II 

109TH CONGRESS 

2D SESSION S. 4037 

To amend the Consumer Credit Protection Act to protect consumers from 

inadequate disclosures and certain abusive practices in rent-to-own transactions, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 29, 2006 

Mr. SCHUMER 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 protect 

consumers from inadequate disclosures and certain abusive practices in rent-to-own transactions, 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 ‘‘Rent-To-Own Reform 

5 Act of 2006’’. 


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1 SEC. 2. RENT-TO-OWN PROTECTION ACT. 

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

3 1601 et seq.) is amended by adding at the end the fol4 lowing new title: 

5 ‘‘TITLE X—RENT-TO-OWN 

6 TRANSACTIONS 

‘‘Sec 

‘‘1001. Short title 

‘‘1002. Findings and purposes 

‘‘1003. Definitions 

‘‘1004. Application of State laws regarding fees, charges, guarantees, and warranties to rent-to-own transactions 

‘‘1005. Application of Federal laws to rent-to-own transactions 

‘‘1006. Disclosures 

‘‘1007. Prohibitions and enforcement 

‘‘1008. Civil liability 

‘‘1009. Application of this title 

‘‘1010. Regulations 

‘‘1011. Relationship to other laws 

7 ‘‘SEC. 1001. SHORT TITLE. 

8 ‘‘This title may be cited as the ‘Rent-To-Own Protec9 tion Act’. 

10 ‘‘SEC. 1002. FINDINGS AND PURPOSES. 

11 ‘‘(a) FINDINGS.—Congress finds that— 

12 ‘‘(1) the rent-to-own industry targets its prod13 ucts primarily to low income and minority neighbor14 hoods; 

15 ‘‘(2) the majority of rent-to-own customers 

16 enter into rent-to-own contracts with the intention of 

17 owning the goods for which they are contracting; 


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1 ‘‘(3) rent-to-own dealers often fail to disclose 

2 key terms of rent-to-own contracts, and engage in 

3 unfair collection practices; and 

4 ‘‘(4) of primary significance, rent-to-own deal5 ers do not provide customers with the protections af6 forded purchasers in retail installment sales under 

7 State and Federal laws, and often charge excessive 

8 fees and interest rates. 

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

10 ‘‘(1) to provide consumers in rent-to-own trans11 actions the range of protections provided under 

12 State and Federal laws to individuals that acquire 

13 goods in other consumer credit sales, while recog14 nizing and preserving consumers’ unilateral right to 

15 terminate; 

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

17 affixed to items available for acquisition in rent-to18 own transactions to disclose material terms of those 

19 transactions; and 

20 ‘‘(3) to prohibit rent-to-own dealers and collec21 tion agents hired by those dealers from engaging in 

22 abusive collection practices. 

23 ‘‘SEC. 1003. DEFINITIONS. 

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

25 shall apply: 


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

2 Board of Governors of the Federal Reserve System. 

3 ‘‘(2) CASH PRICE.—The term ‘cash price’ 

4 means the fair market price at which retail sellers, 

5 not in the business of renting or leasing such goods, 

6 are selling and retail buyers are buying the same or 

7 similar property for cash in the same trade area in 

8 which the lessor’s place of business is located. Any 

9 increase in the cash price above such fair market 

10 price shall be disclosed to the consumer as a finance 

11 charge. 

12 ‘‘(3) CONSUMER.—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) CREDIT.—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 

2 to— 

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) RENT-TO-OWN CONTRACT.—The term 

15 ‘rent-to-own contract’ means— 

16 ‘‘(A) a contract in the form of a terminable 

17 lease or bailment of an item of consumer goods, 

18 under which— 

19 ‘‘(i) a consumer— 

20 ‘‘(I) has the right of possession 

21 and use of the item; and 

22 ‘‘(II) has the option to renew the 

23 contract periodically by making pay24 ments specified in the contract; and 


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1 ‘‘(ii) a seller agrees, in writing or oral2 ly, to transfer ownership of the item to the 

3 consumer upon the fulfillment of all obliga4 tions of the consumer under the contract 

5 for that transfer; and 

6 ‘‘(B) any contract which is advertised as or 

7 denominated as a rent-to-own contract or lease8 purchase contract, or which is in substance a 

9 rent-to-own contract, as described in subpara10 graph (A). 

