I

104TH CONGRESS

2D SESSION H. R. 3515

To amend the consumer lease provisions of the Consumer Credit Protection

Act.

IN THE HOUSE OF REPRESENTATIVES

MAY 22, 1996

Mr. LAFALCE (for himself, Mr. SCHUMER, Ms. ROYBAL-ALLARD, Mr. LIPINSKI, and Mr. FRAZER) introduced the following bill; which was referred

to the Committee on Banking and Financial Services

A BILL

To amend the consumer lease provisions of the Consumer

Credit Protection Act.

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 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Consumer Automobile Leasing Act of 1996’’.

6 (b) REFERENCE.—Whenever in this Act (other than

7 section 7(b)) an amendment or repeal is expressed in

8 terms of an amendment to, or repeal of, a section or other

9 provision, the reference shall be considered to be made to
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1 a section or other provision of the Consumer Credit Pro2 tection Act.

3 SEC. 2. FINDINGS AND PURPOSE.

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

5 (1) There has been a continuing trend toward

6 leasing of automobiles by consumers as an alter7 native to installment credit sales, with automobile

8 leases now constituting nearly one-third of all new

9 automobile transactions.

10 (2) Most consumers are not familiar with the

11 terms used in automobile leases and with the way in

12 which the automobile industry has chosen to struc13 ture lease transactions. Important disclosures are

14 not provided to consumers until the signing of the

15 lease and are routinely incorporated within complex

16 and lengthy lease documents.

17 (3) Automobile lease advertisements tend to

18 confuse and mislead consumers by highlighting only

19 the most attractive terms of leases, by minimizing

20 less attractive terms and costs, by omitting key in21 terest rate information, by combining terms for sales

22 and leases within advertisements, or by advertising

23 vehicle models or lease terms that may not be avail24 able or customarily offered to consumers.
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1 (4) As leasing becomes more popular, there is

2 increasing need for automobile manufacturers, finan3 cial institutions, automobile dealers, and other firms

4 involved in leasing to provide consumers with more

5 appropriate information to allow consumers to evalu6 ate intelligently the attractiveness of a proposed

7 lease, to compare it with other leases offered and ad8 vertised, and to compare it with other alternative

9 cash purchase and credit transactions.

10 (b) PURPOSE.—The purpose of the amendments

11 made by this Act is to enhance public understanding of

12 automobile leases, to encourage competition among busi13 nesses engaged in automobile leasing, to provide consum14 ers with more relevant and more easily understood infor15 mation regarding the terms and costs of lease offerings,

16 to simplify and standardize disclosures in lease advertising

17 and to strengthen protections against unfair or misleading

18 leasing practices.

19 SEC. 3. APPLICABLE CONSUMER LEASES.

20 Section 181(1) (15 U.S.C. 1667(1)) is amended—

21 (1) by striking ‘‘$25,000’’ and inserting

22 ‘‘$50,000’’; and

23 (2) by adding at the end the following: ‘‘The

24 limit on the contractual obligation which comes with25 in such term shall be adjusted annually based upon
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1 the change reported in the Consumer Price Index by

2 the Department of Labor in June of the preceding

3 year.’’.

4 SEC. 4. CONSUMER LEASE DISCLOSURES.

5 Section 182 (15 U.S.C. 1667a) is amended—

6 (1) by amending the portion preceding para7 graph (1) to read as follows: ‘‘Each lessor shall give

8 a lessee prior to the consummation of the lease a

9 statement which is dated and typed or set in type

10 that identifies prominently that the transaction is a

11 lease, that identifies the lessor and lessee, and that

12 sets out accurately and in a clear and conspicuous

13 manner the following information with respect to

14 that lease, as applicable:’’;

15 (2) by amending paragraph (1) to read as fol16 lows:

17 ‘‘(1) A full description of the property to be

18 leased, including any alteration, accessory, or other

19 option;’’;

20 (3) in paragraph (2), by inserting before the

21 semicolon the following: ‘‘, including all charges or

22 fees to be paid at or before lease signing and upon

23 delivery of the leased property’’;

