Union Calendar No. 396

107TH CONGRESS

2D SESSION H. R. 1701

[Report No. 107–590, Parts I and II]

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

MAY 3, 2001

Mr. JONES of North Carolina (for himself, Mr. MALONEY of Connecticut, Mr.

FROST, Mr. BOEHNER, Mr. JEFFERSON, Mr. KANJORSKI, Mr. WATTS of

Oklahoma, Mr. ROSS, Mr. FORD, Mr. SESSIONS, Mr. SANDLIN, Mr.

WAMP, Mr. BAKER, and Mr. ISAKSON) introduced the following bill;

which was referred to the Committee on Financial Services

JULY 18, 2002

Reported with an amendment and referred to the Committee on the Judiciary

for a period ending not later than September 9, 2002, for consideration

of such provisions of the bill and amendment as fall within the jurisdiction of that committee pursuant to clause 1(K), rule X

[Strike out all after the enacting clause and insert the part printed in italic]

SEPTEMBER 9, 2002

Additional sponsors: Mr. SHOWS, Mr. TURNER, Mr. HILLEARY, Mr.

NETHERCUTT, Mr. CLEMENT, Mr. SIMPSON, Mr. HOLDEN, Mr. DUNCAN,

Mr. HUTCHINSON, Mr. BEREUTER, Ms. PRYCE of Ohio, Mr. SKELTON,

Mr. RYUN of Kansas, Mr. COSTELLO, Mr. BARTLETT of Maryland, Mr.

COOKSEY, Mrs. EMERSON, Mr. POMBO, Mr. DICKS, Ms. HOOLEY of Oregon, Mr. BRYANT, Mr. SPRATT, Mr. TIAHRT, Mr. MORAN of Kansas,

Mr. OSBORNE, Mr. HULSHOF, Mr. CLYBURN, Mr. SHERMAN, Mr. REYES,

Mr. SHAYS, Mr. MEEKS of New York, Mr. NEY, Mr. CARSON of Oklahoma, Mr. GOODLATTE, Mr. GILLMOR, Mr. JOHN, Mr. LUCAS of Kentucky, Mrs. KELLY, Mr. LARSON of Connecticut, Mr. ROYCE, Mr.

SHIMKUS, Mr. SWEENEY, Mr. MCINTYRE, Mr. MCCRERY, Mr. ENGLISH,
2

Mr. PHELPS, Mr. TERRY, Mr. LINDER, Mr. HALL of Texas, Mr.

PORTMAN, Ms. JACKSON-LEE of Texas, Mr. KINGSTON, Mr. THORNBERRY, Mr. LATOURETTE, Mr. BALLENGER, Mr. OTTER, Mr. DEAL of

Georgia, Mr. GOODE, Mr. VITTER, Mr. BARTON of Texas, Mr. LATHAM,

Mr. BONILLA, Ms. HART, Mrs. JO ANN DAVIS of Virginia, Mr. TIBERI,

Mr. LAMPSON, Mr. KIRK, Mr. WILSON of South Carolina, Mr. TOWNS,

and Mr. JENKINS

SEPTEMBER 9, 2002

Reported from the Committee on the Judiciary with an amendment, committed to the Committee of the Whole House on the State of the Union,

and ordered to be printed

[Omit the part struck through in italic and insert the part printed in boldface roman]

[For text of introduced bill, see copy of bill as introduced on May 3, 2001]

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 Rental Pur5 chase Agreement Act’’.

6 SEC. 2. FINDINGS AND DECLARATION OF PURPOSE.

7 (a) FINDINGS.—The Congress finds as follows:

8 (1) The rental-purchase industry provides a serv9 ice that meets and satisfies the demands of many con10 sumers.
3

1 (2) Each year, approximately 2,300,000 United

2 States households enter into rental-purchase trans3 actions and over a 5-year period approximately

4 4,900,000 United States households will do so.

5 (3) Competition among the various firms en6 gaged in the extension of rental-purchase transactions

7 would be strengthened by informed use of rental-pur8 chase transactions.

9 (4) The informed use of rental-purchase trans10 actions results from an awareness of the cost thereof

11 by consumers.

12 (b) PURPOSE.—The purpose of this title is to assure

13 the availability of rental-purchase transactions and to as14 sure simple, meaningful, and consistent disclosure of rental15 purchase terms so that consumers will be able to more read16 ily compare the available rental-purchase terms and avoid

17 uninformed use of rental-purchase transactions, and to pro18 tect consumers against unfair rental-purchase practices.

19 SEC. 3. CONSUMER CREDIT PROTECTION ACT.

20 The Consumer Credit Protection Act is amended by

21 adding at the end the following new title:

22 ‘‘TITLE X—RENTAL-PURCHASE

23 TRANSACTIONS

‘‘Sec. 1001. Definitions.

‘‘Sec. 1002. Exempted transactions.

‘‘Sec. 1003. General disclosure requirements.

‘‘Sec. 1004. Rental-purchase disclosures.
4

‘‘Sec. 1005. Other agreement provisions.

‘‘Sec. 1006. Right to acquire ownership.

‘‘Sec. 1007. Prohibited provisions.

‘‘Sec. 1008. Statement of accounts.

‘‘Sec. 1009. Renegotiations and extensions.

