103D CONGRESS

1ST SESSION S. 1566

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

IN THE SENATE OF THE UNITED STATES

OCTOBER 19 (legislative day, OCTOBER 13), 1993

Mr. METZENBAUM (for himself and Mr. DURENBERGER) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

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

5 Consumer Credit Protection Act of 1993’’.

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.

‘‘1005. Application of Federal laws.

‘‘1006. Disclosures on goods.

‘‘1007. Prohibitions; enforcement.

‘‘1008. Civil liability.

‘‘1009. Regulations.

‘‘1010. Relationship to other laws.

2 ‘‘§ 1001. Short title

3 ‘‘This title may be cited as the ‘Rent-To-Own

4 Consumer Credit Protection Act’.

5 ‘‘§ 1002. Findings and purposes

6 ‘‘(a) FINDINGS.—The Congress finds that—

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 debt collection practices; and

16 ‘‘(4) rent-to-own dealers do not provide cus17 tomers with the protections afforded purchasers in

18 retail installment sales under State and Federal
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1 laws, and often charge excessive fees and interest

2 rates.

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

4 ‘‘(1) to provide consumers in rent-to-own trans5 actions the range of protections provided under

6 State and Federal laws to individuals who acquire

7 goods in other consumer credit sales;

8 ‘‘(2) to require rent-to-own contracts, and tags

9 affixed to items available for acquisition in rent-to10 own transactions, to disclose the material terms of

11 those transactions; and

12 ‘‘(3) to prohibit rent-to-own dealers and collec13 tion agents hired by such dealers from engaging in

14 abusive collection practices.

15 ‘‘§ 1003. Definitions

16 ‘‘As used in this title—

17 ‘‘(1) the term ‘cash price’ means—

18 ‘‘(A) with respect to any item of consumer

19 goods—

20 ‘‘(i) the bona fide retail price for the

21 item as offered for sale by a seller to a

22 consumer who pays the full price in one

23 payment before taking possession of the

24 item, as indicated by actual sales of such

25 item; or
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1 ‘‘(ii) the average cash retail price of

2 the item or a similar item in the commu3 nity; and

4 ‘‘(B) with respect to a service—

5 ‘‘(i) the bona fide retail value of the

6 service if provided independently to a

7 consumer; or

8 ‘‘(ii) the estimated bona fide retail

9 value of the service;

10 ‘‘(2) the term ‘Commission’ means the Federal

11 Trade Commission;

12 ‘‘(3) the term ‘consumer’—

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

14 use by an individual primarily for personal,

15 family, or household purposes; and

16 ‘‘(B) when used as a noun, means an indi17 vidual who is the lessee or bailee under a rent18 to-own contract;

19 ‘‘(4) the term ‘credit’—

20 ‘‘(A) includes the right granted by a seller

21 to a consumer to obtain possession of an item

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

23 before payment of the total amount that is re24 quired to be paid to acquire ownership of the

25 item; and
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1 ‘‘(B) is deemed to be a fixed sum equal to

2 the difference of—

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

4 required to obtain ownership of the item

5 under the contract; minus

6 ‘‘(ii) the sum of—

7 ‘‘(I) the cash price;

8 ‘‘(II) any fees specifically allow9 able under State law, except finance

10 charges, interest, or a time price dif11 ferential; and

12 ‘‘(III) the termination fee under

13 section 1004;

14 ‘‘(5) the term ‘organization’ means a corpora15 tion, trust, estate, partnership, cooperative, or asso16 ciation;

17 ‘‘(6) the term ‘person’ means a natural person

18 or an organization;

19 ‘‘(7) the term ‘rent-to-own contract’ means a

20 contract in the form of a terminable lease or bail21 ment of an item of consumer goods, under which—

22 ‘‘(A) the consumer—

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

24 use of the item; and
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1 ‘‘(ii) has the option to renew the con2 tract periodically by making payments

3 specified in the contract; and

4 ‘‘(B) the seller agrees, orally or in writing,

5 to transfer ownership of the item to the

6 consumer upon the fulfillment of all obligations

7 of the consumer under the contract for that

8 transfer;

9 ‘‘(8) the term ‘rent-to-own transaction’ means

10 the lease or bailment of an item of consumer goods

11 under a rent-to-own contract;

12 ‘‘(9) the term ‘seller’ means—

13 ‘‘(A) a person—

14 ‘‘(i) who regularly makes consumer

15 goods available under rent-to-own con16 tracts; and

17 ‘‘(ii) to whom payments are payable

18 under those contracts; and

19 ‘‘(B) an assignee of such a person; and

20 ‘‘(10) the term ‘State’ means any State, the

21 Commonwealth of Puerto Rico, the District of Co22 lumbia, and any territory or possession of the Unit23 ed States.
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1 ‘‘§ 1004. Application of State laws regarding fees,