24 (4) in paragraph (5), by inserting after ‘‘term’’

25 the following: ‘‘, including a description of the les-
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1 sor’s standards for wear and use, which must be

2 reasonable, if a charge for excessive wear and use of

3 the leased property is to be imposed at the end of

4 the lease term,’’;

5 (5) in paragraph (6), by inserting before the

6 comma the following: ‘‘and disclosing whether such

7 warranties and guarantees are assigned or conveyed

8 to the lessee’’;

9 (6) by amending paragraph (7) to read as fol10 lows:

11 ‘‘(7) a statement of whether insurance is pro12 vided or paid for by the lessor, the types and

13 amounts of insurance coverage, and the cost to the

14 lessee or, if not provided or paid for by the lessor,

15 the types and amounts of insurance coverage re16 quired by the lease;’’; and

17 (7) in the sentence following paragraph (11), by

18 striking ‘‘may be made in the lease contract to be

19 signed by the lessee’’ and inserting ‘‘shall appear to20 gether and in a meaningful sequence in which the

21 related disclosures are grouped together and shall

22 appear at the beginning of the lease document or in

23 a separate document presented either before or in

24 conjunction with the lease document’’.
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1 SEC. 5. AUTOMOBILE LEASES.

2 Section 182 (15 U.S.C. 1667a) is amended by insert3 ing ‘‘(a)’’ before ‘‘Each lessor’’ and by adding at the end

4 the following:

5 ‘‘(b)(1) For any lease for personal use of an auto6 mobile the lessor shall disclose separately and conspicu7 ously, at the same time and in the same document as the

8 disclosures required by subsection (a) are made, the fol9 lowing information, to the extent applicable:

10 ‘‘(A) the amount of the total payments to be

11 made by the lessee at the inception of the lease;

12 ‘‘(B) the amount of each monthly payment, the

13 total amount of the monthly payments, and the total

14 amount of monthly payments made under the lease;

15 ‘‘(C) the total amount of all predetermined

16 amounts to be paid by the lessee at the end of the

17 lease;

18 ‘‘(D) the total amount of all payments to be

19 made by the lessee during the term of the lease, in20 cluding total payments due at the inception of the

21 lease, and total monthly payments and predeter22 mined amounts due at the end of the lease;

23 ‘‘(E) the lease annual percentage rate; and

24 ‘‘(F) the automobile residual value used by the

25 lessor in calculating the base monthly payment,

26 which shall represent a reasonable approximation of
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1 the anticipated wholesale market value of the auto2 mobile at the end of the lease term.

3 ‘‘(2) The lessor shall disclose separately in a size and

4 type that is easily read and in terminology that is under5 standable to ordinary consumers the following, as applica6 ble:

7 ‘‘(A) a statement of whether the lessee does or

8 does not have an option to purchase the leased auto9 mobile either upon termination of the lease or before

10 scheduled termination of the lease and, if applicable,

11 the lease-end purchase option price of the leased

12 automobile;

13 ‘‘(B) a statement warning that the lessee may

14 be required to pay a substantial penalty for termi15 nating the lease prior to the expiration of the lease

16 term, to include the actual dollar amount of such

17 penalty based on termination of the lease at the end

18 of the first year and explaining that a collision or

19 other event resulting in a total loss of the leased

20 automobile prior to the end of the lease term shall

21 constitute an early termination of the lease;

22 ‘‘(C) a statement warning that the lessee may

23 be charged for excessive wear or use of the leased

24 automobile upon the termination of the lease and ex25 plaining that the standards for excess wear or use
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1 to be imposed by the lessor are described in the

2 lease document including, if appropriate, the maxi3 mum mileage permitted each year during the lease

4 term before an excess mileage charge is imposed and

5 the amount per mile of such charge; and

6 ‘‘(D) a statement to alert consumers as to other

7 important required disclosures that should be read

8 before signing the lease document.