‘‘Sec. 1010. Point-of-rental disclosures.

‘‘Sec. 1011. Rental-purchase advertising.

‘‘Sec. 1012. Civil liability.

‘‘Sec. 1013. Additional grounds for civil liability.

‘‘Sec. 1014. Liability of assignees.

‘‘Sec. 1015. Regulations.

‘‘Sec. 1016. Enforcement.

‘‘Sec. 1017. Criminal liability for willful and knowing violation.

‘‘Sec. 1018. Relation to other laws.

‘‘Sec. 1019. Effect on government agencies.

‘‘Sec. 1020. Compliance date.

1 ‘‘SEC. 1001. DEFINITIONS.

2 ‘‘For purposes of this title, the following definitions

3 shall apply:

4 ‘‘(1) ADVERTISEMENT.—The term ‘advertise5 ment’ means a commercial message in any medium

6 that promotes, directly or indirectly, a rental-pur7 chase agreement but does not include price tags, win8 dow signs, or other in-store merchandising aids.

9 ‘‘(2) AGRICULTURAL PURPOSE.—The term ‘agri10 cultural purpose’ includes—

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

12 marketing, transformation, processing, or manu13 facture of agricultural products by a natural

14 person who cultivates plants or propagates or

15 nurtures agricultural products; and

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

17 property with a farm residence, or personal
5

1 property and services used primarily in farm2 ing.

3 ‘‘(3) BOARD.—The term ‘Board’ means the

4 Board of Governors of the Federal Reserve System.

5 ‘‘(4) CASH PRICE.—The term ‘cash price’ means

6 the price at which a merchant, in the ordinary course

7 of business, offers to sell for cash the property that is

8 the subject of the rental-purchase transaction.

9 ‘‘(5) CONSUMER.—The term ‘consumer’ means a

10 natural person who is offered or enters into a rental11 purchase agreement.

12 ‘‘(6) DATE OF CONSUMMATION.—The term ‘date

13 of consummation’ means the date on which a con14 sumer becomes contractually obligated under a rental15 purchase agreement.

16 ‘‘(7) INITIAL PAYMENT.—The term ‘initial pay17 ment’ means the amount to be paid before or at the

18 consummation of the agreement or the delivery of the

19 property if delivery occurs after consummation, in20 cluding the rental payment; service, processing, or ad21 ministrative charges; delivery fee; refundable security

22 deposit; taxes; mandatory fees or charges; and any op23 tional fees or charges agreed to by the consumer.

24 ‘‘(8) MERCHANT.—The term ‘merchant’ means a

25 person who provides the use of property through a
6

1 rental-purchase agreement in the ordinary course of

2 business and to whom a consumer’s initial payment

3 under the agreement is payable.

4 ‘‘(9) PAYMENT SCHEDULE.—The term ‘payment

5 schedule’ means the amount and timing of the peri6 odic payments and the total number of all periodic

7 payments that the consumer will make if the con8 sumer acquires ownership of the property by making

9 all periodic payments.

10 ‘‘(10) PERIODIC PAYMENT.—The term ‘periodic

11 payment’ means the total payment a consumer will

12 make for a specific rental period after the initial pay13 ment, including the rental payment, taxes, manda14 tory fees or charges, and any optional fees or charges

15 agreed to by the consumer.

16 ‘‘(11) PROPERTY.—The term ‘property’ means

17 property that is not real property under the laws of

18 the State where the property is located when it is

19 made available under a rental-purchase agreement.

20 ‘‘(12) RENTAL PAYMENT.—The term ‘rental pay21 ment’ means rent required to be paid by a consumer

22 for the possession and use of property for a specific

23 rental period, but does not include taxes or any fees

24 or charges.
7

1 ‘‘(13) RENTAL PERIOD.—The term ‘rental pe2 riod’ means a week, month, or other specific period of

3 time, during which the consumer has a right to pos4 sess and use property that is the subject of a rental5 purchase agreement after paying the rental payment

6 and any applicable taxes for such period.

7 ‘‘(14) RENTAL-PURCHASE AGREEMENT.—

8 ‘‘(A) IN GENERAL.—The term ‘rental-pur9 chase agreement’ means a contract in the form of

10 a bailment or lease for the use of property by a

11 consumer for an initial period of 4 months or

12 less, that is renewable with each payment by the

13 consumer, and that permits but does not obligate

14 the consumer to become the owner of the prop15 erty.

16 ‘‘(B) EXCLUSIONS.—The term ‘rental-pur17 chase agreement’ does not include—

18 ‘‘(i) a credit sale (as defined in section

19 103(g) of the Truth in Lending Act);

20 ‘‘(ii) a consumer lease (as defined in

21 section 181(1) of such Act); or

22 ‘‘(iii) a transaction giving rise to a

23 debt incurred in connection with the busi24 ness of lending money or a thing of value.

25 ‘‘(15) RENTAL-PURCHASE COST.—
8

1 ‘‘(A) IN GENERAL.—For purposes of sections

2 1010 and 1011, the term ‘rental-purchase cost’

3 means the sum of all rental payments and man4 datory fees or charges imposed by the merchant

5 as a condition of entering into a rental-purchase

6 agreement or acquiring ownership of property

7 under a rental-purchase agreement, such as the

8 following:

9 ‘‘(i) Service, processing, or administra10 tive charge.

