I

106TH CONGRESS

1ST SESSION H. R. 1634

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

APRIL 29, 1999

Mr. JONES of North Carolina introduced the following bill; which was referred

to the Committee on Bankng 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 but

25 does not include price tags, window signs, or other

26 in-store merchandising aids.
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1 ‘‘(2) The term ‘agricultural purpose’ includes—

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

3 marketing, transformation, processing, or man4 ufacture of agricultural products by a natural

5 person who cultivates plants or propagates or

6 nurtures agricultural products; and

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

8 property with a farm residence, or personal

9 property and services used primarily in farm10 ing.

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

12 Governors of the Federal Reserve System.

13 ‘‘(4) The term ‘consumer’ means a natural per14 son who is offered or enters into a rental-purchase

15 agreement.

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

17 the date on which a consumer becomes contractually

18 obligated under a rental-purchase agreement.

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

20 provides the use of property through a rental-pur21 chase agreement in the ordinary course of business

22 and to whom a consumer’s initial obligation under

23 the agreement is payable.

24 ‘‘(7) The term ‘personal property’ means prop25 erty that is not real property under the laws of the
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1 State where the property is located when it is made

2 available under a rental-purchase agreement unless

3 otherwise stated.

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

5 means a contract between a consumer and a

6 merchant—

7 ‘‘(A) under which the merchant agrees to

8 provide the consumer the use of the personal

9 property for an initial period of 4 months or

10 less,

11 ‘‘(B) that is automatically renewable with

12 each payment by the consumer, and

13 ‘‘(C) that permits but does not obligate the

14 consumer to become the owner of the property.

15 Such term does not include a credit sale as defined

16 in section 103(g) of the Truth in Lending Act (15

17 U.S.C. 1602(g)), a consumer lease as defined in sec18 tion 181(1) of the Truth in Lending Act (15 U.S.C.

19 1667(1)), or a transaction giving rise to a debt in20 curred in connection with the business of lending

21 money or a thing of value.

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

23 District of Columbia, the Commonwealth of Puerto

24 Rico, and any territory or possession of the United

25 States.
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1 ‘‘SEC. 1002. EXEMPTED TRANSACTIONS.

2 ‘‘This title does not apply to rental-purchase agree3 ments primarily for business, commercial, or agricultural

4 purposes, or those made with Government agencies or in5 strumentalities.

6 ‘‘SEC. 1003. GENERAL DISCLOSURE REQUIREMENTS.

7 ‘‘(a) IN GENERAL.—The merchant under a rental8 purchase agreement shall disclose to the consumer under

9 the agreement the information required by sections 1004,

10 1005, and 1006. In an agreement involving more than 1

11 merchant, only 1 merchant is required to make the disclo12 sures.

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

14 sections 1004 and 1005 and the agreement provisions re15 quired to be included under 1006 shall be made or

16 included—

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

18 the rental-purchase agreement;

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

20 a form that the consumer may keep; and

21 ‘‘(3) in a case of disclosures required under sec22 tion 1004, segregated from all other terms, data, or

23 information provided to the consumer.

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

25 made by a merchant to a consumer under section 1004

26 becomes inaccurate as the result of any mutual written
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1 agreement between the merchant and such consumer oc2 curring after delivery of the required disclosure to such

3 consumer under this title, the resulting inaccuracy is not

4 a violation of this title.

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

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

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

8 under the agreement the following:

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

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

11 which may be required at or before the date of con12 summation of the agreement.

13 ‘‘(2) The amount and timing of rental pay14 ments.

15 ‘‘(3) The total number and total dollar amount

16 of rental payments necessary to acquire ownership of

17 the property.

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

19 own the property until the consumer has paid the

20 total dollar amount necessary to acquire ownership.

21 ‘‘(5) A disclosure, to the extent applicable, that

22 the total dollar amount of payments does not include

23 other fees or charges, such as a delivery fee, an ini24 tial processing fee, taxes, or other fees or charges

25 which may be payable under the agreement. Such
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1 fees and charges shall be separately identified in the

2 agreement.