9 ‘‘(3) The lessor shall disclose separately and con10 spicuously and at the same time and in the same docu11 ment as the disclosures required by this subsection a sum12 mary of all charges and costs by type and amount to be

13 included in—

14 ‘‘(A) the amount due at lease inception, includ15 ing all charges or fees to be paid by the lessee at

16 or before lease signing and upon delivery of the

17 leased automobile; and

18 ‘‘(B) the total capitalized cost of the automobile

19 to be leased, including the agreed upon acquisition

20 value of the automobile and any other costs or

21 charges to be added to the total cost of the leased

22 automobile and which are not paid separately by the

23 lessee.

24 ‘‘(4) Information required to be disclosed under para25 graphs (1) and (2) shall be provided under the heading
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1 ‘Important Information for the Consumer’ at the same

2 time and at the beginning of the same document in which

3 the required disclosures are made.

4 ‘‘(c)(1) For any lease for personal use of an auto5 mobile the lessor shall provide disclosure under this sub6 section at the earlier of either the consummation of the

7 lease or, if the automobile is ordered and a security deposit

8 or other charge is required of the lessee, at the time the

9 lessee incurs any legal obligation on the lease transaction.

10 ‘‘(2) If the lessee is obligated on the lease prior to

11 consummation of the lease contract, the lessor may not

12 change or modify the terms of the lease prior to con13 summation, except that if the lessor has knowledge of, or

14 anticipates, significant delay for delivery of the automobile

15 and consummation of the lease, the lessor shall make an

16 affirmative statement that identifies the date on which the

17 terms of the lease may expire and become subject to

18 change and states that after such date the security deposit

19 or charge shall be returned to the lessee if the terms of

20 the lease are changed or modified.’’.

21 SEC. 6. AUTOMOBILE LEASE ADVERTISING.

22 (a) GENERAL REQUIREMENTS.—

23 (1) AMENDMENTS.—Section 184(a) (15 U.S.C.

24 1667c) is amended—
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1 (A) by striking ‘‘(a) No’’ and inserting

2 ‘‘(a)(1) Except as otherwise provided in this

3 section, no’’, and

4 (B) by redesignating paragraphs (1)

5 through (5) as subparagraphs (A) through (E),

6 respectively, and by adding at the end the fol7 lowing:

8 ‘‘(F) The lease annual interest rate.

9 ‘‘(2) Information required to be disclosed under para10 graph (1) shall be in the same language that principally

11 is used in the advertisement. Identification in a television

12 advertisement of the advertised transaction as a lease, as

13 required by paragraph (1)(A), shall be included in both

14 the audio and video portions of the television advertise15 ment.

16 ‘‘(3) The requirements of this subsection shall apply

17 to all aspects of advertising, including television, radio,

18 and videotaped advertisements, print advertisements in

19 publications, newsletters, and fliers, advertisements on

20 computer programs and on the internet, and advertise21 ments by toll-free telephone numbers.’’.

22 (2) CONFORMING AMENDMENTS.—Section

23 184(b) (15 U.S.C. 1667c(b)) is amended by striking

24 ‘‘subsection (a)’’ each time it occurs and inserting

25 ‘‘subsection (a)(1)’’ and in paragraph (1) by striking
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1 ‘‘paragraphs (1) and (2)’’ and inserting ‘‘subpara2 graphs (A) and (B)’’.

3 (b) ADVERTISEMENT FOR AUTOMOBILE LEASE.—

4 Section 184 (15 U.S.C. 1667c) is amended by adding at

5 the end the following:

6 ‘‘(d) ADVERTISEMENT FOR AUTOMOBILE LEASE.—

7 No advertisement to promote or assist, directly or indi8 rectly, any consumer lease for personal use of an auto9 mobile shall—

10 ‘‘(1) state that no downpayment is required on

11 the lease when the lessor requires a capitalized cost

12 reduction payment, acquisition fee, vehicle trade-in,

13 or other payment upon initiation of the lease, except

14 that payment of the first monthly payment on the

15 lease and any refundable deposit shall not be consid16 ered a downpayment;

17 ‘‘(2) incorporate within the same advertisement

18 the amounts of any payment, downpayment, interest

19 rate, or other term pertaining to both a lease trans20 action and to an alternative installment credit trans21 action;