11 ‘‘(ii) Fee for an investigation or credit

12 report.

13 ‘‘(iii) Charge for delivery required by

14 the merchant.

15 ‘‘(B) EXCLUDED ITEMS.—The following fees

16 or charges shall not be taken into account in de17 termining the rental-purchase cost with respect

18 to a rental-purchase transaction:

19 ‘‘(i) Fees and charges prescribed by

20 law, which actually are or will be paid to

21 public officials or government entities, such

22 as sales tax.

23 ‘‘(ii) Fees and charges for optional

24 products and services offered in connection

25 with a rental-purchase agreement.
9

1 ‘‘(16) STATE.—The term ‘State’ means any

2 State of the United States, the District of Columbia,

3 any territory of the United States, Puerto Rico,

4 Guam, American Samoa, the Trust Territory of the

5 Pacific Islands, the Virgin Islands, and the Northern

6 Mariana Islands.

7 ‘‘(17) TOTAL COST.—The term ‘total cost’ means

8 the sum of the initial payment and all periodic pay9 ments in the payment schedule to be paid by the con10 sumer to acquire ownership of the property that is the

11 subject of the rental-purchase agreement.

12 ‘‘SEC. 1002. EXEMPTED TRANSACTIONS.

13 ‘‘This title shall not apply to rental-purchase agree14 ments primarily for business, commercial, or agricultural

15 purposes, or those made with Government agencies or in16 strumentalities.

17 ‘‘SEC. 1003. GENERAL DISCLOSURE REQUIREMENTS.

18 ‘‘(a) RECIPIENT OF DISCLOSURE.—A merchant shall

19 disclose to any person who will be a signatory to a rental20 purchase agreement the information required by sections

21 1004 and 1005.

22 ‘‘(b) TIMING OF DISCLOSURE.—The disclosures re23 quired under sections 1004 and 1005 shall be made before

24 the consummation of the rental-purchase agreement and
10

1 clearly and conspicuously in writing as part of the rental2 purchase agreement to be signed by the consumer.

3 ‘‘(c) CLEARLY AND CONSPICUOUSLY.—As used in this

4 section, the term ‘clearly and conspicuously’ means that in5 formation required to be disclosed to the consumer shall be

6 worded plainly and simply, and appear in a type size,

7 prominence, and location as to be readily noticeable, read8 able, and comprehensible to an ordinary consumer.

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

10 ‘‘(a) IN GENERAL.—For each rental-purchase agree11 ment, the merchant shall disclose to the consumer the fol12 lowing, to the extent applicable:

13 ‘‘(1) The date of the consummation of the rental14 purchase transaction and the identities of the mer15 chant and the consumer.

16 ‘‘(2) A brief description of the rental property,

17 which shall be sufficient to identify the property to

18 the consumer, including an identification or serial

19 number, if applicable, and a statement indicating

20 whether the property is new or used.

21 ‘‘(3) A description of any fee, charge or penalty,

22 in addition to the periodic payment, that the con23 sumer may be required to pay under the agreement,

24 which shall be separately identified by type and

25 amount.
11

1 ‘‘(4) A clear and conspicuous statement that the

2 transaction is a rental-purchase agreement and that

3 the consumer will not obtain ownership of the prop4 erty until the consumer has paid the total dollar

5 amount necessary to acquire ownership.

6 ‘‘(5) The amount of any initial payment, which

7 includes the first periodic payment, and the total

8 amount of any fees, taxes, or other charges, required

9 to be paid by the consumer.

10 ‘‘(6) The amount of the cash price of the prop11 erty that is the subject of the rental-purchase agree12 ment, and, if the agreement involves the rental of 2

13 or more items as a set (as may be defined by the

14 Board in regulation) a statement of the aggregate

15 cash price of all items shall satisfy this requirement.

16 ‘‘(7) The amount and timing of periodic pay17 ments, and the total number of periodic payments

18 necessary to acquire ownership of the property under

19 the rental-purchase agreement.

20 ‘‘(8) The total cost, using that term, and a brief

21 description, such as ‘This is the amount you will pay

22 the merchant if you make all periodic payments to

23 acquire ownership of the property.’.

24 ‘‘(9) A statement of the consumer’s right to ter25 minate the agreement without paying any fee or
12

1 charge not previously due under the agreement by vol2 untarily surrendering or returning the property in

3 good repair upon expiration of any lease term.

4 ‘‘(10) Substantially the following statement:

5 ‘OTHER IMPORTANT TERMS: See your rent6 al-purchase agreement for additional important infor7 mation on early termination procedures, purchase op8 tion rights, responsibilities for loss, damage or de9 struction of the property, warranties, maintenance re10 sponsibilities, and other charges or penalties you may

11 incur.’.

12 ‘‘(b) FORM OF DISCLOSURE.—The disclosures required

13 by paragraphs (4) through (10) of subsection (a) shall be

14 segregated from other information at the beginning of the

15 rental-purchase agreement and shall contain only directly

16 related information, and shall be identified in boldface,

17 upper-case letters as follows: ‘‘IMPORTANT RENTAL18 PURCHASE DISCLOSURES’.

