II

103D CONGRESS

2D SESSION S. 1956

To amend the Consumer Credit Protection Act to improve disclosures made

to consumers who enter into rental-purchase transactions, to set standards for collection practices, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MARCH 22 (legislative day, FEBRUARY 22), 1994

Mr. SHELBY (for himself, Mr. CONRAD, Mr. JOHNSTON, Mr. BREAUX, and

Mr. FAIRCLOTH) introduced the following bill; which was read twice and

referred to the Committee on Banking, Housing, and Urban Affairs

A BILL

To amend the Consumer Credit Protection Act to improve

disclosures made to consumers who enter into rentalpurchase transactions, to set standards for collection

practices, 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 ‘‘Rental-Purchase

5 Reform Act of 1994’’.
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1 SEC. 2. REQUIREMENTS FOR RENTAL-PURCHASE TRANS2 ACTIONS.

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

4 1601 et seq.) is amended by adding at the end the follow5 ing new title:

6 ‘‘TITLE X—RENTAL-PURCHASE

7 TRANSACTIONS

8 ‘‘§ 1001. Short title

9 ‘‘This title may be cited as the ‘Rental-Purchase

10 Reform Act of 1994’.

11 ‘‘§ 1002. Findings and purposes

12 ‘‘(a) The Congress finds that a significant number

13 of consumers engage in rental-purchase transactions.

14 These transactions have taken place, in many instances,

15 without provision of adequate disclosures and other pro16 tections to consumers.

17 ‘‘(b) The purposes of this title are the following:

18 ‘‘(1) To assure meaningful disclosure of the

19 terms of rental-purchase agreements, including dis20 closure of all costs to consumers under those agree21 ments.

22 ‘‘(2) To regulate the collection practices of

23 rental-purchase merchants.

24 ‘‘(3) To provide certain substantive rights to

25 consumers under rental purchase agreements.
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1 ‘‘§ 1003. Definitions

2 ‘‘(a) For purposes of this title:

3 ‘‘(1) The term ‘advertisement’ means a com4 mercial message in any medium intended to aid,

5 promote, or assist, directly or indirectly, a rental6 purchase agreement.

7 ‘‘(2) The term ‘agricultural purpose’ includes—

8 ‘‘(A) the production, harvest, exhibition,

9 marketing, transportation, processing, or manu10 facture of agricultural products by a natural

11 person who cultivates plants or propagates or

12 nurtures agricultural products; and

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

14 property with a farm residence, or personal

15 property and services used primarily in farm16 ing.

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

18 Governors of the Federal Reserve System.

19 ‘‘(4) The term ‘consumer’ means an individual

20 that, as a party to a rental-purchase agreement, is

21 provided use of personal property.

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

23 the date on which a consumer becomes contractually

24 obligated under a rental-purchase agreement.

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

26 provides the use of property through a rental-pur-
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1 chase agreement and to whom a consumer’s initial

2 obligation under the agreement is payable.

3 ‘‘(7) The term ‘personal property’ means prop4 erty that is not real property under the laws of the

5 State where the property is located when it is made

6 available under a rental-purchase agreement.

7 ‘‘(8) The term ‘rental-purchase agreement’—

8 ‘‘(A) means an agreement between a

9 consumer and a merchant—

10 ‘‘(i) under which the merchant agrees

11 to provide to the consumer the use of per12 sonal property for an initial period of 4

13 months or less;

14 ‘‘(ii) that is automatically renewable

15 with each payment by the consumer; and

16 ‘‘(iii) that permits but does not obli17 gate the consumer to become the owner of

18 the property; and

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

20 that term is defined in section 103(g)).

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

22 District of Columbia, the Commonwealth of Puerto

23 Rico, and any territory or possession of the United

24 States.
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1 ‘‘(b) REFERENCES TO REGULATIONS.—Any ref2 erence to any provision of this title shall be considered

3 to include reference to the regulations prescribed by the

4 Board under this title.

5 ‘‘§ 1004. Exempted transactions

6 ‘‘This title does not apply to rental-purchase agree7 ments primarily for business, commercial, or agricultural

8 purposes, or those made with government agencies or in9 strumentalities or with organizations.