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 a statement indicating

8 that new property is used property is not a violation

9 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 acquire ownership.

17 ‘‘(10) A statement—

18 ‘‘(A) identifying the party responsible for

19 maintaining or servicing the property while it is

20 being rented;

21 ‘‘(B) describing the responsibility for main22 tenance or service; and

23 ‘‘(C) disclosing that if any part of a manu24 facturer’s express warranty covers the property

25 at the time the consumer acquires ownership of
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1 the property, the warranty will be transferred

2 to the consumer if allowed by the terms of the

3 warranty.

4 ‘‘(11) The date of consummation of the trans5 action and the identities of the merchant and con6 sumer.

7 ‘‘(12) Late fees for past due rental charges.

8 ‘‘SEC. 1005. POINT-OF-RENTAL DISCLOSURES.

9 ‘‘(a) IN GENERAL.—Except as provided in subsection

10 (b), each item of property or each set of items, if offered

11 as a set or displayed or offered in connection with a rental12 purchase agreement, shall have displayed on or next to

13 it a card, tag, or label that clearly and conspicuously dis14 closes only the following:

15 ‘‘(1) A brief description of the property.

16 ‘‘(2) Whether the property is new or used.

17 ‘‘(3) The cash price of the property.

18 ‘‘(4) The amount of each rental payment.

19 ‘‘(5) The total number of rental payments nec20 essary to acquire ownership of the property.

21 ‘‘(6) The total dollar amount of the rental pay22 ments necessary to acquire ownership of the prop23 erty.

24 ‘‘(b) EXCEPTION.—A merchant may make the disclo25 sure required by subsection (a) in the form of a list or
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1 catalog which is readily available to the customer if the

2 merchandise is not displayed in the merchant’s showroom

3 or if displaying a tag would be impractical due to the size

4 of the merchandise.

5 ‘‘SEC. 1006. AGREEMENT PROVISIONS.

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

7 shall—

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

9 the consumer and the merchant under the agree10 ment to repair any defect or malfunction of the

11 property covered by the agreement, and any limita12 tion of those obligations;

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

14 the agreement without penalty by voluntarily surren15 dering or returning the property covered by the

16 agreement upon expiration of any rental term; and

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

18 the agreement, which at a minimum—

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

20 a timely rental renewal payment to reinstate

21 the agreement, without losing any rights or op22 tions which exist under the agreement, by the

23 payment of all past due rental charges and any

24 late fee and a payment for the next rental term

25 within 7 business days after the renewal date if
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1 the consumer pays monthly, or within 3 busi2 ness days after the renewal date if the con3 sumer pays more frequently than monthly;

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

5 surrenders the property covered by the agree6 ment, other than through judicial process, dur7 ing the applicable reinstatement period set forth

8 in subparagraph (A), permits the consumer to

9 reinstate the agreement during a period of at

10 least 30 days after the date of the return or

11 surrender of the property by the payment of all

12 past due rental charges, and any applicable re13 delivery, repair, or late fees and a payment for

14 the next rental term; and

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

16 or more of the total dollar amount of payments

17 necessary to acquire ownership of the property

18 under the agreement and returns or voluntarily

19 surrenders the property, other than through ju20 dicial process, during the applicable reinstate21 ment period set forth in subparagraph (A), per22 mits the consumer to reinstate the agreement

23 during a period of at least 90 days after the

24 date of the return of the property by the pay25 ment of all past due rental charges and any ap-
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1 plicable redelivery, repair, or late fees and a

2 payment for the next rental term.

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

4 construed to prevent a merchant from attempting to re5 possess property during the reinstatement period pursuant

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

7 affect the consumer’s right to reinstate. Upon reinstate8 ment, the merchant shall provide the consumer with the

9 same property, if available; if it is not available the mer10 chant shall substitute property of comparable quality and

11 condition.

12 ‘‘SEC. 1007. PROHIBITED INCLUSION.

