Consumer Rental Purchase Agreement Act

To require 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. Short title This Act may be cited as the Consumer Rental Purchase Agreement Act 2. Findings and declaration of purpose (a) Findings Congress finds that— (1) the rental-purchase industry provides a service that meets and satisfies the demands of many consumers; (2) each year, approximately 2,300,000 United States households enter into rental-purchase transactions, and over a 5-year period, approximately 4,900,000 United States households will do so; (3) competition among the various firms engaged in the extension of rental-purchase transactions would be strengthened by informed use of rental-purchase transactions; and (4) the informed use of rental-purchase transactions results from an awareness of the cost thereof by consumers. (b) Purpose The purpose of this Act is to ensure the availability of rental-purchase transactions and to ensure simple, meaningful, and consistent disclosure of rental-purchase terms so that consumers will be able to more readily compare the available rental-purchase terms and avoid uninformed use of rental-purchase transactions, and to protect consumers against unfair rental-purchase practices. 3. Definitions For purposes of this Act, the following definitions shall apply: (1) Advertisement The term advertisement (A) a commercial message in any medium that promotes, directly or indirectly, a rental-purchase agreement; and (B) does not include any price tag, window sign, or other in-store merchandising aid. (2) Agricultural purpose The term agricultural purpose (A) the production, harvest, exhibition, marketing, transformation, processing, or manufacture of agricultural products by a natural person who cultivates plants or propagates or nurtures agricultural products; and (B) the acquisition of farmlands, real property with a farm residence, or personal property and services used primarily in farming. (3) Cash price The term cash price (4) Commission The term Commission (5) Consumer The term consumer (6) Date of consummation The term date of consummation (7) Initial payment The term initial payment (A) the rental payment; (B) service, processing, or administrative charges; (C) any delivery fee; (D) any refundable security deposit; (E) taxes; (F) mandatory fees or charges; and (G) any optional fees or charges agreed to by the consumer. (8) Merchant The term merchant (9) Payment schedule The term payment schedule (10) Periodic payment The term periodic payment (11) Property The term property (12) Rental payment The term rental payment (13) Rental period The term rental period (14) Rental-purchase agreement (A) In general The term rental-purchase agreement (B) Exclusions The term rental-purchase agreement (i) A credit sale (as defined in section 103(g) of the Truth in Lending Act (15 U.S.C. 1602(g))). (ii) A consumer lease (as defined in section 181(1) of the Truth in Lending Act (15 U.S.C. 1667(1))). (iii) An extension of credit or a transaction giving rise to a debt incurred in connection with the purchase of a thing of value. (15) Rental-purchase cost (A) In general For purposes of sections 1010 and 1011, the term rental-purchase cost (i) a service, processing, or administrative charge; (ii) a fee for an investigation or credit report; or (iii) a charge for delivery required by the merchant. (B) Excluded items The following fees or charges shall not be taken into account in determining the rental-purchase cost with respect to a rental-purchase transaction: (i) Fees and charges prescribed by law, which actually are or will be paid to public officials or government entities, such as sales tax. (ii) Fees and charges for optional products and services offered in connection with a rental-purchase agreement. (16) State The term State (17) Total cost The term total cost 4. Exempted transactions This Act shall not apply to rental-purchase agreements primarily for business, commercial, or agricultural purposes, or those made with Government agencies or instrumentalities. 5. General disclosure requirements (a) Recipient of disclosure A merchant shall disclose to any person who will be a signatory to a rental-purchase agreement the information required by sections 6 and 7. (b) Timing of disclosure The disclosures required under sections 6 and 7 shall be made— (1) before the consummation of the rental-purchase agreement; and (2) clearly and conspicuously, in writing, as part of the rental-purchase agreement to be signed by the consumer. (c) Clearly and conspicuously As used in this section, the term clearly and conspicuously 6. Rental-purchase disclosures (a) In general For each rental-purchase agreement, the merchant shall clearly and conspicuously disclose to the consumer, to the extent applicable— (1) the date of the consummation of the rental-purchase transaction and the identities of the merchant and the consumer; (2) a brief description of the rental property, which shall be sufficient to identify the property to the consumer, including