10 ‘‘§ 1005. General disclosure requirements

11 ‘‘(a) The merchant under a rental-purchase agree12 ment shall disclose to the consumer under the agreement

13 the information required by this title. In a transaction in14 volving more than one merchant, only one merchant is re15 quired to make the disclosures.

16 ‘‘(b) The disclosures required under this title shall

17 be made—

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

19 the rental-purchase agreement;

20 ‘‘(2) clearly and conspicuously in writing, in a

21 form that the consumer may keep; and

22 ‘‘(3) in the case of disclosures required under

23 section 1006, segregated from all other terms, data,

24 or information provided to the consumer.
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1 ‘‘(c) If a disclosure required to be made by a mer2 chant under this title becomes inaccurate as the result of

3 any act, occurrence, or agreement occurring after delivery

4 of the required disclosure, the resulting inaccuracy is not

5 a violation of this title.

6 ‘‘§ 1006. Rental-purchase disclosures

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

8 shall disclose to the consumer under the agreement the

9 following, as applicable:

10 ‘‘(1) The amount of the initial rental payment,

11 including any fees, taxes, or other charges which

12 may be required at or before the date of consumma13 tion of the agreement.

14 ‘‘(2) The amount and timing of rental renewal

15 payments.

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

17 amount of rental payments and other charges nec18 essary to acquire ownership of the property.

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

20 own the property until the consumer has made the

21 total dollar amount necessary to acquire ownership.

22 ‘‘(5) A statement that the total dollar amount

23 of payments does not include other charges, such as

24 late payment or reinstatement fees, and that the

25 consumer should examine the rental-purchase agree-
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1 ment for an explanation of these charges, if applica2 ble.

3 ‘‘(6) A statement that the consumer may be re4 sponsible for the fair market value of the property

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

6 ‘‘(7) A statement indicating whether the prop7 erty is new or used, except that a statement that in8 dicates that new property is used property is not a

9 violation of this title.

10 ‘‘(8) A statement of—

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

12 price, where applicable; or

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

14 available from the merchant in a cash sale.

15 ‘‘(9) A clear statement of the terms of the con16 sumer’s option to purchase.

17 ‘‘(10) A statement—

18 ‘‘(A) identifying the party that is respon19 sible for maintaining or servicing the property

20 while it is being rented;

21 ‘‘(B) describing that responsibility; and

22 ‘‘(C) disclosing that if any part of a manu23 facturer’s express warranty covers the property

24 at the time the consumer acquires ownership of

25 the property, the warranty will be transferred
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1 to the consumer if allowed by the terms of the

2 warranty.

3 ‘‘(11) The date of consummation of the trans4 action and the identities of the merchant and

5 consumer.

6 ‘‘§ 1007. Point-of-sale disclosures

7 ‘‘Each item of property displayed or offered pursuant

8 to a rental-purchase agreement shall have affixed to it a

9 point-of-sale card, tag, or label that clearly and conspicu10 ously discloses only the following:

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

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

13 ‘‘(3) The amount of each rental payment under

14 the agreement.

15 ‘‘(4) The total number of rental payments nec16 essary to acquire ownership of the property under

17 the agreement.

18 ‘‘(5) The total dollar amount of rental pay19 ments necessary to acquire ownership of the prop20 erty under the agreement.

21 ‘‘§ 1008. Prohibited practices

22 ‘‘(a) A rental-purchase agreement may not contain—

23 ‘‘(1) a confession of judgment;

24 ‘‘(2) a negotiable instrument;
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1 ‘‘(3) a security interest or any other claim of a

2 property interest in any goods except those goods

3 the use of which is provided by the merchant pursu4 ant to the agreement;

5 ‘‘(4) a wage assignment; or

6 ‘‘(5) a waiver by the consumer of a claim or

7 defense.