2 charges, guarantees, and warranties

3 ‘‘(a) IN GENERAL.—Subject to subsection (b), a sell4 er in a rent-to-own transaction may not take, receive, or

5 assess any interest, finance charge, or other fee for the

6 transaction that is in excess of the interest, fees, or fi7 nance charges that may be charged under the laws of the

8 State in which the seller is located that—

9 ‘‘(1) establish a maximum rate or amount of in10 terest, finance charge, or time-price differential that

11 may be charged in connection with a credit sale or

12 retail installment sale;

13 ‘‘(2) establish the types of fees and the maxi14 mum amount of fees that a seller may charge in

15 connection with a credit sale or retail installment

16 sale; or

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

18 the maximum amount of premiums that may be

19 charged for credit insurance in connection with a

20 credit sale or a retail installment sale.

21 ‘‘(b) ADDITIONAL TERMINATION CHARGES AND

22 FEES.—

23 ‘‘(1) CHARGES AND FEES AUTHORIZED.—In ad24 dition to charges and fees authorized under sub25 section (a), a seller in a rent-to-own transaction may

26 charge—
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1 ‘‘(A) a termination fee in accordance with

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

3 given the right to terminate the rent-to-own

4 contract for the transaction at any time without

5 regard to whether the consumer has completed

6 payment of the fee; and

7 ‘‘(B) reasonable fees for recovery of the

8 items that are the subject of the contract and

9 that are not voluntarily returned to the seller

10 upon the completion or termination of the con11 tract.

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

13 under paragraph (1)(A)—

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

15 price disclosed under the contract;

16 ‘‘(B) shall be disclosed in the contract; and

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

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

19 and

20 ‘‘(D) shall be calculated as part of the fi21 nance charge determined under section 106 of

22 the Truth in Lending Act.

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

24 paragraph (1)(B) shall be disclosed in the contract.
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1 ‘‘(4) EFFECT OF TERMINATION.—The termi2 nation of a rent-to-own contract by a consumer in

3 accordance with a right of termination given to the

4 consumer in exchange for a termination fee under

5 subsection (a)(1) shall be deemed to satisfy the con6 sumer’s obligations for all payments and fees due

7 under the contract, except for payments and fees

8 under the contract that were due prior to the date

9 of termination.

10 ‘‘(c) GUARANTEES AND WARRANTIES.—All guaran11 tees and warranties established or required under the laws

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

13 sale or retail installment sale shall apply to goods that

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

15 ‘‘§ 1005. Application of Federal laws

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

17 transaction, as follows:

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

19 Lending Act applies as it applies to consumer credit

20 transactions other than consumer credit transactions

21 under an open end credit plan.

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

23 Equal Credit Opportunity Act applies as it applies

24 to credit transactions. For purposes of this applica25 tion—
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1 ‘‘(A) a consumer shall be treated as an ap2 plicant; and

3 ‘‘(B) a seller shall be treated as a creditor.

4 ‘‘(3) FAIR DEBT COLLECTION PRACTICES

5 ACT.—The Fair Debt Collection Practices Act ap6 plies to the collection of overdue payments arising

7 from a rent-to-own transaction, unless the payments

8 are collected by any person specified in subpara9 graphs (A) through (F) of section 803(6) of such

10 Act. For purposes of this application, overdue pay11 ments shall be treated as debt.

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

13 Credit Reporting Act applies as it applies to a credit

14 transaction and to any extension or denial of credit.

15 ‘‘§ 1006. Disclosures on goods

16 ‘‘A seller shall include on each item in the place of

17 business of the seller that is available for purchase pursu18 ant to a rent-to-own transaction—

19 ‘‘(1) the cash price of the item;

20 ‘‘(2) an itemization of services offered under a

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

22 of each service;

23 ‘‘(3) the annual percentage rate of the item

24 under a rent-to-own contract, determined under sec25 tion 107 of the Truth in Lending Act;
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1 ‘‘(4) the weekly, biweekly, monthly, or other in2 cremental payment applicable under the rent-to-own

3 contract for the transaction and the number of pay4 ments;

5 ‘‘(5) the total of payments required to be paid

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

7 contract for the transaction, determined under regu8 lations under the Truth in Lending Act; and

9 ‘‘(6) specification of whether the item is new or

10 used.