an identification or serial number, if applicable, and a statement indicating whether the property is new or used at the time of the agreement; (3) a description of any fee, charge, or penalty, in addition to the periodic payment, that the consumer may be required to pay under the agreement, which shall be separately identified by type and amount; (4) a statement that— (A) the transaction is a rental-purchase agreement; and (B) the consumer will not obtain ownership of the property until the consumer has paid the total dollar amount necessary to acquire ownership; (5) the amount of any initial payment; (6) the amount of the cash price of the property that is the subject of the rental-purchase agreement, and, if the agreement involves the rental of 2 or more items as a set (as may be defined by the Commission, by regulation) a statement of the aggregate cash price of all items shall satisfy this requirement; (7) the payment schedule; (8) the total cost, using that term, and a brief description, such as This is the amount you will pay the merchant if you make all periodic payments to acquire ownership of the property. (9) a statement of the right of the consumer to terminate the agreement without paying any fee or charge not previously due under the agreement, by voluntarily surrendering or returning the property in good repair upon expiration of any rental period; (10) a description of the reinstatement periods of terminated rental-purchase agreements; and (11) substantially the following statement: OTHER IMPORTANT TERMS (b) Form of disclosure The disclosures required by paragraphs (4) through (12) of subsection (a)— (1) shall be segregated from other information at the beginning of the rental-purchase agreement; (2) shall contain only directly related information; and (3) shall be identified in boldface, upper-case letters as follows: IMPORTANT RENTAL-PURCHASE DISCLOSURES (c) Disclosure requirements relating to insurance premiums and liability waivers (1) In general The merchant shall clearly and conspicuously disclose in writing to the consumer before the consummation of a rental-purchase agreement that the purchase of leased property insurance or liability waiver coverage is not required as a condition for entering into the rental-purchase agreement. (2) Affirmative written request after cost disclosure A merchant may provide insurance or liability waiver coverage, directly or indirectly, in connection with a rental-purchase transaction only if— (A) the merchant clearly and conspicuously discloses to the consumer the cost of such coverage before the consummation of the rental-purchase agreement; and (B) the consumer signs an affirmative written request for such coverage after receiving the disclosures required under paragraph (1) and subparagraph (A) of this paragraph. (d) Accuracy of disclosure (1) In general The disclosures required to be made under subsection (a) shall be accurate as of the date on which the disclosures are made, based on the information available to the merchant. (2) Information subsequently rendered inaccurate If information required to be disclosed under subsection (a) is rendered inaccurate as a result of any agreement between the merchant and the consumer subsequent to the delivery of the required disclosures, the resulting inaccuracy shall not constitute a violation of this Act. 7. Other agreement provisions (a) In general Each rental-purchase agreement shall— (1) provide a statement specifying whether the merchant or the consumer is responsible for loss, theft, damage, or destruction of the property; (2) provide a statement specifying whether the merchant or the consumer is responsible for maintaining or servicing the property, together with a brief description of the responsibility; (3) contain a provision for reinstatement of the agreement, which, at a minimum— (A) permits a consumer who fails to make a timely rental payment to reinstate the agreement, without losing any rights or options which exist under the agreement, by the payment of all past due rental payments and any other charges then due under the agreement and a payment for the next rental period— (i) within 7 business days after failing to make a timely rental payment, if the consumer pays monthly; or (ii) within 3 business days after failing to make a timely rental payment, if the consumer pays more frequently than monthly; (B) if the consumer returns or voluntarily surrenders the property covered by the agreement, other than through judicial process, during the applicable reinstatement period set forth in subparagraph (A), permits the consumer to reinstate the agreement during a period of at least 60 days after the date of the return or surrender of the property by the payment of all amounts previously due under the agreement, any applicable fees, and a payment for the next rental period; (C) if the consumer has paid 50 percent or more of the total cost necessary to acquire ownership and returns or voluntarily surrenders the property, other than through