22 ‘‘(3) include the amounts of any payment,

23 downpayment, interest rate, or other term of leases

24 that the lessor does not customarily provide or will

25 offer only to selected consumers, or the amounts of
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1 any payment, downpayment, interest rate, or other

2 term of leases of automobile models that the lessor

3 does not have in sufficient quantities to meet reason4 ably anticipated consumer demand for the vehicle at

5 such advertised terms; and

6 ‘‘(4) display any lease term, including the

7 amount of any monthly payment, interest rate, or

8 downpayment or no downpayment more prominently

9 than the term ‘lease’ or more prominently than the

10 amount of the total payment required to be paid at

11 the inception of the lease.

12 ‘‘(e) LEASE BOX.—

13 ‘‘(1) IN GENERAL.—A written advertisement to

14 promote a lease for personal use of an automobile

15 that—

16 ‘‘(A) appears in a general circulation publi17 cation, printed newsletter, commercial mailing,

18 or printed flier, and

19 ‘‘(B) includes a statement about the pay20 ment required for such lease,

21 shall not be required to include the information re22 quired by subsection (a)(1) but shall state clearly

23 and conspicuously that the transaction advertised is

24 a lease and shall provide separately for each auto25 mobile which is promoted in such advertisement and
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1 for which a payment amount, downpayment amount,

2 or other payment is stated the following items of in3 formation, as applicable:

4 ‘‘(A) The amount due at lease signing

5 which amount shall include all charges and fees

6 to be paid by the lessee at or before the lease

7 signing and upon delivery of the automobile.

8 ‘‘(B) The automobile capitalized cost which

9 cost shall—

10 ‘‘(i) include the automobile price for

11 the advertised automobile model with the

12 most common options offered or leased by

13 the advertiser or lessor and all charges for

14 taxes, insurance, service contracts, and

15 other costs to be added to the automobile

16 price and not paid separately by the lessee;

17 and

18 ‘‘(ii) be stated as a dollar amount that

19 represents the average capitalized cost as a

20 percentage of manufacturer’s suggested re21 tail price of all similar automobiles leased

22 by the advertiser or lessor during the most

23 recent 6 month period ending either De24 cember 31 or June 30.
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1 ‘‘(C) The amount financed by the lease

2 which amount shall be a dollar amount rep3 resenting the automobile capatalized cost as set

4 forth in subparagraph (B) reduced by—

5 ‘‘(i) the amount of any downpayment

6 amount, capitalized cost reduction pay7 ment, or trade-in amount required to be

8 paid by the lessee at lease signing; and

9 ‘‘(ii) the residual value of the model

10 advertised as established by the Auto11 motive Lease Guide or other industry pub12 lication which the Board shall stipulate in

13 regulation for comparable automobile mod14 els with a lease term as set forth in sub15 paragraph (E) and a maximum mileage al16 lowance of 12,000 miles per year for such

17 lease term for determining excess mileage

18 charges, if any.

19 ‘‘(D) The lease annual interest rate.

20 ‘‘(E) The term of the lease which shall be

21 either 24 months or 36 months whichever is of22 fered by the lessor or whichever is more typical

23 for leases for the automobile model advertised.

24 ‘‘(F) The amount of each monthly pay25 ment under the lease which shall be a dollar
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1 amount calculated using the amounts stated

2 pursuant to subparagraphs (C), (D), and (E).

3 ‘‘(2) SEPARATION OF INFORMATION.—The in4 formation required to be provided under paragraph

5 (1) shall be separated conspicuously from other in6 formation in the advertisement, be presented in close

7 proximity to any monthly payment amount, down8 payment amount, or other payment amounts stated

9 for each automobile model promoted, and be of suffi10 cient type size to be legible to and easily read by

11 consumers.