19 ‘‘(c) DISCLOSURE REQUIREMENTS RELATING TO IN20 SURANCE PREMIUMS AND LIABILITY WAIVERS.—

21 ‘‘(1) IN GENERAL.—A merchant shall clearly and

22 conspicuously disclose in writing to the consumer be23 fore the consummation of a rental-purchase agreement

24 that the purchase of leased property insurance or li-
13

1 ability waiver coverage is not required as a condition

2 for entering into the rental-purchase agreement.

3 ‘‘(2) AFFIRMATIVE WRITTEN REQUEST AFTER

4 COST DISCLOSURE.—A merchant may provide insur5 ance or liability waiver coverage, directly or indi6 rectly, in connection with a rental-purchase trans7 action only if—

8 ‘‘(A) the merchant clearly and conspicu9 ously discloses to the consumer the cost of each

10 component of such coverage before the con11 summation of the rental-purchase agreement;

12 and

13 ‘‘(B) the consumer signs an affirmative

14 written request for such coverage after receiving

15 the disclosures required under subparagraph

16 paragraph (A) of this paragraph and paragraph

17 (1).

18 ‘‘(d) ACCURACY OF DISCLOSURE.—

19 ‘‘(1) IN GENERAL.—The disclosures required to

20 be made under subsection (a) shall be accurate as of

21 the date the disclosures are made, based on the infor22 mation available to the merchant.

23 ‘‘(2) INFORMATION SUBSEQUENTLY RENDERED

24 INACCURATE.—If information required to be disclosed

25 under subsection (a) is subsequently rendered inac-
14

1 curate as a result of any agreement between the mer2 chant and the consumer subsequent to the delivery of

3 the required disclosures, the resulting inaccuracy shall

4 not constitute a violation of this title.

5 ‘‘SEC. 1005. OTHER AGREEMENT PROVISIONS.

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

7 shall—

8 ‘‘(1) provide a statement specifying whether the

9 merchant or the consumer is responsible for loss, theft,

10 damage, or destruction of the property;

11 ‘‘(2) provide a statement specifying whether the

12 merchant or the consumer is responsible for main13 taining or servicing the property, together with a

14 brief description of the responsibility;

15 ‘‘(3) provide that the consumer may terminate

16 the agreement without paying any charges not pre17 viously due under the agreement by voluntarily sur18 rendering or returning the property that is the subject

19 of the agreement upon expiration of any rental pe20 riod;

21 ‘‘(4) contain a provision for reinstatement of the

22 agreement, which at a minimum—

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

24 a timely rental payment to reinstate the agree25 ment, without losing any rights or options which
15

1 exist under the agreement, by the payment of all

2 past due rental payments and any other charges

3 then due under the agreement and a payment for

4 the next rental period within 7 business days

5 after failing to make a timely rental payment if

6 the consumer pays monthly, or within 3 business

7 days after failing to make a timely rental pay8 ment if the consumer pays more frequently than

9 monthly;

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

11 surrenders the property covered by the agree12 ment, other than through judicial process, during

13 the applicable reinstatement period set forth in

14 subparagraph (A), permits the consumer to rein15 state the agreement during a period of at least

16 60 days after the date of the return or surrender

17 of the property by the payment of all amounts

18 previously due under the agreement, any appli19 cable fees, and a payment for the next rental pe20 riod;

21 ‘‘(C) if the consumer has paid 50 percent or

22 more of the total cost necessary to acquire owner23 ship and returns or voluntarily surrenders the

24 property, other than through judicial process,

25 during the applicable reinstatement period set
16

1 forth in subparagraph (A), permits the consumer

2 to reinstate the agreement during a period of at

3 least 120 days after the date of the return of the

4 property by the payment of all amounts pre5 viously due under the agreement, any applicable

6 fees, and a payment for the next rental period;

7 and

8 ‘‘(D) permits the consumer, upon reinstate9 ment of the agreement to receive the same prop10 erty, if available, that was the subject of the rent11 al-purchase agreement, or if the same property is

12 not available, a substitute item of comparable

13 quality and condition may be provided to the

14 consumer; except that, the Board may, by regula15 tion or order, exempt any independent small

16 business (as defined by the Board by regulation)

17 from the requirement of providing the same or

18 comparable product during the extended rein19 statement period provided in subparagraph (C),

20 if the Board determines, taking into account

21 such standards as the Board determines to be ap22 propriate, that the reinstatement right provided

23 in such subparagraph would provide excessive

24 hardship for such independent small business.
17

1 ‘‘(5) provide a statement specifying the terms

2 under which the consumer shall acquire ownership of

3 the property that is the subject of the rental-purchase

4 agreement either by payment of the total cost to ac5 quire ownership, as provided in section 1006, or by

6 exercise of any early purchase option provided in the

7 rental-purchase agreement;

8 ‘‘(6) provide a statement disclosing that if any

9 part of a manufacturer’s express warranty covers the

10 property at the time the consumer acquires ownership

11 of the property, the warranty will be transferred to

12 the consumer if allowed by the terms of the warranty;

13 and

14 ‘‘(7) provide, to the extent applicable, a descrip15 tion of any grace period for making any periodic

16 payment, the amount of any security deposit, if any,

17 to be paid by the consumer upon initiation of the

18 rental-purchase agreement, and the terms for refund

19 of such security deposit to the consumer upon return,

20 surrender or purchase of the property.

