I
107TH CONGRESS
1ST SESSION
H. R. 2498
To amend the Consumer Credit Protection Act to protect consumers from
inadequate disclosures and certain abusive practices in rent-to-own trans-
actions, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 12, 2001
Ms. WATERS introduced the following bill; which was referred to the
Committee on Financial Services
A BILL
To amend the Consumer Credit Protection Act to protect
consumers from inadequate disclosures and certain abu-
sive practices in rent-to-own transactions, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Rent-To-Own Reform
Act of 2001’’.
SEC. RENT-TO-OWN PROTECTION ACT.
The Consumer Credit Protection Act (15 U.S.C.
1601 et seq.) is amended by adding at the end the fol-
lowing new title:
‘‘TITLE X—RENT-TO-OWN
TRANSACTIONS
‘‘Sec.
‘‘1001. Short title.
‘‘1002. Findings and purposes.
‘‘1003. Definitions.
‘‘1004. Application of State laws regarding fees, charges, guarantees, and war-
ranties 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.
‘‘SEC. 1001. SHORT TITLE.
‘‘This title may be cited as the ‘Rent-To-Own Protec-
tion Act’.
‘‘SEC. 1002. FINDINGS AND PURPOSES.
‘‘(a) FINDINGS.—The Congress finds the following:
‘‘(1) The rent-to-own industry targets its prod-
ucts primarily to low income and minority neighbor-
hoods.
‘‘(2) The majority of rent-to-own customers
enter into rent-to-own contracts with the intention of
owning the goods for which they are contracting.
‘‘SEC. 1003. DEFINITIONS.
‘‘For purposes of this title, the following definitions
shall apply:
‘‘(1) BOARD.—The term ‘Board’ means the
Board of Governors of the Federal Reserve System.
‘‘(2) CASH
PRICE.—The term ‘cash price’
means—
‘‘(A) the bona fide retail price for an item
or service in sales by a seller to consumers who
pay 
the 
full 
price 
in 
one 
payment,
respectively—
‘‘(i) before taking possession of the
item, or
‘‘(ii) for receipt of the service other
than in a rent-to-own transaction,
as indicated by actual sales of such item or
service by the seller; and
‘‘(B) in the case of a seller that does not
regularly engage in such sales of the item or
service, respectively—
‘‘(i) the average cash retail price of
the item or a similar item in the commu-
nity; or
‘‘(ii) the estimated bona fide retail
value of the service.
‘‘(3) CONSUMER.—The term ‘consumer’—
‘‘(A) when used as an adjective, means for
use by an individual primarily for personal,
family, or household purposes; and
‘‘(B) when used as a noun, means an indi-
vidual who is the lessee or bailee under a rent-
to-own contract.
‘‘(4) CREDIT.—The term ‘credit’—
‘‘(A) includes the right granted by a seller
to a consumer to obtain possession of an item
of consumer goods under a rent-to-own contract
before payment of the total amount that is re-
quired to be paid to acquire ownership of the
item; and
‘‘(B) is deemed to be a fixed sum equal
to—
‘‘(i) the total of payments for the item
required to obtain ownership of the item
under the contract; minus
‘‘(ii) the sum of—
‘‘(I) the cash price;
‘‘(II) any fees specifically allow-
able under State law, except finance
charges, interest, or a time price dif-
ferential; and
‘‘(III) the termination fee under
section 1004.
‘‘(5) 
RENT-TO-OWN
CONTRACT.—The 
term
‘rent-to-own contract’ means a contract in the form
of a terminable lease or bailment of an item of con-
sumer goods, under which—
‘‘(A) a consumer—
‘‘(i) has the right of possession and
use of the item; and
‘‘(ii) has the option to renew the con-
tract periodically by making payments
specified in the contract; and
‘‘(B) a seller agrees, in writing or orally, to
transfer ownership of the item to the consumer
upon the fulfillment of all obligations of the
consumer under the contract for that transfer.
‘‘(6) RENT-TO-OWN TRANSACTION.—The term
‘rent-to-own transaction’ means the lease or bail-
ment of an item of consumer goods under a rent-to-
own contract.
‘‘(7) SELLER.—The term ‘seller’ means—
‘‘(A) a person—
‘‘(i) who regularly makes consumer
goods available under rent-to-own con-
tracts; and
‘‘(ii) to whom payments are payable
under those contracts; and
‘‘(B) an assignee of such a person.
‘‘(8) STATE.—The term ‘State’ means any
State, the Commonwealth of Puerto Rico, the Dis-
trict of Columbia, and any territory or possession of
the United States.
