term ‘rent-to-own transaction’ means

6 the lease or bailment of an item of consumer goods

7 under a rent-to-own contract.

8 ‘‘(7) The term ‘seller’ means—

9 ‘‘(A) a person—

10 ‘‘(i) who regularly makes consumer

11 goods available under rent-to-own con12 tracts; and

13 ‘‘(ii) to whom payments are payable

14 under those contracts; and

15 ‘‘(B) an assignee of such a person.

16 ‘‘(8) The term ‘‘State’’ means any State, the

17 Commonwealth of Puerto Rico, the District of Co18 lumbia, and any territory or possession of the

19 United States.

20 ‘‘§ 1004. Application of State laws regarding fees,

21 charges, guarantees, and warranties to

22 rent-to-own transactions

23 ‘‘(a) IN GENERAL.—Subject to subsection (b), a sell24 er in a rent-to-own transaction may not take, receive, or

25 assess any interest, finance charge, or other fee for the
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1 transaction that is in excess of the interest, fees, or fi2 nance charges that may be charged under the laws of the

3 State in which the seller is located which—

4 ‘‘(1) establish a maximum rate or amount of in5 terest, finance charge, or time-price differential that

6 may be charged in connection with a credit sale or

7 retail installment sale for the same or a similar item;

8 ‘‘(2) establish the types of fees and the maxi9 mum amount of fees that a seller may charge in

10 connection with a credit sale or retail installment

11 sale for the same or a similar item; or

12 ‘‘(3) establish the types of credit insurance and

13 the maximum amount of premiums that can be

14 charged for credit insurance in connection with a

15 credit sale or a retail installment sale for the same

16 or a similar item.

17 ‘‘(b) ADDITIONAL TERMINATION CHARGES AND

18 FEES.—

19 ‘‘(1) CHARGES AND FEES AUTHORIZED.—In ad20 dition to fees and charges authorized under sub21 section (a), a seller in a rent-to-own transaction may

22 charge—

23 ‘‘(A) a termination fee in accordance with

24 paragraph (2), if in exchange the consumer is

25 given the right to terminate the rent-to-own
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1 contract for the transaction at any time without

2 regard to whether the consumer has completed

3 payment of the fee; and

4 ‘‘(B) fees that are reasonable in relation to

5 the cash price of the good, for recovery of the

6 items that are the subject of the contract and

7 that are not voluntarily returned to the seller

8 upon the completion or termination of the con9 tract.

10 ‘‘(2) TERMINATION FEE.—A termination fee

11 under paragraph (1)(A)—

12 ‘‘(A) shall not exceed 5 percent of the cash

13 price under the contract;

14 ‘‘(B) shall be disclosed in the contract;

15 ‘‘(C) may be paid at the time the contract

16 is entered into or over the life of the contract;

17 and

18 ‘‘(D) shall be calculated as part of the fi19 nance charge as determined under section 106

20 of the Truth in Lending Act.

21 ‘‘(3) RECOVERY FEES.—A recovery fee under

22 paragraph (1)(B) shall be disclosed in the contract.

23 ‘‘(4) EFFECT OF TERMINATION.—The termi24 nation of a rent-to-own contract by a consumer in

25 accordance with a right of termination given to the
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1 consumer in exchange for a termination fee under

2 subsection (a)(1) is deemed to satisfy the consumer’s

3 obligation for all payments and fees due under the

4 contract, except fees and charges under the contract

5 that become due before the date of termination.

6 ‘‘(c) GUARANTEES AND WARRANTIES.—All guaran7 tees and warranties established or required under the laws

8 of a State for goods sold pursuant to a consumer credit

9 sale or retail installment sale apply to goods which are

10 the subject of a rent-to-own transaction in the State.

11 ‘‘§ 1005. Application of Federal laws to rent-to-own

12 transactions

13 ‘‘The following Federal laws apply to a rent-to-own

14 transaction, as follows:

15 ‘‘(1) TRUTH IN LENDING ACT.—The Truth in

16 Lending Act applies as it applies to a consumer

17 credit transaction that is a credit sale (as that term

18 is defined in that Act).