21 ‘‘(b) REPOSSESSION DURING REINSTATEMENT PE22 RIOD.—Subsection (a)(4) shall not be construed so as to

23 prevent a merchant from attempting to repossess property

24 during the reinstatement period pursuant to subsection
18

1 (a)(4)(A), but such a repossession does not affect the con2 sumer’s right to reinstate.

3 ‘‘SEC. 1006. RIGHT TO ACQUIRE OWNERSHIP.

4 ‘‘(a) IN GENERAL.—The consumer shall acquire own5 ership of the property that is the subject of the rental-pur6 chase agreement, and the rental-purchase agreement shall

7 terminate, upon compliance by the consumer with the re8 quirements of subsection (b) or any early payment option

9 provided in the rental purchase agreement, and upon pay10 ment of any past due payments and fees, as permitted in

11 regulation by the Board.

12 ‘‘(b) PAYMENT OF TOTAL COST.—The consumer shall

13 acquire ownership of the rental property upon payment of

14 the total cost of the rental-purchase agreement, as such term

15 is defined in section 1001(17), and as disclosed to the con16 sumer in the rental-purchase agreement pursuant to section

17 1004(a).

18 ‘‘(c) ADDITIONAL FEES PROHIBITED.—A merchant

19 shall not require the consumer to pay, as a condition for

20 acquiring ownership of the property that is the subject of

21 the rental-purchase agreement, any fee or charge in addi22 tion to, or in excess of, the regular periodic payments re23 quired by subsection (b), or any early purchase option

24 amount provided in the rental-purchase agreement, as ap25 plicable. A requirement that the consumer pay an unpaid
19

1 late charge or other fee or charge which the merchant has

2 previously billed to the consumer shall not constitute an ad3 ditional fee or charge for purposes of this subsection.

4 ‘‘(d) TRANSFER OF OWNERSHIP RIGHTS.—Upon pay5 ment by the consumer of all payments necessary to acquire

6 ownership under subsection (b) or any early purchase op7 tion amount provided in the rental-purchase agreement, as

8 appropriate, the merchant shall—

9 ‘‘(1) deliver, or mail to the consumer’s last

10 known address, such documents or other instruments,

11 which the Board has determined by regulation, are

12 necessary to acknowledge full ownership by the con13 sumer of the property acquired pursuant to the rent14 al-purchase agreement; and

15 ‘‘(2) transfer to the consumer the unexpired por16 tion of any warranties provided by the manufacturer,

17 distributor, or seller of the property, which shall

18 apply as if the consumer were the original purchaser

19 of the property, except where such transfer is prohib20 ited by the terms of the warranty.

21 ‘‘SEC. 1007. PROHIBITED PROVISIONS.

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

23 ‘‘(1) a confession of judgment;

24 ‘‘(2) a negotiable instrument;
20

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

2 property interest in any goods, except those goods the

3 use of which is provided by the merchant pursuant to

4 the agreement;

5 ‘‘(4) a wage assignment;

6 ‘‘(5) a provision requiring the waiver of any

7 legal claim or remedy created by this title or other

8 provision of Federal or State law;

9 ‘‘(6) a provision requiring the consumer, in the

10 event the property subject to the rental-purchase

11 agreement is lost, stolen, damaged, or destroyed, to

12 pay an amount in excess of the least of—

13 ‘‘(A) the fair market value of the property,

14 as determined by the Board in regulation;

15 ‘‘(B) any early purchase option amount

16 provided in the rental-purchase agreement; or

17 ‘‘(C) the actual cost of repair, as appro18 priate;

19 ‘‘(7) a provision authorizing the merchant, or a

20 person acting on behalf of the merchant, to enter the

21 consumer’s dwelling or other premises without obtain22 ing the consumer’s consent or to commit any breach

23 of the peace in connection with the repossession of the

24 rental property or the collection of any obligation or
21

1 alleged obligation of the consumer arising out of the

2 rental-purchase agreement;

3 ‘‘(8) a provision requiring the purchase of insur4 ance or liability damage waiver to cover the property

5 that is the subject of the rental-purchase agreement,

6 except as permitted by the Board in regulation;

7 ‘‘(9) a provision requiring the consumer to pay

8 more than 1 late fee or charge for an unpaid or delin9 quent periodic payment, regardless of the period in

10 which the payment remains unpaid or delinquent, or

11 to pay a late fee or charge for any periodic payment

12 because a previously assessed late fee has not been

13 paid in full.

14 ‘‘SEC. 1008. STATEMENT OF ACCOUNTS.

15 ‘‘Upon request of a consumer, a merchant shall provide

16 a statement of the consumer’s account. If a consumer re17 quests a statement for an individual account more than 4

18 times in any 12-month period, the merchant may charge

19 a reasonable fee for the additional statements.

20 ‘‘SEC. 1009. RENEGOTIATIONS AND EXTENSIONS.

21 ‘‘(a) RENEGOTIATIONS.—A renegotiation occurs when

22 a rental-purchase agreement is satisfied and replaced by a

23 new agreement undertaken by the same consumer. A renego24 tiation requires new disclosures, except as provided in sub25 section (c).
22

1 ‘‘(b) EXTENSIONS.—An extension is an agreement by

2 the consumer and the merchant, to continue an existing

3 rental-purchase agreement beyond the original end of the

4 payment schedule, but does not include a continuation that

5 is the result of a renegotiation.