judicial process, during the applicable reinstatement period set forth in subparagraph (A), permits the consumer to reinstate the agreement during a period of at least 120 days after the date of the return of the property by the payment of all amounts previously due under the agreement, any applicable fees, and a payment for the next rental period; (D) if the consumer is a member of the Armed Forces and returns or voluntarily surrenders property as set forth in subparagraph (A) due to a permanent change of station or other relocation of the member, provides that the applicable reinstatement period set forth in subparagraph (B) or (C) be tolled or otherwise suspended until such time as the consumer returns to the area where the property is located; and (E) permits the consumer, upon reinstatement of the agreement to receive the same property, if available, that was the subject of the rental-purchase agreement, or if the same property is not available, a substitute item of comparable quality and condition may be provided to the consumer, except that, the Commission may, by regulation or order, exempt any independent small business (as defined by the Commission, by regulation) from the requirement of providing the same or comparable product during the extended reinstatement period provided in subparagraph (C), if the Commission determines, taking into account such standards as the Commission determines to be appropriate, that the reinstatement right provided in such subparagraph would provide excessive hardship for such independent small business; (4) provide a statement specifying the terms under which the consumer shall acquire ownership of the property that is the subject of the rental-purchase agreement, either by payment of the total cost to acquire ownership, as provided in section 8, or by exercise of any early purchase option provided in the rental-purchase agreement; (5) provide a statement disclosing that if any part of an express warranty of the manufacturer covers the property at the time the consumer acquires ownership of the property, the warranty will be transferred to the consumer, if allowed by the terms of the warranty; and (6) provide, to the extent applicable, a description of— (A) any grace period for making any periodic payment; (B) the amount of any security deposit, to be paid by the consumer upon initiation of the rental-purchase agreement; and (C) the terms for refund of such security deposit to the consumer upon return, surrender, or purchase of the property. (b) Repossession during reinstatement period Subsection (a)(3) may not be construed so as to prevent a merchant from attempting to repossess property during the reinstatement period pursuant to subsection (a)(3)(A), but such a repossession does not affect the consumer’s right to reinstate in accordance with this Act. 8. Right to acquire ownership (a) In general The consumer shall acquire ownership of the property that is the subject of a rental-purchase agreement, and the rental-purchase agreement shall terminate, upon compliance by the consumer with the requirements of subsection (b) or any early payment option provided in the rental-purchase agreement, and upon payment of any past due payments and fees, as permitted in regulation by the Commission. (b) Payment of total cost The consumer shall acquire ownership of the rental property upon payment of the total cost of the subject rental-purchase agreement, as disclosed to the consumer in the rental-purchase agreement pursuant to section 6(a). (c) Additional fees prohibited (1) In general A merchant shall not require the consumer to pay, as a condition for acquiring ownership of the property that is the subject of a rental-purchase agreement, any fee or charge in addition to, or in excess of, the regular periodic payments required by subsection (b), or any early purchase option amount provided in the rental-purchase agreement, as applicable. (2) Rule of construction A requirement that the consumer pay an unpaid late charge or other fee that is past due shall not constitute an additional fee or charge for purposes of this subsection. (d) Transfer of ownership rights Upon payment by the consumer of all payments necessary to acquire ownership under subsection (b) or any early purchase option amount provided in the rental-purchase agreement, as appropriate, the merchant shall— (1) deliver to the consumer, or mail to the consumer’s last known address, such documents or other instruments, which the Commission has determined, by regulation, are necessary to acknowledge full ownership by the consumer of the property acquired pursuant to the rental-purchase agreement; and (2) transfer to the consumer the unexpired portion of any warranties provided by the manufacturer, distributor, or seller of the property, which shall apply as if the consumer were the original purchaser of the property, except where such transfer is prohibited by the terms of the warranty. 