12 ‘‘(3) ADVERTISEMENT REQUIREMENT.—A writ13 ten advertisement described in paragraph (1) shall—

14 ‘‘(A) disclose separately and in close prox15 imity to the information required by paragraph

16 (1) the amount of any additional charge, fee, or

17 penalty to be paid by the lessee that are not in18 cluded in the automobile capitalized cost or paid

19 separately by the lessee at lease signing;

20 ‘‘(B) include a statement that the lessee

21 may be required to pay a substantial penalty

22 for terminating the lease prior to the expiration

23 of the lease term; and

24 ‘‘(C) include no monthly payment amount,

25 downpayment amount, interest rate, or other
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1 payment for a automobile model that is dif2 ferent from any amount required to be stated

3 under paragraph (1) or used to compute any

4 amount required to be stated under paragraph

5 (1).’’.

6 (c) ALTERNATIVE DISCLOSURES.—Section 184(b)

7 (15 U.S.C. 1667c(b)) is amended—

8 (1) by striking ‘‘RADIO’’ in the subsection head9 ing and inserting ‘‘BROADCAST’’;

10 (2) by striking ‘‘radio broadcast’’ each place it

11 occurs and inserting ‘‘radio or television broadcast’’;

12 (3) in paragraph (1)(A), by striking ‘‘para13 graphs (1) and (2)’’ and inserting ‘‘subparagraphs

14 (A), (B), and (F) of subsection (a)(1)’’;

15 (4) in paragraph (2)(A)(iii), by striking ‘‘pro16 vide the’’ and inserting the following: ‘‘provide a re17 corded message which provides, in a uniform manner

18 and in a form which is easily understood and capa19 ble of being repeated, the’’;

20 (5) in paragraph (2)(A), by striking ‘‘and’’ at

21 the end of clause (ii), by striking the period at the

22 end of clause (iii) and inserting ‘‘; and’’, and by add23 ing after clause (iii) the following:

24 ‘‘(iv) exclude from the information

25 provided by such toll-free telephone all
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1 marketing and sales promotional informa2 tion.’’; and

3 (6) by amending paragraph (2)(B) to read as

4 follows:

5 ‘‘(B) WRITTEN INFORMATION.—A toll-free

6 number established in accordance with subpara7 graph (A) shall include an option that permits

8 consumers to request the information required

9 to be provided under subparagraph (A)(iii) in

10 written form and by mail.’’.

11 (d) DEFINITION.—Section 184 (15 U.S.C. 1667c), as

12 amended by subsection (b), is amended by adding at the

13 end the following:

14 ‘‘(f) CLEARLY AND CONSPICUOUSLY.—

15 ‘‘(1) IN GENERAL.—For purposes of this sec16 tion, the term ‘clearly and conspicuously’ means—

17 ‘‘(A) in print advertisements, the required

18 disclosure shall appear in a type size, shade,

19 contrast, prominence, and location as to be

20 readily noticeable, readable, and comprehensible

21 to an ordinary consumer;

22 ‘‘(B) in the video portion of television or

23 videotaped advertisements, the required disclo24 sures shall appear on the screen in a type size,

25 shade, contrast, prominence, and location and
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1 for a duration as to be readily noticeable, read2 able, and comprehensible to an ordinary

3 consumer;

4 ‘‘(C) in the audio portion of television,

5 videotaped, and radio advertisements, the re6 quired disclosures shall be delivered in a vol7 ume, cadence, and location and for a duration

8 as to be readily noticeable, hearable, and com9 prehensible to an ordinary consumer; and

10 ‘‘(D) in advertisements on the internet, the

11 required disclosures shall appear in a type size,

12 shade, contrast, prominence, and location as to

13 be readily readable and comprehensible to users

14 and shall be separated from marketing and pro15 motional information and easily accessible

16 under the label or heading ‘Important Informa17 tion for Consumers’.

18 ‘‘(2) LIMITATION.—Nothing contrary to, incon19 sistent with, or in mitigation of, the required disclo20 sures shall be used in any advertisement in any me21 dium and no audio, videos, or print technique shall

22 be used that is likely to obscure or detract signifi23 cantly from the communication of the disclosures.’’.
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1 SEC. 7. CIVIL LIABILITY.