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

14 ‘‘(1) a confession of judgment;

15 ‘‘(2) a negotiable instrument;

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

17 property interest in any goods, except those goods

18 the use of which is provided by the merchant pursu19 ant to the agreement;

20 ‘‘(4) a wage assignment; or

21 ‘‘(5) a waiver by the consumer of a claim or de22 fense.

23 ‘‘SEC. 1008. STATEMENT OF ACCOUNTS.

24 ‘‘A merchant shall be required upon request by the

25 consumer to provide a quarterly statement.
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1 ‘‘SEC. 1009. RENEGOTIATIONS AND EXTENSIONS.

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

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

4 requiring new disclosures under section 1004. A renegoti5 ation shall be considered to occur when an existing rental

6 purchase agreement is satisfied and replaced by a new

7 agreement undertaken by the same merchant. Events such

8 as the following shall not be treated as renegotiations:

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

10 multiple-item agreement or the substitution of prop11 erty, if in either case the average payment allocable

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

13 percent.

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

15 periodic payments, or portions of a periodic pay16 ment.

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

18 ‘‘(4) An agreement involving a court pro19 ceeding.

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

21 prescribed by the Board.

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

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

24 to or states the amount of any payment and the right to

25 acquire ownership for any specific item, the merchant that
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1 makes the advertisement shall also clearly and conspicu2 ously state in the advertisement the following items:

3 ‘‘(1) The transaction advertised is a rental-pur4 chase agreement.

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

6 of rental payments necessary to acquire ownership

7 under the agreement.

8 ‘‘(3) The consumer acquires no ownership

9 rights in the property if the total dollar amount of

10 rental payments necessary to acquire ownership is

11 not paid.

12 ‘‘(b) LIABILITY.—The owner or personnel of any me13 dium in which an advertisement appears or through which

14 it is disseminated shall not be liable for a violation of sub15 section (a).

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

17 to an advertisement which—

18 ‘‘(1) is published in the yellow pages of a tele19 phone directory or in any similar directory of busi20 nesses, or

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

22 business.

23 ‘‘SEC. 1011. CIVIL LIABILITY.

24 ‘‘(a) LIABILITY AMOUNT.—Except as otherwise pro25 vided in this title, a merchant who willfully violates this
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1 title with respect to a consumer is liable to the consumer

2 in an amount equal to the following:

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

4 the sum of—

5 ‘‘(A) actual damages sustained by the con6 sumer as a result of the violation; and

7 ‘‘(B) Not less than $100.

8 ‘‘(2) In a class action, the amount the court de9 termines to be appropriate with no minimum recov10 ery as to each member. The total recovery in any

11 class action or series of class actions arising out of

12 the same violation shall not be more than the lesser

13 of $500,000 or 1 percent of the net worth of the

14 merchant.

15 ‘‘(b) STATUTE OF LIMITATIONS.—

16 ‘‘(1) ACTIONS IN UNITED STATES CONSTITU17 TION.—An action under this section may be brought

18 in any United States district court of competent ju19 risdiction, but not later than one year of the date of

20 the occurrence of the violation.

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

22 bar a consumer from asserting a violation of this

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

24 one year after the date of the occurrence of the vio-
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1 lation as a matter of defense by recoupment or set

2 off, except as otherwise provided by State law.

3 ‘‘(c) OFFSET.—

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

5 any action to offset any amount for which a mer6 chant is potentially liable under subsection (a)

7 against any amount owed by the consumer, unless

8 the amount of the merchant’s liability has been de9 termined by judgment of a court of competent juris10 diction in an action in which the merchant was a

11 party.

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

13 bar a consumer who is in default on the obligation

14 from asserting a violation of this title as an original

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

16 brought by the merchant to collect amounts owed by

17 the consumer.

18 ‘‘SEC. 1012. DEFENSES.