9. Prohibited provisions A rental-purchase agreement may not contain— (1) a confession of judgment; (2) a negotiable instrument; (3) a security interest or any other claim of a property interest in any goods, except those goods, the use of which is provided by the merchant pursuant to the rental-purchase agreement; (4) a wage assignment; (5) a provision requiring the waiver of any legal claim or remedy created by this Act or other provision of Federal or State law; (6) a provision requiring the consumer, in the event that the property subject to the rental-purchase agreement is lost, stolen, damaged, or destroyed, to pay an amount in excess of the least of— (A) the fair market value of the property, as determined by the Commission, by regulation; (B) any early purchase option amount provided in the rental-purchase agreement; or (C) the actual cost of repair, as appropriate; (7) a provision authorizing the merchant, or a person acting on behalf of the merchant— (A) to enter the consumer’s dwelling or other premises without obtaining the consumer’s consent; or (B) to commit any breach of the peace in connection with the repossession of the rental property or the collection of any obligation or alleged obligation of the consumer arising out of the rental-purchase agreement; (8) a provision requiring the purchase of insurance or liability damage waiver to cover the property that is the subject of the rental-purchase agreement, except as permitted by the Commission, by regulation; or (9) a provision requiring the consumer to pay more than 1 late fee or charge for an unpaid or delinquent periodic payment, regardless of the period in which the payment remains unpaid or delinquent, or to pay a late fee or charge for any periodic payment because a previously assessed late fee has not been paid in full. 10. Statement of accounts Upon request of a consumer, a merchant shall provide a statement of the consumer’s account. If a consumer requests a statement for an individual account more than 4 times in any 12-month period, the merchant may charge a reasonable fee for the additional statements. 11. Renegotiations and extensions (a) Renegotiations With respect to any rental-purchase agreement, a renegotiation occurs when the agreement is satisfied and replaced by a new agreement undertaken by the same consumer. A renegotiation requires new disclosures in accordance with this Act, except as provided in subsection (c). (b) Extensions With respect to any rental-purchase agreement, an extension is an agreement by the consumer and the merchant, to continue an existing rental-purchase agreement beyond the original end of the payment schedule, but does not include a continuation that is the result of a renegotiation. (c) Exceptions New disclosures under this Act are not required in connection with a rental-purchase agreement for the following events, even if the event meets the definition of a renegotiation or an extension: (1) A reduction in payments. (2) A deferment of 1 or more payments. (3) The extension of a rental-purchase agreement. (4) The substitution of property with property that has a substantially equivalent or greater economic value, provided the rental-purchase cost does not increase. (5) The deletion of property in a multiple-item agreement. (6) A change in rental period, provided the rental-purchase cost does not increase. (7) An agreement resulting from a court proceeding. (8) Any other event described in regulations prescribed by the Commission. 12. Point-of-rental disclosures (a) In general For any item of property or set of items displayed or offered for rental-purchase, the merchant shall display on or next to the item or set of items a card, tag, or label that clearly and conspicuously discloses— (1) a brief description of the property; (2) whether the property is new or used; (3) the cash price of the property; (4) the amount of each rental payment; (5) the total number of rental payments necessary to acquire ownership of the property; and (6) the rental-purchase cost. (b) Form of disclosure (1) In general A merchant may make the disclosures required by subsection (a) in the form of a list, catalog, or electronic facsimile of the card, tag, or label which is readily available to the consumer at the point of rental if the merchandise is not displayed in the merchant’s showroom or if displaying a card, tag, or label would be impractical due to the size of the merchandise. (2) Clearly and conspicuously As used in this section, the term clearly and conspicuously 13. Rental-purchase advertising (a) In general If an advertisement for a rental-purchase transaction refers to or states the amount of any payment for any specific item or set of items, the merchant making the advertisement shall also clearly and conspicuously state in the advertisement, for the item or set of items advertised— (1) that the transaction advertised is a rental-purchase agreement; (2) the amount, timing, and total number of rental payments necessary to acquire ownership under the rental-purchase agreement; (3) the amount of the rental-purchase cost; (4) that, to