11 ‘‘(6) RENT-TO-OWN TRANSACTION.—The term 

12 ‘rent-to-own transaction’ means the lease or bail13 ment of an item of consumer goods under a rent-to14 own contract. 

15 ‘‘(7) SELLER.—The term ‘seller’ means— 

16 ‘‘(A) a person— 

17 ‘‘(i) who regularly makes consumer 

18 goods available under rent-to-own con19 tracts; and 

20 ‘‘(ii) to whom payments are payable 

21 under those contracts; and 

22 ‘‘(B) an assignee of such a person. 

23 ‘‘(8) STATE.—The term ‘State’ means any 

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1 trict of Columbia, and any territory or possession of 

2 the United States. 

3 ‘‘SEC. 1004. APPLICATION OF STATE LAWS REGARDING 

4 FEES, CHARGES, GUARANTEES, AND WARRAN5 TIES TO RENT-TO-OWN TRANSACTIONS. 

6 ‘‘(a) IN GENERAL.—Subject to subsection (b), a sell7 er in a rent-to-own transaction may not take, receive, or 

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

9 transaction that is in excess of the interest, fees, or fi10 nance charges that may be charged under the laws of the 

11 State in which the seller is located which— 

12 ‘‘(1) establish a maximum rate or amount of in13 terest, finance charge, or time-price differential that 

14 may be charged in connection with a credit sale or 

15 retail installment sale for the same or a similar item; 

16 ‘‘(2) establish the types of fees and the max17 imum amount of fees that a seller may charge in 

18 connection with a credit sale or retail installment 

19 sale for the same or a similar item; or 

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

21 the maximum amount of premiums that can be 

22 charged for credit insurance in connection with a 

23 credit sale or a retail installment sale for the same 

24 or a similar item. 


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1 ‘‘(b) ADDITIONAL TERMINATION CHARGES AND

2 FEES.— 

3 ‘‘(1) CHARGES AND FEES AUTHORIZED.—In ad4 dition to fees and charges authorized under sub5 section (a), a seller in a rent-to-own transaction may 

6 charge— 

7 ‘‘(A) a termination fee in accordance with 

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

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

10 contract for the transaction at any time without 

11 regard to whether the consumer has completed 

12 payment of the fee; and 

13 ‘‘(B) fees that are reasonable in relation to 

14 the cash price of the good, for recovery of the 

15 items that are the subject of the contract and 

16 that are not voluntarily returned to the seller 

17 upon the termination of the contract. 

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

19 under paragraph (1)(A)— 

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

21 price under the contract; 

22 ‘‘(B) shall be disclosed in the contract; 

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

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

25 and 


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1 ‘‘(D) shall be calculated as part of the fi2 nance charge as determined under section 106 

3 of the Truth in Lending Act. 

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

5 paragraph (1)(B) shall be disclosed in the contract. 

6 ‘‘(4) EFFECT OF TERMINATION.—The termi7 nation of a rent-to-own contract by a consumer in 

8 accordance with a right of termination given to the 

9 consumer in exchange for a termination fee under 

10 subsection (a)(1) is deemed to satisfy the consumer’s 

11 obligation for all payments and fees due under the 

12 contract, except fees and charges under the contract 

13 that become due before the date of termination. 

14 ‘‘(c) GUARANTEES AND WARRANTIES.—All guaran15 tees and warranties established or required under the laws 

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

17 sale or retail installment sale apply to goods which are 

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

19 ‘‘SEC. 1005. APPLICATION OF FEDERAL LAWS TO RENT-TO20 OWN TRANSACTIONS. 

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

22 transaction, as follows: 

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

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1 sumer credit transaction that is a credit sale (as 

2 that term is defined in that Act). 