8 ‘‘(b) Each rental-purchase agreement shall—

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

10 the consumer and the merchant under the agree11 ment to repair any defect or malfunction of the

12 property covered by the agreement, and any limita13 tion of those obligations;

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

15 the agreement without penalty by voluntarily surren16 dering or returning the property covered by the

17 agreement upon expiration of any rental term; and

18 ‘‘(3) contain a provision for reinstatement of

19 the agreement, which at a minimum—

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

21 a timely rental renewal payment to reinstate

22 the agreement, without losing any rights or op23 tions which exist under the agreement, by the

24 payment of all past due rental charges and any

25 late fee, within 7 days after the renewal date;
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1 ‘‘(B) if the consumer returns or voluntarily

2 surrenders the property covered by the agree3 ment, other than through judicial process, dur4 ing the applicable reinstatement period set forth

5 in subparagraph (A), permits the consumer to

6 reinstate the agreement during a period of at

7 least 30 days after the date of the return or

8 surrender of the property by the payment of all

9 past due rental charges, and any applicable re10 delivery, repair, or late fees; and

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

12 or more of the total dollar amount of payments

13 necessary to acquire ownership of the property

14 under the agreement and returns or voluntarily

15 surrenders the property, other than through ju16 dicial process, during the applicable reinstate17 ment period set forth in subparagraph (A), per18 mits the consumer to reinstate the agreement

19 during a period of at least 90 days after the

20 date of the return of the property by the pay21 ment of all past due rental charges, and any

22 applicable redelivery, repair, or late fees.

23 ‘‘(c) Subsection (b) shall not be construed to prevent

24 a merchant from attempting to repossess property during

25 the reinstatement period, but such a repossession does not
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1 affect the consumer’s right to reinstate. Upon reinstate2 ment, the merchant shall provide the consumer with the

3 same property, or substitute property of comparable qual4 ity and condition.

5 ‘‘§ 1009. Collection practices

6 ‘‘(a) A merchant under a rental-purchase agreement,

7 in communicating with any person other than the

8 consumer for the purpose of acquiring information as to

9 the location of a consumer—

10 ‘‘(1) shall identify himself or herself and state

11 that he or she is confirming or correcting location

12 information concerning the consumer;

13 ‘‘(2) shall not communicate with any person

14 more than once, unless—

15 ‘‘(A) requested to do so by the person; or

16 ‘‘(B) the merchant reasonably believes that

17 the earlier response is erroneous or incomplete

18 and that the person now has correct or com19 plete location information;

20 ‘‘(3) shall not communicate by postcard;

21 ‘‘(4) shall not use any language or symbol on

22 any envelope or in the contents of any communica23 tion which indicates that the communication relates

24 to the recovery or repossession of property; and
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1 ‘‘(5) shall not communicate with any person

2 other than the consumer’s attorney, after the mer3 chant knows the consumer is represented by an at4 torney with regard to the rental-purchase agreement

5 and has knowledge of, or can readily ascertain, the

6 attorney’s name and address, unless the attorney

7 fails to respond within a reasonable period of time

8 to communication from the merchant or unless the

9 attorney consents to direct communication with the

10 consumer.

11 ‘‘(b)(1) Without the prior consent of the consumer

12 given directly to the merchant or the express permission

13 of a court of competent jurisdiction, a merchant shall not

14 communicate with a consumer in connection with the

15 recovery or repossession of property—

16 ‘‘(A) at the consumer’s place of employment;

17 ‘‘(B) at any unusual time or place or a time; or

18 ‘‘(C) at any place known or which should be

19 known to be inconvenient to the consumer.

20 ‘‘(2) In the absence of knowledge of circumstances

21 to the contrary, a merchant shall assume that the conven22 ient time for communicating with a consumer is after 8:00

23 a.m. and before 9:00 p.m., local time at the consumer’s

24 location.
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1 ‘‘(c) A merchant may not communicate, in connection

2 with a rental-purchase agreement, with any person other

3 than the consumer, the consumer’s attorney, or the mer4 chant’s attorney, except—

5 ‘‘(1) as reasonably necessary to acquire location

6 information concerning the consumer in accordance

7 with subsection (a);

8 ‘‘(2) after receiving prior consent from the

9 consumer given directly to the merchant;

10 ‘‘(3) after receiving express permission of a

11 court of competent jurisdiction; or

12 ‘‘(4) as reasonably necessary to effectuate a

13 post-judgment judicial remedy.

14 ‘‘(d) If a consumer notifies the merchant in writing

15 that the consumer desires the merchant to cease further

16 communication with the consumer, the merchant shall not

17 communicate further with the consumer with respect to

18 the rental-purchase agreement, except—

19 ‘‘(1) to advise the consumer that the mer20 chant’s further efforts to communicate are being

21 terminated;

22 ‘‘(2) to notify the consumer that the merchant

23 may invoke specified remedies allowable under law

24 which are ordinarily invoked by the merchant; or
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1 ‘‘(3) as necessary to effectuate any post-judg2 ment remedy.