11 ‘‘§ 1007. Prohibitions; enforcement

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

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

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

15 a consumer for any matter related to the contract,

16 unless there is clear and convincing evidence that

17 the goods that are the subject of the contract are

18 being held by the consumer with an intent to de19 fraud the seller;

20 ‘‘(2) use threats or coercion to collect or at21 tempt to collect any amounts alleged to be due from

22 the consumer;

23 ‘‘(3) engage in any conduct, the natural con24 sequence of which is to oppress, harass, or abuse
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1 any person in connection with an attempt to collect

2 amounts owed by the consumer under the contract;

3 ‘‘(4) unreasonably publicize information to third

4 parties regarding amounts owed by the consumer;

5 ‘‘(5) make any fraudulent, deceptive, or mis6 leading representation to obtain information about

7 the consumer or to collect amounts owed by the

8 consumer;

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

10 attempt to collect a debt owed to the seller;

11 ‘‘(7) engage in any act or practice that is unfair

12 or deceptive in making, servicing, or collecting pay13 ment pursuant to a rent-to-own contract;

14 ‘‘(8) advertise, announce, solicit, or otherwise

15 represent as free or available without charge (includ16 ing by use of other words of similar meaning) any

17 service under the contract for which the seller

18 charges the consumer, including any service for

19 which a charge is collected by inclusion in the

20 amount required to be paid under the contract;

21 ‘‘(9) use, for purposes of complying with any

22 State or Federal law governing rent-to-own trans23 actions (other than a State or Federal tax law) any

24 definition of the term ‘cash price’ other than the def25 inition under section 1003(2); or
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1 ‘‘(10) attempt to evade the provisions of this

2 title by any devise or subterfuge.

3 ‘‘(b) ENFORCEMENT.—

4 ‘‘(1) IN GENERAL.—Compliance with the re5 quirements under this title shall be enforced by the

6 Commission. All functions and powers of the Com7 mission under the Federal Trade Commission Act

8 shall be available to the Commission to enforce com9 pliance with this title by any person, irrespective of

10 whether the person is engaged in commerce or meets

11 any other jurisdictional tests in the Federal Trade

12 Commission Act, including the power to enforce the

13 provisions of this title in the same manner as if the

14 violation had been a violation of a Commission trade

15 regulation rule.

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

17 purpose of the exercise by the Commission of its

18 functions and powers under the Federal Trade Com19 mission Act, a violation of any requirement or prohi20 bition under this title is deemed to be an unfair or

21 deceptive act or practice in commerce in violation of

22 that Act.

23 ‘‘§ 1008. Civil liability

24 ‘‘(a) LIABILITY FOR FAILURE TO PROPERLY DIS25 CLOSE TERMS.—A seller who fails to comply with a re-
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1 quirement under section 1006 shall be liable to the

2 consumer in an amount equal to the sum of—

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

4 as a result of the failure;

5 ‘‘(2) $500 for each failure; and

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

8 ‘‘(b) OTHER LIABILITY.—A seller who violates this

9 title or fails to comply with any requirement imposed

10 under this title, other than under section 1005, shall be

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

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

13 as a result of the violation;

14 ‘‘(2) $5,000 for each violation; and

15 ‘‘(3) all costs of the action and reasonable at16 torney fees, as determined by the court.

17 ‘‘(c) JURISDICTION; LIMITATION.—

18 ‘‘(1) IN GENERAL.—An action under this title

19 may be brought in any United States district court

20 or in any other court of competent jurisdiction, not

21 later than 2 years after the date of the violation or

22 failure that is the subject of the action.

23 ‘‘(2) OTHER ACTIONS.—The 2-year statute of

24 limitations in paragraph (1) shall not prohibit any

25 person from asserting a violation of this title as a
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1 defense in an action to collect amounts alleged to be

2 due from such person, if such action is brought more

3 than 2 years after the date of the occurrence of the

4 violation.

5 ‘‘(d) REMEDIES.—Nothing in this title shall be con6 strued to limit any remedy otherwise available under State

7 or Federal law.

8 ‘‘§ 1009. Regulations

9 ‘‘Not later than 6 months after the date of enactment

10 of this title, the Commission shall issue such regulations

11 as may be necessary to implement this title.

12 ‘‘§ 1010. Relationship to other laws

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

14 affect, or exempt any person subject to the provisions of

15 this title from complying with the laws of any State with

16 respect to rent-to-own transactions, except to the extent

17 that such laws are inconsistent with any provision of this

18 title, and then only to the extent of the inconsistency.

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

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

21 relating to consumer leases, shall not apply to a rent-to22 own transaction to the extent application of that Act to

23 the transaction is inconsistent with this title.’’.
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1 SEC. 3. RECOMMENDATIONS TO CONGRESS.

2 Not later than 2 years after the date of enactment

3 of this Act, the Federal Trade Commission shall submit

4 to the Congress any recommendations for further legisla5 tive or administrative action with respect to the regulation

6 of rent-to-own transactions.

7 SEC. 4. EFFECTIVE DATE.

8 The provisions of this Act and the amendments made

9 by this Act shall take effect on the date of enactment of

10 this Act.

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