6 ‘‘(c) EXCEPTIONS.—New disclosures are not required

7 for the following, even if they meet the definition of a re8 negotiation or an extension:

9 ‘‘(1) A reduction in payments.

10 ‘‘(2) A deferment of 1 or more payments.

11 ‘‘(3) The extension of a rental-purchase agree12 ment.

13 ‘‘(4) The substitution of property with property

14 that has a substantially equivalent or greater eco15 nomic value provided the rental-purchase cost does

16 not increase.

17 ‘‘(5) The deletion of property in a multiple-item

18 agreement.

19 ‘‘(6) A change in rental period provided the rent20 al-purchase cost does not increase.

21 ‘‘(7) An agreement resulting from a court pro22 ceeding.

23 ‘‘(8) Any other event described in regulations

24 prescribed by the Board.
23

1 ‘‘SEC. 1010. POINT-OF-RENTAL DISCLOSURES.

2 ‘‘(a) IN GENERAL.—For any item of property or set

3 of items displayed or offered for rental-purchase, the mer4 chant shall display on or next to the item or set of items

5 a card, tag, or label that clearly and conspicuously discloses

6 the following:

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

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

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

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

11 ‘‘(5) The total number of rental payments nec12 essary to acquire ownership of the property.

13 ‘‘(6) The rental-purchase cost.

14 ‘‘(b) FORM OF DISCLOSURE.—

15 ‘‘(1) IN GENERAL.—A merchant may make the

16 disclosure required by subsection (a) in the form of a

17 list or catalog which is readily available to the con18 sumer at the point of rental if the merchandise is not

19 displayed in the merchant’s showroom or if dis20 playing a card, tag, or label would be impractical due

21 to the size of the merchandise.

22 ‘‘(2) CLEARLY AND CONSPICUOUSLY.—As used in

23 this section, the term ‘clearly and conspicuously’

24 means that information required to be disclosed to the

25 consumer shall appear in a type size, prominence,
24

1 and location as to be noticeable, readable, and com2 prehensible to an ordinary consumer.

3 ‘‘SEC. 1011. RENTAL-PURCHASE ADVERTISING.

4 ‘‘(a) IN GENERAL.—If an advertisement for a rental5 purchase transaction refers to or states the amount of any

6 payment for any specific item or set of items, the merchant

7 making the advertisement shall also clearly and conspicu8 ously state in the advertisement the following for the item,

9 or set of items, advertised:

10 ‘‘(1) The transaction advertised is a rental-pur11 chase agreement.

12 ‘‘(2) The amount, timing, and total number of

13 rental payments necessary to acquire ownership

14 under the rental-purchase agreement.

15 ‘‘(3) The amount of the rental-purchase cost.

16 ‘‘(4) To acquire ownership of the property the

17 consumer must pay the rental-purchase cost plus ap18 plicable taxes.

19 ‘‘(5) Whether the stated payment amount and

20 advertised rental-purchase cost is for new or used

21 property.

22 ‘‘(b) PROHIBITION.—An advertisement for a rental23 purchase agreement shall not state or imply that a specific

24 item, or set of items, is available at specific amounts or

25 terms unless the merchant usually and customarily offers,
25

1 or will offer, the item or set of items at the stated amounts

2 or terms.

3 ‘‘(c) CLEARLY AND CONSPICUOUSLY.—

4 ‘‘(1) IN GENERAL.—For purposes of this section,

5 the term ‘clearly and conspicuously’ means that re6 quired disclosures shall be presented in a type, size,

7 shade, contrast, prominence, location, and manner, as

8 applicable to different mediums for advertising, so as

9 to be readily noticeable and comprehensible to the or10 dinary consumer.

11 ‘‘(2) REGULATORY GUIDANCE.—The Board shall

12 prescribe regulations on principles and factors to

13 meet the clear and conspicuous standard as appro14 priate to print, video, audio, and computerized adver15 tising, reflecting the principles and factors typically

16 applied in each medium by the Federal Trade Com17 mission.

18 ‘‘(3) 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, video, or print technique shall

22 be used that is likely to obscure or detract signifi23 cantly from the communication of the disclosures.
26

1 ‘‘SEC. 1012. CIVIL LIABILITY.

2 ‘‘(a) IN GENERAL.—Except as otherwise provided in

3 section 1013, any merchant who fails to comply with any

4 requirement of this title with respect to any consumer is

5 liable to such consumer as provided for leases in section

6 130. For purposes of this section, the term ‘creditor’ as used

7 in section 130 shall include a ‘merchant’, as defined in sec8 tion 1001.

9 ‘‘(b) JURISDICTION OF COURTS; LIMITATION ON AC10 TIONS.—

11 ‘‘(1) IN GENERAL.—Notwithstanding section

12 130(e), any action under this section may be brought

13 in any United States district court, or in any other

14 court of competent jurisdiction, before the end of the

15 1-year period beginning on the date the last payment

16 was made by the consumer under the rental-purchase

17 agreement.