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

4 Equal Credit Opportunity Act applies as such Act 

5 applies to credit transactions. For purposes of that 

6 application— 

7 ‘‘(A) a consumer shall be treated as an ap8 plicant; and 

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

10 ‘‘(3) FAIR DEBT COLLECTION PRACTICES

11 ACT.—The Fair Debt Collection Practices Act ap12 plies to the collection of payments owed that arise 

13 from a rent-to-own transaction, unless those pay14 ments are collected by any person specified in sub15 paragraphs (A) through (F) of section 803(6) of 

16 such Act. For purposes of that application, pay17 ments owed shall be treated as debt. 

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

19 Credit Reporting Act applies as such Act applies to 

20 a credit transaction and to any extension or denial 

21 of credit. 

22 ‘‘SEC. 1006. DISCLOSURES. 

23 ‘‘(a) DISCLOSURES ON GOODS.—A seller shall include 

24 on each item in the place of business of the seller that 


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1 is available for purchase pursuant to a rent-to-own trans2 action the following information: 

3 ‘‘(1) The cash price of the item. 

4 ‘‘(2) An itemization of services offered under a 

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

6 of each service. 

7 ‘‘(3) The annual percentage rate of the item 

8 under a rent-to-own contract, determined under sec9 tion 107 of the Truth in Lending Act. 

10 ‘‘(4) The weekly, biweekly, monthly, or other in11 cremental payment applicable under the rent-to-own 

12 contract for the transaction and the number of pay13 ments. 

14 ‘‘(5) The total of payments required to be paid 

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

16 contract for the transaction, determined under regu17 lations under the Truth in Lending Act. 

18 ‘‘(6) Specification of whether the item is new or 

19 used. 

20 ‘‘(b) DISCLOSURES UPON CONTRACTING.—A seller 

21 shall provide to a consumer in writing, at the time the 

22 seller and consumer enter into a rent-to-own contract for 

23 an item, the information referred to in subsection (a) for 

24 the item and the contract. 


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1 ‘‘SEC. 1007. PROHIBITIONS AND ENFORCEMENT. 

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

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

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

5 a consumer for any matter related to the contract, 

6 unless there is clear and convincing evidence that 

7 the goods that are the subject of the contract are 

8 being held by the consumer with an intent to de9 fraud the seller; 

10 ‘‘(2) use threats or coercion to collect or at11 tempt to collect any amounts alleged to be due from 

12 the consumer; 

13 ‘‘(3) engage in any conduct, the natural con14 sequence of which is to oppress, harass, or abuse 

15 any person in connection with an attempt to collect 

16 amounts owed by the consumer under the contract; 

17 ‘‘(4) unreasonably disclose information to third 

18 parties regarding amounts owed by the consumer; 

19 ‘‘(5) make any fraudulent, deceptive, or mis20 leading representation to obtain information about 

21 the consumer or to collect amounts owed by the con22 sumer; 

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

24 attempt to collect a debt owed to the seller; 

25 ‘‘(7) advertise, announce, solicit, or otherwise 

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1 ing by use of other words of similar meaning) any 

2 service under the contract for which the seller 

3 charges the consumer, including any service for 

4 which a charge is collected by inclusion in the 

5 amount required to be paid under the contract; 

6 ‘‘(8) use, for purposes of complying with any 

7 State or Federal law governing rent-to-own trans8 actions (other than a State or Federal tax law) any 

9 definition of the term ‘cash price’ other than the def10 inition under section 1003(2); 

11 ‘‘(9) engage in any act or practice which is un12 fair or deceptive in connection with a rent-to-own 

13 transaction; or 

14 ‘‘(10) violate any regulation issued by the 

15 Board under subsection (c)(1). 

16 ‘‘(b) ENFORCEMENT.— 

17 ‘‘(1) ENFORCEMENT.—Compliance with the re18 quirements under this title shall be enforced by the 

19 Federal Trade Commission. All functions and pow20 ers of the Federal Trade Commission under the 

21 Federal Trade Commission Act shall be available to 

22 the Commission to enforce compliance with this title 

23 by any person, irrespective of whether the person is 

24 engaged in commerce or meets any other jurisdic25 tional tests in the Federal Trade Commission Act, 


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1 including the power to enforce the provisions of this 

2 title in the same manner as if the violation had been 

3 a violation of a Federal Trade Commission trade 

4 regulation rule. 