19 ‘‘(2) EQUAL CREDIT OPPORTUNITY ACT.—The

20 Equal Credit Opportunity Act applies as it applies

21 to credit transactions. For purposes of that applica22 tion—

23 ‘‘(A) a consumer shall be treated as an ap24 plicant; and

25 ‘‘(B) a seller shall be treated as a creditor.
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1 ‘‘(3) FAIR DEBT COLLECTION PRACTICES

2 ACT.—The Fair Debt Collection Practices Act ap3 plies to the collection of payments owed that arise

4 from a rent-to-own transaction, unless those pay5 ments are collected by any person specified in sec6 tion 803(6) (A) through (F) of that Act. For pur7 poses of that application, payments owed shall be

8 treated as debt.

9 ‘‘(4) FAIR CREDIT REPORTING ACT.—The Fair

10 Credit Reporting Act applies as it applies to a credit

11 transaction and to any extension or denial of credit.

12 ‘‘§ 1006. Disclosures

13 ‘‘(a) DISCLOSURES ON GOODS.—A seller shall include

14 on each item in the place of business of the seller that

15 is available for purchase pursuant to a rent-to-own trans16 action the following information:

17 ‘‘(1) The cash price of the item.

18 ‘‘(2) An itemization of services offered under a

19 rent-to-own contract for the item, and the cash price

20 of each service.

21 ‘‘(3) The annual percentage rate of the item

22 under a rent-to-own contract, determined under sec23 tion 107 of the Truth in Lending Act.

24 ‘‘(4) The weekly, biweekly, monthly, or other in25 cremental payment applicable under the rent-to-own
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1 contract for the transaction and the number of pay2 ments.

3 ‘‘(5) The total of payments required to be paid

4 to acquire ownership of the item under a rent-to-own

5 contract for the transaction, determined under regu6 lations under the Truth in Lending Act.

7 ‘‘(6) Specification of whether the item is new or

8 used.

9 ‘‘(b) DISCLOSURES UPON CONTRACTING.—A seller

10 shall provide to a consumer in writing, at the time the

11 seller and consumer enter into a rent-to-own contract for

12 an item, the information referred to in subsection (a) for

13 the item and the contract.

14 ‘‘§ 1007. Prohibitions and enforcement

15 ‘‘(a) PROHIBITIONS.—A person who is a seller under

16 a rent-to-own contract with a consumer shall not—

17 ‘‘(1) threaten or invoke criminal prosecution of

18 a consumer for any matter related to the contract,

19 unless there is clear and convincing evidence that

20 the goods that are the subject of the contract are

21 being held by the consumer with an intent to de22 fraud the seller;

23 ‘‘(2) use threats or coercion to collect or at24 tempt to collect any amounts alleged to be due from

25 the consumer;
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1 ‘‘(3) engage in any conduct, the natural con2 sequence of which is to oppress, harass, or abuse

3 any person in connection with an attempt to collect

4 amounts owed by the consumer under the contract;

5 ‘‘(4) unreasonably disclose information to third

6 parties regarding amounts owed by the consumer;

7 ‘‘(5) make any fraudulent, deceptive, or mis8 leading representation to obtain information about

9 the consumer or to collect amounts owed by the

10 consumer;

11 ‘‘(6) use any unconscionable means to collect or

12 attempt to collect a debt owed to the seller;

13 ‘‘(7) advertise, announce, solicit, or otherwise

14 represent as free or available without charge (includ15 ing by use of other words of similar meaning) any

16 service under the contract for which the seller

17 charges the consumer, including any service for

18 which a charge is collected by inclusion in the

19 amount required to be paid under the contract;

20 ‘‘(8) use, for purposes of complying with any

21 State or Federal law governing rent-to-own trans22 actions (other than a State or Federal tax law) any

23 definition of the term ‘cash price’ other than the def24 inition under section 1003(2);
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1 ‘‘(9) engage in any act or practice which is un2 fair or deceptive in connection with a rent-to-own

3 transaction; or

4 ‘‘(10) violate any regulation issued by the

5 Board under subsection (c)(1).

6 ‘‘(b) ENFORCEMENT.—

7 ‘‘(1) ENFORCEMENT.—Compliance with the re8 quirements under this title shall be enforced by the

9 Federal Trade Commission. All functions and pow10 ers of the Federal Trade Commission under the

11 Federal Trade Commission Act shall be available to

12 the Commission to enforce compliance with this title

13 by any person, irrespective of whether the person is

14 engaged in commerce or meets any other jurisdic15 tional tests in the Federal Trade Commission Act,

16 including the power to enforce the provisions of this

17 title in the same manner as if the violation had been

18 a violation of a Federal Trade Commission trade

19 regulation rule.