18 ‘‘(2) RECOUPMENT OR SET-OFF.—This subsection

19 shall not bar a consumer from asserting a violation

20 of this title in an action to collect an obligation aris21 ing from a rental-purchase agreement, which was

22 brought after the end of the 1-year period described in

23 paragraph (1) as a matter of defense by recoupment

24 or set-off in such action, except as otherwise provided

25 by State law.
27

1 ‘‘SEC. 1013. ADDITIONAL GROUNDS FOR CIVIL LIABILITY.

2 ‘‘(a) INDIVIDUAL CASES WITH ACTUAL DAMAGES.—

3 Any merchant who fails to comply with any requirements

4 imposed under section 1010 or 1011 with respect to any

5 consumer who suffers actual damage from the violation

6 shall be liable to such consumer as provided in section 130.

7 ‘‘(b) PATTERN OR PRACTICE OF VIOLATIONS.—If a

8 merchant engages in a pattern or practice of violating any

9 requirement imposed under section 1010 or 1011, the Fed10 eral Trade Commission or an appropriate State attorney

11 general, in accordance with section 1016, may initiate an

12 action to enforce sanctions against the merchant,

13 including—

14 ‘‘(1) an order to cease and desist from such prac15 tices; and

16 ‘‘(2) a civil money penalty of such amount as the

17 court may impose, based on such factors as the court

18 may determine to be appropriate.

19 ‘‘SEC. 1014. LIABILITY OF ASSIGNEES.

20 ‘‘(a) ASSIGNEES INCLUDED.—For purposes of section

21 1013, and this section, the term ‘merchant’ includes an as22 signee of a merchant.

23 ‘‘(b) LIABILITIES OF ASSIGNEES.—

24 ‘‘(1) APPARENT VIOLATION.—An action under

25 section 1012 or 1013 for a violation of this title may

26 be brought against an assignee only if the violation
28

1 is apparent on the face of the rental-purchase agree2 ment to which it relates.

3 ‘‘(2) APPARENT VIOLATION DEFINED.—For pur4 poses of this subsection, a violation that is apparent

5 on the face of a rental-purchase agreement includes

6 includes, but is not limited to, a disclosure

7 that can be determined to be incomplete or inaccurate

8 from the face of the agreement.

9 ‘‘(3) INVOLUNTARY ASSIGNMENT.—An assignee

10 has no liability in a case in which the assignment is

11 involuntary.

12 ‘‘(4) RULE OF CONSTRUCTION.—No provision of

13 this section shall be construed as limiting or altering

14 the liability under section 1012 or 1013 of a mer15 chant assigning a rental-purchase agreement.

16 ‘‘(b) PROOF OF DISCLOSURE.—In an action by or

17 against an assignee, the consumer’s written acknowledg18 ment of receipt of a disclosure, made as part of the rental19 purchase agreement, shall be conclusive proof that the dis20 closure was made, if the assignee had no knowledge that

21 the disclosure had not been made when the assignee acquired

22 the rental-purchase agreement to which it relates.

23 ‘‘SEC. 1015. REGULATIONS.

24 ‘‘(a) IN GENERAL.—The Board shall prescribe regula25 tions as necessary to carry out the purposes of this title,
29

1 to prevent its circumvention, and to facilitate compliance

2 with its requirements.

3 ‘‘(b) MODEL DISCLOSURE FORMS.—The Board may

4 publish model disclosure forms and clauses for common

5 rental-purchase agreements to facilitate compliance with

6 the disclosure requirements of this title and to aid the con7 sumer in understanding the transaction by utilizing readily

8 understandable language to simplify the technical nature

9 of the disclosures. In devising such forms, the Board shall

10 consider the use by merchants of data processing or similar

11 automated equipment. Nothing in this title may be con12 strued to require a merchant to use any such model form

13 or clause prescribed by the Board under this section. A mer14 chant shall be deemed to be in compliance with the require15 ment to provide disclosure under section 1003(a) if the

16 merchant—

17 ‘‘(1) uses any appropriate model form or clause

18 as published by the Board; or

19 ‘‘(2) uses any such model form or clause and

20 changes it by—

21 ‘‘(A) deleting any information which is not

22 required by this title; or

23 ‘‘(B) rearranging the format, if in making

24 such deletion or rearranging the format, the mer-
30

1 chant does not affect the substance, clarity, or

2 meaningful sequence of the disclosure.

3 ‘‘(c) EFFECTIVE DATE OF REGULATIONS.—Any regu4 lation prescribed by the Board, or any amendment or inter5 pretation thereof, shall not be effective before the October

6 1 that follows the date of publication of the regulation in

7 final form by at least 6 months. The Board may at its dis8 cretion lengthen that period of time to permit merchants

9 to adjust to accommodate new requirements. The Board

10 may also shorten that period of time, notwithstanding the

11 first sentence, if it makes a specific finding that such action

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

13 prevent unfair or deceptive practices. In any case, mer14 chants may comply with any newly prescribed disclosure

15 requirement prior to its effective date.

16 ‘‘SEC. 1016. ENFORCEMENT.