acquire ownership of the property, the consumer must pay the rental-purchase cost plus applicable taxes; and (5) whether the stated payment amount and advertised rental-purchase cost is for new or used property. (b) Prohibition An advertisement for a rental-purchase agreement shall not state or imply that a specific item or set of items is available at specific amounts or terms, unless the merchant usually and customarily offers, or will offer, the item or set of items at the stated amounts or terms. (c) Clearly and conspicuously (1) In general For purposes of this section, the term clearly and conspicuously (2) Regulatory guidance The Commission shall prescribe regulations on principles and factors to meet the clear and conspicuous standard, as appropriate to print, video, audio, and computerized advertising, reflecting the principles and factors typically applied in each such medium by the Commission. (3) Limitation Nothing contrary to, inconsistent with, or in mitigation of, the disclosures required by this section shall be used in any advertisement in any medium, and no audio, video, or print technique shall be used that is likely to obscure or detract significantly from the communication of the disclosures. 14. Enforcement by Commission (a) Unfair or deceptive acts or practices A violation of a provision of this Act or a rule or regulation prescribed pursuant to this Act shall be treated as a violation of a rule defining an unfair or deceptive act or practice described under section 18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)). (b) Powers of Commission (1) In general Except as provided in paragraph (3), the Commission shall enforce this Act in the same manner, by the same means, and with the same jurisdiction, powers, and duties as though all applicable terms and provisions of the Federal Trade Commission Act ( 15 U.S.C. 41 et seq. (2) Privileges and immunities Except as provided in paragraph (3), any person who violates this Act shall be subject to the penalties and entitled to the privileges and immunities provided in the Federal Trade Commission Act (15 U.S.C. 41 et seq.). 15. Regulations (a) In general (1) Commission action The Commission shall prescribe regulations as necessary to carry out this Act. (2) Content Regulations required by this subsection may contain such additional requirements, classifications, differentiations, or other provisions, and may provide for such adjustments and exceptions for all or any class of transactions, as in the judgment of the Commission are necessary or proper to effectuate the purposes of this Act, to prevent circumvention or evasion thereof, or to facilitate compliance therewith. (b) Model disclosure forms (1) In general The Commission may publish model disclosure forms and clauses for common rental-purchase agreements to facilitate compliance with the disclosure requirements of this Act and to aid the consumer in understanding the transaction by utilizing readily understandable language to simplify the technical nature of the disclosures. (2) Considerations In devising model forms under this subsection, the Commission shall consider the use by merchants of data processing or similar automated equipment. (3) Voluntary use of model forms Nothing in this Act may be construed to require a merchant to use any model form or clause prescribed by the Commission under this section. (4) Presumption A merchant shall be deemed to be in compliance with the requirement to provide disclosure under section 5(a), if the merchant— (A) uses any appropriate model form or clause as published by the Commission under this section; or (B) uses any such model form or clause and changes it by— (i) deleting any information which is not required by this Act; or (ii) rearranging the format, if in making such deletion or rearranging the format, the merchant does not affect the substance, clarity, or meaningful sequence of the disclosure. 16. Effective date of regulations (a) In general Any regulation prescribed by the Commission under this Act, or any amendment or interpretation thereof, shall not be effective before the October 1 that follows the date of publication of the regulation in final form by at least 6 months. (b) Authority To extend time The Commission may, at its discretion— (1) lengthen the period of time described in subsection (a) to permit merchants to adjust to accommodate new requirements; or (2) shorten that period of time, if the Commission makes a specific finding that such action is necessary to comply with the findings of a court or to prevent unfair or deceptive practices. (c) Early compliance authorized Notwithstanding the time periods established under subsection (a) or (b), a merchant may comply with any newly prescribed disclosure requirement prior to such established date. 17. Relation to other laws (a) Relation to State law (1) No effect on consistent State laws Except as provided in subsection (b), this Act does not annul, alter, or affect in any manner the meaning, scope, or applicability