20 ‘‘(2) TREATMENT OF VIOLATIONS.—For the

21 purpose of the exercise by the Federal Trade Com22 mission of its functions and powers under the Fed23 eral Trade Commission Act, a violation of any re24 quirement or prohibition under this title is deemed
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1 to be an unfair or deceptive act or practice in com2 merce in violation of that Act.

3 ‘‘(c) REGULATIONS.—

4 ‘‘(1) BOARD.—The Board shall issue such regu5 lations as are necessary or appropriate for imple6 menting subsection (a), including regulations de7 scribing specific practices by a seller that are prohib8 ited by paragraphs (1) through (9) of that sub9 section.

10 ‘‘(2) FEDERAL TRADE COMMISSION.—The Fed11 eral Trade Commission shall issue regulations imple12 menting subsection (b).

13 ‘‘§ 1008. Civil liability

14 ‘‘(a) LIABILITY FOR FAILURE TO PROPERLY DIS15 CLOSE TERMS.—Any seller who fails to comply with a re16 quirement under section 1006 is liable to the consumer

17 in an amount equal to the sum of—

18 ‘‘(1) actual damages sustained by the consumer

19 as a result of the failure;

20 ‘‘(2) $250 for each failure; and

21 ‘‘(3) all costs of the action and reasonable at22 torney fees, as determined by the court.

23 ‘‘(b) OTHER LIABILITY.—A seller that violates this

24 title or fails to comply with any requirement imposed
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1 under this title, other than under section 1006, shall be

2 liable to the consumer in an amount equal to the sum of—

3 ‘‘(1) actual damages sustained by the consumer

4 as a result of the violation;

5 ‘‘(2) $2,500 for each violation; and

6 ‘‘(3) all costs of the action and reasonable at7 torney fees, as determined by the court.

8 ‘‘(c) JURISDICTION AND LIMITATION.—An action

9 under this title may be brought in any United States dis10 trict court or in any other court of competent jurisdiction,

11 within 24 months after the date of the violation or failure

12 that is the subject of the action. This subsection does not

13 bar a person from asserting a violation of this title in an

14 action to collect amounts alleged to be due from the person

15 which is brought more than 2 years after the date of the

16 occurrence of the violation as a matter of defense by

17 recoupment or set-off in such action.

18 ‘‘§ 1009. Application of this title

19 ‘‘(a) IN GENERAL.—This title applies to rent-to-own

20 contracts entered into after the date of the issuance of

21 regulations by the Board under section 1010.

22 ‘‘(b) MOTOR VEHICLES.—This title does not apply to

23 any lease or sale of a motor vehicle entered into after the

24 date of the enactment of the Rent-to-Own Reform Act of

25 1996 that, if entered into on the day before that date of
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1 enactment, would have been subject to chapter 5 of the

2 Truth in Lending Act.

3 ‘‘§ 1010. Regulations

4 ‘‘The Board shall issue such regulations as may be

5 necessary to implement this Act (including regulations

6 under section 1007(c)(1)), by not later than 12 months

7 after the date of the enactment of the Rent-To-Own Re8 form Act of 1996.

9 ‘‘§ 1011. Relationship to other laws

10 ‘‘(a) STATE LAW.—This title does not annul, alter,

11 or affect, or exempt any person subject to the provisions

12 of this title from complying with, the laws of any State

13 with respect to rent-to-own transactions, except to the ex14 tent that those laws are inconsistent with any provision

15 of this title, and then only to the extent of the inconsist16 ency.

17 ‘‘(b) CONSUMER LEASE PROVISIONS OF TRUTH IN

18 LENDING ACT.—Chapter 5 of the Truth in Lending Act,

19 relating to consumer leases, shall not apply to a rent-to20 own transaction except the lease or sale of a motor vehicle

21 that, if entered into on the day before the date of the en22 actment of the Rent-To-Own Reform Act of 1996, would

23 have been subject to that chapter.’’.

Æ