2 (a) SECTION 185.—Section 185 (15 U.S.C. 1667d)

3 is amended by adding at the end the following:

4 ‘‘(d) No stipulation, provision, or term of any lease

5 contract may waive any liability of a lessor under this sec6 tion or deprive a lessee of any other right or benefit under

7 Federal or State law.’’.

8 (b) SECTION 130.—Section 130(a)(2) of the Truth

9 in Lending Act (15 U.S.C. 1640) is amended by striking

10 ‘‘or’’ at the end of subparagraph (A), by inserting ‘‘or’’

11 at the end of subparagraph (B), and by adding after sub12 paragraph (B) the following:

13 ‘‘(C) in the case of calculating the total civil li14 ability for violation of any requirement of chapter 5,

15 the liability under this subparagraph shall not be

16 greater than $10,000;’’.

17 SEC. 8. REGULATIONS.

18 (a) IN GENERAL.—The Federal Reserve Board, not

19 later than 12 months after the date of the enactment of

20 this Act, shall issue regulations to implement the amend21 ments made by this Act. The Board shall also issue regula22 tions, together with staff commentary if appropriate, to

23 update and clarify the requirements and definitions for

24 lease disclosures and any other issue relating to consumer

25 leasing to carry out the intent of the amendments made

26 by this Act, to implement any initiative which the Board
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1 shall recommend pursuant to the study required by section

2 9, to prevent the circumvention of the amendments made

3 by this Act, and to facilitate compliance with the require4 ments in the amendments.

5 (b) MODEL FORMS.—The Federal Reserve Board

6 shall publish model disclosure forms and clauses to facili7 tate and simplify compliance with the disclosure require8 ments in the amendments made by this Act, to aid the

9 consumer in understanding lease transactions, and to as10 sist the consumer in comparing different leases and lease

11 and credit purchase options. The Board shall require that

12 such model forms be used by lessors to meet the require13 ments of sections 182 and 184 of the Consumer Credit

14 Protection Act. Lessors that properly use the model forms

15 in providing disclosure shall be deemed in compliance with

16 the requirements of sections 182 and 184 of the Consumer

17 Credit Protection Act, except that use of such forms shall

18 not exempt the lessor from liability for penalties or admin19 istrative sanctions for false or inaccurate disclosures under

20 sections 108 and 112 of the Truth in Lending Act or from

21 civil liability under section 185 of the Consumer Credit

22 Protection Act.

23 (c) EFFECTIVE DATE.—Any regulation of the Fed24 eral Reserve Board which requires changes in disclosures

25 to be made under the Consumer Credit Protection Act
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1 shall become effective no sooner than 6 months following

2 the promulgation of a final rule, except that the Board

3 may shorten the effective date if the Board determines

4 that such shorter date is necessary to prevent unfair or

5 deceptive practices or to comply with a court ruling. A

6 lessor may comply with a new regulation of the Board be7 fore its effective date.

8 SEC. 9. STUDY.

9 (a) IN GENERAL.—The Board of Governors of the

10 Federal Reserve System shall conduct a study on the fea11 sibility of instituting, for purposes of consumer disclosures

12 under section 182 and 184 of the Consumer Credit Pro13 tection Act, a procedure for standardizing the terms and

14 costs of automobile leases to be disclosed in automobile

15 promotions and advertising that would be similar in intent

16 to the unit pricing concept used for consumer perishable

17 goods in providing uniform standards of pricing and dis18 closure that permit comparison of the basic or core costs

19 to a lease transaction with other similar lease offerings

20 and that enhance consumer understanding and compari21 son of costs associated with additional lease options and

22 financial arrangements.

23 (b) CONSULTATIONS.—For purposes of the study au24 thorized by subsection (a), the Board shall consult with

25 State officials, businesses involved in automobile leasing,
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1 and consumer organizations and shall conduct consumer

2 research to assess consumer attitudes and responses to

3 standardized lease disclosure concepts.

4 (c) REPORT.—Not later than 12 months after the

5 date of the enactment of this Act, the Board shall submit

6 to the Congress a written report of its findings and rec7 ommendations from the study.

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