of the laws of any State relating to rental-purchase agreements, except to the extent that those laws are inconsistent with any provision of this Act, and then only to the extent of the inconsistency. (2) Determination of inconsistency Upon its own motion or upon the request of an interested party, which is submitted in accordance with procedures prescribed in regulations of the Commission, the Commission shall determine whether any such inconsistency exists. If the Commission determines that a term or provision, of a State law is inconsistent, merchants located in that State need not follow such term or provision and shall incur no liability under the law of that State for failure to follow such term or provision, notwithstanding that such determination is subsequently amended, rescinded, or determined by judicial or other authority to be invalid for any reason. (3) Greater protection under State law Except as provided in subsection (b), for purposes of this section, a term or provision of a State law is not inconsistent with the provisions of this Act if the term or provision affords greater protection and benefit to the consumer than the protection and benefit provided under this Act, as determined by the Commission, on its own motion or upon the petition of any interested party. (b) State laws relating to characterization of transaction Notwithstanding subsection (a), this Act shall supersede any provision of State law, to the extent that such law— (1) regulates a rental-purchase agreement as a security interest, credit sale, retail installment sale, conditional sale or any other form of consumer credit, or that imputes to a rental-purchase agreement the creation of a debt or extension of credit; or (2) requires the disclosure of a percentage rate calculation, including a time-price differential, an annual percentage rate, or an effective annual percentage rate. (c) Relation to Federal Trade Commission Act No provision of this Act shall be construed as limiting, superseding, or otherwise affecting the applicability of the Federal Trade Commission Act 18. Effect on Government agencies No civil liability or criminal penalty under this Act may be imposed on the United States or any of its departments or agencies, any State or political subdivision, or any agency of a State or political subdivision. 19. Compliance date Compliance with this Act and regulations issued under this Act is not required until 6 months after the date of enactment of this Act. In any case, merchants may comply with this Act at any time after such date of enactment.

Summary: Consumer Rental Purchase Agreement Act - Prescribes consumer protection guidelines for rental-purchase transactions, including: (1) the determination of rental-purchase cost and a payment schedule; (2) disclosure requirements; (3) prohibitions against confessions of judgment, wage assignments, waiver of consumer legal claims or remedies, and other specified provisions; (4) furnishing of statements of account; (5) point-of-rental disclosures; and (6) clear and conspicuous rental-purchase advertising disclosures. Shields "rental-purchase agreements" from laws regulating: (1) a credit sale and a consumer lease as defined in the Truth in Lending Act, or (2) an extension of credit or a transaction giving rise to a debt incurred in connection with the purchase of a thing of value. Exempts from jurisdiction of this Act rental-purchase agreements primarily for business, commercial, or agricultural purposes, or those made with government agencies or instrumentalities. Declares that the consumer shall acquire ownership of a property that is the subject of the rental-purchase agreement, and the rental-purchase agreement shall terminate, upon the consumer's compliance with specified total cost payment requirements, or any early payment option provided in the rental purchase agreement, and upon payment of any past due payments and fees. Grants enforcement powers to the Federal Trade Commission (FTC) and requires violations of this Act to be treated as unfair or deceptive acts or practices under the Federal Trade Commission Act. Provides that a term or provision of state law is not inconsistent with this Act if it affords greater protection and benefit to the consumer than is provided under this Act as determined by the FTC, on its own motion or upon the petition of any interested party. Declares this Act to supersede state law to the extent that such law: (1) regulates a rental-purchase agreement as a security interest, credit sale, retail installment sale, conditional sale or any other form of consumer credit, or that imputes to a rental-purchase agreement the creation of a debt or extension of credit; or (2) requires the disclosure of a percentage rate calculation, including a time-price differential, an annual percentage rate, or an effective annual percentage rate. Shields from civil or criminal liability under this Act the United States and its agencies and any state, state agency, or state political subdivision.