‘‘SEC. 1004. APPLICATION OF STATE LAWS REGARDING
FEES, CHARGES, GUARANTEES, AND WARRAN-
TIES TO RENT-TO-OWN TRANSACTIONS.
‘‘(a) IN GENERAL.—Subject to subsection (b), a sell-
er in a rent-to-own transaction may not take, receive, or
assess any interest, finance charge, or other fee for the
transaction that is in excess of the interest, fees, or fi-
nance charges that may be charged under the laws of the
State in which the seller is located which—
‘‘(1) establish a maximum rate or amount of in-
terest, finance charge, or time-price differential that
may be charged in connection with a credit sale or
retail installment sale for the same or a similar item;
‘‘(2) establish the types of fees and the max-
imum amount of fees that a seller may charge in
connection with a credit sale or retail installment
sale for the same or a similar item; or
‘‘(3) establish the types of credit insurance and
the maximum amount of premiums that can be
charged for credit insurance in connection with a
credit sale or a retail installment sale for the same
or a similar item.
‘‘(b) ADDITIONAL
TERMINATION
CHARGES
AND
FEES.—
‘‘(1) CHARGES AND FEES AUTHORIZED.—In ad-
dition to fees and charges authorized under sub-
section (a), a seller in a rent-to-own transaction may
charge—
‘‘(A) a termination fee in accordance with
paragraph (2), if in exchange the consumer is
given the right to terminate the rent-to-own
contract for the transaction at any time without
regard to whether the consumer has completed
payment of the fee; and
‘‘(B) fees that are reasonable in relation to
the cash price of the good, for recovery of the
items that are the subject of the contract and
that are not voluntarily returned to the seller
upon the termination of the contract.
‘‘(2) TERMINATION
FEE.—A termination fee
under paragraph (1)(A)—
‘‘(A) shall not exceed 5 percent of the cash
price under the contract;
‘‘(B) shall be disclosed in the contract;
‘‘(C) may be paid at the time the contract
is entered into or over the life of the contract;
and
‘‘(D) shall be calculated as part of the fi-
nance charge as determined under section 106
of the Truth in Lending Act.
‘‘(3) RECOVERY FEES.—A recovery fee under
paragraph (1)(B) shall be disclosed in the contract.
‘‘(4) EFFECT
OF
TERMINATION.—The termi-
nation of a rent-to-own contract by a consumer in
accordance with a right of termination given to the
consumer in exchange for a termination fee under
subsection (a)(1) is deemed to satisfy the consumer’s
obligation for all payments and fees due under the
contract, except fees and charges under the contract
that become due before the date of termination.
‘‘(c) GUARANTEES AND WARRANTIES.—All guaran-
tees and warranties established or required under the laws
of a State for goods sold pursuant to a consumer credit
sale or retail installment sale apply to goods which are
the subject of a rent-to-own transaction in the State.
‘‘SEC. 1005. APPLICATION OF FEDERAL LAWS TO RENT-TO-
OWN TRANSACTIONS.
‘‘The following Federal laws apply to a rent-to-own
transaction, as follows:
‘‘(1) TRUTH IN LENDING ACT.—The Truth in
Lending Act applies as such Act applies to a con-
sumer credit transaction that is a credit sale (as
that term is defined in that Act).
‘‘(2) EQUAL CREDIT OPPORTUNITY ACT.—The
Equal Credit Opportunity Act applies as such Act
applies to credit transactions. For purposes of that
application—
‘‘(A) a consumer shall be treated as an ap-
plicant; and
‘‘(B) a seller shall be treated as a creditor.
‘‘(3) 
FAIR
DEBT
COLLECTION
PRACTICES
ACT.—The Fair Debt Collection Practices Act ap-
plies to the collection of payments owed that arise
from a rent-to-own transaction, unless those pay-
ments are collected by any person specified in sub-
paragraphs (A) through (F) of section 803(6) of
such Act. For purposes of that application, pay-
ments owed shall be treated as debt.
‘‘(4) FAIR CREDIT REPORTING ACT.—The Fair
Credit Reporting Act applies as such Act applies to
a credit transaction and to any extension or denial
of credit.
‘‘SEC. 1006. DISCLOSURES.
‘‘(a) DISCLOSURES ON GOODS.—A seller shall include
on each item in the place of business of the seller that
is available for purchase pursuant to a rent-to-own trans-
action the following information:
‘‘(1) The cash price of the item.
‘‘(2) An itemization of services offered under a
rent-to-own contract for the item, and the cash price
of each service.