3 ‘‘(e) A merchant shall not—

4 ‘‘(1) use or threaten to use violence or criminal

5 means to harm the physical person, reputation, or

6 property of any person;

7 ‘‘(2) use obscene, profane, or abusive language;

8 ‘‘(3) cause a telephone to ring, or engage any

9 person in telephone conversation, repeatedly or con10 tinuously with intent to annoy, abuse, or harass any

11 person;

12 ‘‘(4) place any telephone call without disclosing

13 the caller’s identity; or

14 ‘‘(5) perform any other act intended to harass

15 or abuse a consumer.

16 ‘‘§ 1010. Receipts and accounts

17 ‘‘A merchant shall provide the consumer a written re18 ceipt for each payment made by cash or money order.

19 ‘‘§ 1011. Renegotiations and extensions

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

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

22 requiring new disclosures. A renegotiation shall be consid23 ered to occur when an existing rental-purchase agreement

24 is satisfied and replaced by a new agreement undertaken
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1 by the same merchant. Events such as the following shall

2 not be treated as renegotiations:

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

4 multiple-item agreement or the substitution of prop5 erty, if in either case the average payment allocable

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

7 percent.

8 ‘‘(2) A deferral or extension of one or more

9 periodic payments, or portions of a periodic pay10 ment.

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

12 ‘‘(4) An agreement involving a court proceed13 ing.

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

15 prescribed by the Board.

16 ‘‘§ 1012. Rental-purchase advertising

17 ‘‘(a) If an advertisement refers to or states the

18 amount of any payment or the right to acquire ownership,

19 the merchant that makes the advertisement shall also

20 clearly and conspicuously state in the advertisement the

21 following items, as applicable:

22 ‘‘(1) That the transaction advertised is to occur

23 under a rental-purchase agreement.
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1 ‘‘(2) The total number and total dollar amount

2 of rental payments necessary to acquire ownership

3 under the agreement.

4 ‘‘(3) That the consumer acquires no ownership

5 rights in the property if the total dollar amount of

6 rental payments necessary to acquire ownership is

7 not paid.

8 ‘‘(b) The owner or personnel of any medium in which

9 an advertisement appears or through which it is dissemi10 nated shall not be liable for a violation of this section.

11 ‘‘(c) Subsection (a) does not apply to an advertise12 ment which—

13 ‘‘(1) does not refer to or state the amount of

14 any payment,

15 ‘‘(2) is published in the yellow pages of a tele16 phone directory or in any similar directory of busi17 nesses, or

18 ‘‘(3) is displayed in the merchant’s place of

19 business.

20 ‘‘§ 1013. Administrative enforcement

21 ‘‘(a) The requirements imposed by this title shall be

22 enforced by the Board.

23 ‘‘(b) All of the functions and powers of the Board

24 under this Act are available to the Board to enforce com-
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1 pliance by any person with the requirements imposed by

2 this title.

3 ‘‘§ 1014. Civil liability

4 ‘‘(a) Except as otherwise provided in this title, a mer5 chant who willfully violates this title with respect to a

6 consumer is liable to the consumer in an amount equal

7 to the following:

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

9 the sum of—

10 ‘‘(A) actual damages sustained by the

11 consumer as a result of the violation; and

12 ‘‘(B) not less than $100.

13 ‘‘(2) In a class action, the amount the court de14 termines to be appropriate with no minimum recov15 ery as to each member.

16 ‘‘(b)(1) An action under this section may be brought

17 in any United States district court of competent jurisdic18 tion, by not later than one year of the date of the occur19 rence of the violation.

20 ‘‘(2) This subsection does not bar a consumer from

21 asserting a violation of this title in an action to collect

22 a debt brought more than one year after the date of the

23 occurrence of the violation as a matter of defense by

24 recoupment or set off, except as otherwise provided by

25 State law.
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1 ‘‘(c)(1) A consumer may not take any action to offset

2 any amount for which a merchant is potentially liable

3 under subsection (a) against any amount owed by the

4 consumer, unless the amount of the merchant’s liability

5 has been determined by judgment of a court of competent

6 jurisdiction in an action in which the merchant was a

7 party.