19 ‘‘A merchant is not liable—

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

21 requirements of section 1004 if within 15 days after

22 first having knowledge of the violation, and before

23 an action under section 1011 is filed or written no24 tice of the violation is received from the consumer,

25 the merchant notifies the consumer of the violation
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1 and makes whatever adjustments in the account are

2 necessary to assure that the consumer will not be re3 quired to pay an amount in excess of the amounts

4 actually disclosed;

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

6 in good faith in conformity with any rule, regulation,

7 interpretation, or approval promulgated by the

8 Board or by an official duly authorized by the

9 Board; or

10 ‘‘(3) under this title for a violation if the mer11 chant establishes, and at the time of the violation is

12 implementing, procedures reasonably calculated to

13 prevent the violation.

14 Paragraph (2) applies even if, after the act or omission

15 has occurred, the rule, regulation, interpretation, or ap16 proval is amended, rescinded, or determined by judicial or

17 other authority to be invalid for any reason.

18 ‘‘SEC. 1013. LIABILITY OF ASSIGNEES.

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

20 1012 and this section, the term ‘‘merchant’’ includes an

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

22 1011 for a violation of this title may be brought against

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

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

25 violation apparent in the face of a rental purchase agree-
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1 ment includes a disclosure that can be determined to be

2 incomplete or inaccurate from the face of the agreement.

3 An assignee has no liability in a case in which the assign4 ment is involuntary.

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

6 by or against an assignee, the consumer’s written acknowl7 edgment of receipt of a disclosure shall be conclusive proof

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

9 knowledge that the disclosure had not been made when

10 the assignee acquired the rental-purchase agreement to

11 which it relates.

12 ‘‘SEC. 1014. REGULATIONS AND ENFORCEMENT.

13 ‘‘(a) IN GENERAL.—The Board shall issue regula14 tions to carry out the purposes of this title, to prevent

15 its circumvention, and to facilitate compliance with its re16 quirements. The regulations may contain classification

17 and differentiations and may provide for adjustments and

18 exceptions for any class of transaction.

19 ‘‘(b) MODELS.—The Board shall publish model dis20 closure forms and clauses to facilitate compliance with the

21 disclosure requirements of this title and to aid consumers

22 in understanding transactions under rental-purchase

23 agreements. In designing forms, the Board shall consider

24 the use by merchants of data processing or similar auto25 mated equipment. Use of the models shall be optional. A
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1 merchant who properly uses the model disclosure forms

2 shall be deemed to be in compliance with the disclosure

3 requirements.

4 ‘‘(c) EFFECTIVE DATE OF REGULATIONS.—Any reg5 ulation issued by the Board, or any amendment or inter6 pretation thereof, shall not be effective before the October

7 1 that follows the date of promulgation by at least 6

8 months. The Board may at its discretion lengthen that

9 period of time to permit merchants to adjust their forms

10 to accommodate new requirements. The Board may also

11 shorten that period of time, notwithstanding the first sen12 tence, if it makes a specific finding that such action is

13 necessary to comply with the findings of a court or to pre14 vent unfair or deceptive practices. In any case, merchants

15 may comply with any newly promulgated disclosure re16 quirement prior to its effective date.

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

18 requirements of this title. The authority of section 108

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

20 such requirements.

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

22 ‘‘Except as provided in section 129 of the Truth in

23 Lending Act (15 U.S.C. 1639) nothing in this title shall

24 be construed to annul, alter, affect, or exempt any person

25 subject to this title from complying with the laws of any
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1 State relating to rental-purchase agreement, except to the

2 extent that those laws—

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

4 ‘‘(2) attempt to regulate rental-purchase trans5 actions as consumer credit, retail installment, or

6 conditional sales; or

7 ‘‘(3) attempt to impute to such transactions the

8 creation of debt or an extension of credit or require

9 the disclosure of a time-price differential, annual

10 percentage rate, or other similar disclosures which

11 might suggest the existence of a debt, and extension

12 of credit, or the payment of interest.

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

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

15 may be imposed on the United States or any of its depart16 ments or agencies, any State or political subdivision, or

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

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