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

6 purpose of the exercise by the Federal Trade Com7 mission of the functions and powers of such Com8 mission under the Federal Trade Commission Act, a 

9 violation of any requirement or prohibition under 

10 this title is deemed to be an unfair or deceptive act 

11 or practice in commerce in violation of that Act. 

12 ‘‘(c) REGULATIONS.— 

13 ‘‘(1) BOARD.—The Board shall issue such regu14 lations as are necessary or appropriate for imple15 menting subsection (a), including regulations de16 scribing specific practices by a seller that are prohib17 ited by paragraphs (1) through (9) of that sub18 section. 

19 ‘‘(2) FEDERAL TRADE COMMISSION.—The Fed20 eral Trade Commission shall issue regulations imple21 menting subsection (b). 

22 ‘‘SEC. 1008. CIVIL LIABILITY. 

23 ‘‘(a) LIABILITY FOR FAILURE TO PROPERLY DIS24 CLOSE TERMS.—Any seller who fails to comply with a reVerDate Aug 31 2005 23:49 Oct 04, 2006 Jkt 059196 PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 E:\BILLS\S4037.IS S4037

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1 quirement under section 1006 is liable to the consumer 

2 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) $250 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 that violates this 

9 title or fails to comply with any requirement imposed 

10 under this title, other than under section 1006, 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) $2,500 for each violation; and 

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

17 ‘‘(c) JURISDICTION AND LIMITATION.—An action 

18 under this title may be brought in any United States dis19 trict court or in any other court of competent jurisdiction, 

20 within 24 months after the date of the violation or failure 

21 that is the subject of the action. This subsection does not 

22 bar a person from asserting a violation of this title in an 

23 action to collect amounts alleged to be due from the person 

24 which is brought more than 2 years after the date of the 


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1 occurrence of the violation as a matter of defense by 

2 recoupment or set-off in such action. 

3 ‘‘SEC. 1009. APPLICATION OF THIS TITLE. 

4 ‘‘(a) IN GENERAL.—This title shall apply to rent-to5 own contracts entered into after the date of the issuance 

6 of regulations by the Board under section 1010. 

7 ‘‘(b) MOTOR VEHICLES.—This title shall not apply 

8 to any lease or sale of a motor vehicle entered into after 

9 the date of enactment of the Rent-To-Own Reform Act 

10 of 2006 that, if entered into on the day before that date 

11 of enactment, would have been subject to chapter 5 of the 

12 Truth in Lending Act. 

13 ‘‘SEC. 1010. REGULATIONS. 

14 ‘‘The Board shall issue such regulations as may be 

15 necessary to implement this title (including regulations 

16 under section 1007(c)(1)), not later than 12 months after 

17 the date of enactment of the Rent-To-Own Reform Act 

18 of 2006. 

19 ‘‘SEC. 1011. RELATIONSHIP TO OTHER LAWS. 

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

21 or affect, or exempt any person subject to the provisions 

22 of this title from complying with, the laws of any State 

23 with respect to rent-to-own transactions, except to the ex24 tent that those laws are inconsistent with any provision 

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1 ency. A State law is not inconsistent with this title solely 

2 because the protection afforded by such provision of law 

3 to any consumer is greater than the protection afforded 

4 by this title. 

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

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

7 relating to consumer leases, shall not apply to a rent-to8 own transaction except the lease or sale of a motor vehicle 

9 that, if entered into on the day before the date of enact10 ment of the Rent-To-Own Reform Act of 2006, would have 

11 been subject to that chapter.’’. 

Æ 


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