8 ‘‘(2) This subsection does not bar a consumer who

9 is in default on the obligation from asserting a violation

10 of this title as an original action, or as a defense or coun11 terclaim to an action brought by the merchant to collect

12 amounts owed by the consumer.

13 ‘‘§ 1015. Defenses

14 ‘‘(a) A merchant is not liable under section 1014 for

15 a violation of the requirements of section 1006 if within

16 15 days after first having knowledge of the violation, and

17 before an action under section 1014 is filed or written no18 tice of the violation is received from the consumer, the

19 merchant notifies the consumer of the violation and makes

20 whatever adjustments in the account are necessary to as21 sure that the consumer will not be required to pay an

22 amount in excess of the amounts actually disclosed.

23 ‘‘(b)(1) A merchant is not liable under this title for

24 any act done or omitted in good faith in conformity with

25 any rule, regulation, interpretation, or approval promul-
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1 gated by the Board or by an official duly authorized by

2 the Board.

3 ‘‘(2) Paragraph (1) applies even if, after the act or

4 omission has occurred, the rule, regulation, interpretation,

5 or approval is amended, rescinded, or determined by judi6 cial or other authority to be invalid for any reason.

7 ‘‘(c) A merchant is not liable under this title for a

8 violation if the merchant establishes, and at the time of

9 the violation is implementing, procedures reasonably cal10 culated to prevent the violation.

11 ‘‘§ 1016. Liability of assignees

12 ‘‘(a) For purposes of sections 1014 and 1015, the

13 term ‘merchant’ includes an assignee of a merchant. How14 ever, an action under section 1014 for a violation of this

15 title may be brought against an assignee only if the viola16 tion is apparent on the face of the rental-purchase agree17 ment to which it relates. A violation apparent on the face

18 of a rental-purchase agreement includes a disclosure that

19 can be determined to be incomplete or inaccurate from the

20 face of the agreement. An assignee has no liability in a

21 case in which the assignment is involuntary.

22 ‘‘(b) In an action by or against an assignee, the con23 sumer’s written acknowledgement of receipt of a disclosure

24 shall be conclusive proof that the disclosure was made, if

25 the assignee had no knowledge that the disclosure had not
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1 been made when the assignee acquired the rental-purchase

2 agreement to which it relates.

3 ‘‘§ 1017. Regulations

4 ‘‘(a) The Board shall issue regulations to carry out

5 the purposes of this title, to prevent its circumvention, and

6 to facilitate compliance with its requirements. The regula7 tions may contain classifications and differentiations and

8 may provide for adjustments and exceptions for any class

9 of transaction.

10 ‘‘(b) The Board shall publish model disclosure forms

11 and clauses to facilitate compliance with the disclosure re12 quirements of this title and to aid consumers in under13 standing transactions under rental-purchase agreements.

14 In designing forms, the Board shall consider the use by

15 merchants of data processing or similar automated equip16 ment. Use of the models shall be optional. A merchant

17 who properly uses the model disclosure forms shall be

18 deemed to be in compliance with the disclosure require19 ments.

20 ‘‘(c) Any regulation issued by the Board, or any

21 amendment or interpretation thereof, that requires a dis22 closure different from the disclosures previously required

23 by regulations of the Board shall not be effective before

24 the October 1 that follows the date of promulgation by

25 at least 6 months. The Board may at its discretion length-
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1 en that period of time to permit merchants to adjust their

2 forms to accommodate new requirements. The Board may

3 also shorten that period of time, notwithstanding the first

4 sentence, if it makes a specific finding that such action

5 is necessary to comply with the findings of a court or to

6 prevent unfair or deceptive practices. In any case, mer7 chants may comply with any newly promulgated disclosure

8 requirement prior to its effective date.

9 ‘‘§ 1018. 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; and

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

16 consumers.

17 ‘‘§ 1019. Effect on government agencies

18 ‘‘No civil liability under this title may be imposed on

19 the United States or any of its departments or agencies,

20 any State or political subdivision, or any agency of a State

21 or political subdivision.’’.

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