17 ‘‘(a) FEDERAL ENFORCEMENT.—Compliance with the

18 requirements imposed under this title shall be enforced

19 under the Federal Trade Commission Act (15 U.S.C. 41 et

20 seq.), and a violation of any requirements imposed under

21 this title shall be deemed a violation of a requirement im22 posed under that Act. All of the functions and powers of

23 the Federal Trade Commission under the Federal Trade

24 Commission Act are available to the Commission to enforce

25 compliance by any person with the requirements of this
31

1 title, irrespective of whether that person is engaged in com2 merce or meets any other jurisdictional test in the Federal

3 Trade Commission Act.

4 ‘‘(b) STATE ENFORCEMENT.—

5 ‘‘(1) IN GENERAL.—An action to enforce the re6 quirements imposed by this title may also be brought

7 by the appropriate State attorney general in any ap8 propriate United States district court, or any other

9 court of competent jurisdiction.

10 ‘‘(2) PRIOR WRITTEN NOTICE.—

11 ‘‘(A) IN GENERAL.—The State attorney gen12 eral shall provide prior written notice of any

13 such civil action to the Federal Trade Commis14 sion and shall provide the Commission with a

15 copy of the complaint.

16 ‘‘(B) EMERGENCY ACTION.—If prior notice

17 is not feasible, the State attorney general shall

18 provide notice to the Commission immediately

19 upon instituting the action.

20 ‘‘(3) FTC INTERVENTION.—The Commission

21 may—

22 ‘‘(A) intervene in the action;

23 ‘‘(B) upon intervening—
32

1 ‘‘(i) remove the action to the appro2 priate United States district court, if it was

3 not originally brought there; and

4 ‘‘(ii) be heard on all matters arising in

5 the action; and

6 ‘‘(C) file a petition for appeal.

7 ‘‘SEC. 1017. CRIMINAL LIABILITY FOR WILLFUL AND KNOW8 ING VIOLATION.

9 ‘‘Whoever willfully and knowingly gives false or inac10 curate information or fails to provide information which

11 he is required to disclose under the provisions of this title

12 or any regulation issued thereunder shall be subject to the

13 penalty provisions as provided in section 112.

14 ‘‘SEC. 1018. RELATION TO OTHER LAWS.

15 ‘‘(a) RELATION TO STATE LAW.—

16 ‘‘(1) NO EFFECT ON CONSISTENT STATE LAWS.—

17 Except as otherwise provided in subsection (b), this

18 title does not annul, alter, or affect in any manner

19 the meaning, scope or applicability of the laws of any

20 State relating to rental-purchase agreements, except to

21 the extent those laws are inconsistent with any provi22 sion of this title, and then only to the extent of the

23 inconsistency.

24 ‘‘(2) DETERMINATION OF INCONSISTENCY.—

25 Upon its own motion or upon the request of an inter-
33

1 ested party, which is submitted in accordance with

2 procedures prescribed in regulations of the Board, the

3 Board shall determine whether any such inconsistency

4 exists. If the Board determines that a term or provi5 sion of a State law is inconsistent, merchants located

6 in that State need not follow such term or provision

7 and shall incur no liability under the law of that

8 State for failure to follow such term or provision, not9 withstanding that such determination is subsequently

10 amended, rescinded, or determined by judicial or

11 other authority to be invalid for any reason.

12 ‘‘(3) GREATER PROTECTION UNDER STATE

13 LAW.—Except as provided in subsection (b), for pur14 poses of this section, a term or provision of a State

15 law is not inconsistent with the provisions of this title

16 if the term or provision affords greater protection and

17 benefit to the consumer than the protection and ben18 efit provided under this title as determined by the

19 Board, on its own motion or upon the petition of any

20 interested party.

21 ‘‘(b) STATE LAWS RELATING TO CHARACTERIZATION

22 OF TRANSACTION.—Notwithstanding the provisions of sub23 section (a), this title shall supersede any State law to the

24 extent that such law—
34

1 ‘‘(1) regulates a rental-purchase agreement as a

2 security interest, credit sale, retail installment sale,

3 conditional sale or any other form of consumer credit,

4 or that imputes to a rental-purchase agreement the

5 creation of a debt or extension of credit, or

6 ‘‘(2) requires the disclosure of a percentage rate

7 calculation, including a time-price differential, an

8 annual percentage rate, or an effective annual per9 centage rate.

10 ‘‘(c) RELATION TO FEDERAL TRADE COMMISSION

11 ACT.—No provision of this title shall be construed as lim12 iting, superseding, or otherwise affecting the applicability

13 of the Federal Trade Commission Act to any merchant or

14 rental-purchase transaction.

15 ‘‘SEC. 1019. EFFECT ON GOVERNMENT AGENCIES.

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

17 may be imposed on the United States or any of its depart18 ments or agencies, any State or political subdivision, or

19 any agency of a State or political subdivision.

20 ‘‘SEC. 1020. COMPLIANCE DATE.

21 ‘‘Compliance with this title shall not be required until

22 6 months after the date of the enactment of the Consumer

23 Rental Purchase Agreement Act. In any case, merchants

24 may comply with this title at any time after such date of

25 enactment.’’.
Union Calendar No. 396

107TH CONGRESS

2D SESSION H. R. 1701

[Report No. 107–590, Parts I and II]

A BILL

To amend the Consumer Credit Protection Act to

assure meaningful disclosures of the terms ofrental-purchase agreements, including disclosuresof all costs to consumers under such agreements,to provide certain substantive rights to consumers under such agreements, and for otherpurposes.

SEPTEMBER 9, 2002

Reported from the Committee on the Judiciary with an

amendment, committed to the Committee of the WholeHouse on the State of the Union, and ordered to beprinted