‘‘(3) The annual percentage rate of the item
under a rent-to-own contract, determined under sec-
tion 107 of the Truth in Lending Act.
‘‘(4) The weekly, biweekly, monthly, or other in-
cremental payment applicable under the rent-to-own
contract for the transaction and the number of pay-
ments.
‘‘(5) The total of payments required to be paid
to acquire ownership of the item under a rent-to-own
contract for the transaction, determined under regu-
lations under the Truth in Lending Act.
‘‘(6) Specification of whether the item is new or
used.
‘‘(b) DISCLOSURES UPON CONTRACTING.—A seller
shall provide to a consumer in writing, at the time the
seller and consumer enter into a rent-to-own contract for
an item, the information referred to in subsection (a) for
the item and the contract.
‘‘SEC. 1007. PROHIBITIONS AND ENFORCEMENT.
‘‘(a) PROHIBITIONS.—A person who is a seller under
a rent-to-own contract with a consumer shall not—
‘‘(1) threaten or invoke criminal prosecution of
a consumer for any matter related to the contract,
unless there is clear and convincing evidence that
the goods that are the subject of the contract are
being held by the consumer with an intent to de-
fraud the seller;
‘‘(2) use threats or coercion to collect or at-
tempt to collect any amounts alleged to be due from
the consumer;
‘‘(3) engage in any conduct, the natural con-
sequence of which is to oppress, harass, or abuse
any person in connection with an attempt to collect
amounts owed by the consumer under the contract;
‘‘(4) unreasonably disclose information to third
parties regarding amounts owed by the consumer;
‘‘(5) make any fraudulent, deceptive, or mis-
leading representation to obtain information about
the consumer or to collect amounts owed by the con-
sumer;
‘‘(6) use any unconscionable means to collect or
attempt to collect a debt owed to the seller;
‘‘(7) advertise, announce, solicit, or otherwise
represent as free or available without charge (includ-
ing by use of other words of similar meaning) any
service under the contract for which the seller
charges the consumer, including any service for
which a charge is collected by inclusion in the
amount required to be paid under the contract;
‘‘(8) use, for purposes of complying with any
State or Federal law governing rent-to-own trans-
actions (other than a State or Federal tax law) any
definition of the term ‘cash price’ other than the def-
inition under section 1003(2);
‘‘(9) engage in any act or practice which is un-
fair or deceptive in connection with a rent-to-own
transaction; or
‘‘(10) violate any regulation issued by the
Board under subsection (c)(1).
‘‘(b) ENFORCEMENT.—
‘‘(1) ENFORCEMENT.—Compliance with the re-
quirements under this title shall be enforced by the
Federal Trade Commission. All functions and pow-
ers of the Federal Trade Commission under the
Federal Trade Commission Act shall be available to
the Commission to enforce compliance with this title
by any person, irrespective of whether the person is
engaged in commerce or meets any other jurisdic-
tional tests in the Federal Trade Commission Act,
including the power to enforce the provisions of this
title in the same manner as if the violation had been
a violation of a Federal Trade Commission trade
regulation rule.
‘‘(2) TREATMENT
OF
VIOLATIONS.—For the
purpose of the exercise by the Federal Trade Com-
mission of the functions and powers of such Com-
mission under the Federal Trade Commission Act, a
violation of any requirement or prohibition under
this title is deemed to be an unfair or deceptive act
or practice in commerce in violation of that Act.
‘‘(c) REGULATIONS.—
‘‘(1) BOARD.—The Board shall issue such regu-
lations as are necessary or appropriate for imple-
menting subsection (a), including regulations de-
scribing specific practices by a seller that are prohib-
ited by paragraphs (1) through (9) of that sub-
section.
‘‘(2) FEDERAL TRADE COMMISSION.—The Fed-
eral Trade Commission shall issue regulations imple-
menting subsection (b).
‘‘SEC. 1008. CIVIL LIABILITY.
‘‘(a) LIABILITY FOR FAILURE TO PROPERLY DIS-
CLOSE TERMS.—Any seller who fails to comply with a re-
quirement under section 1006 is liable to the consumer
in an amount equal to the sum of—
‘‘(1) actual damages sustained by the consumer
as a result of the failure;
‘‘(2) $250 for each failure; and
‘‘(3) all costs of the action and reasonable at-
torney fees, as determined by the court.
‘‘(b) OTHER LIABILITY.—A seller that violates this
title or fails to comply with any requirement imposed
under this title, other than under section 1006, shall be
liable to the consumer in an amount equal to the sum of—
‘‘(1) actual damages sustained by the consumer
as a result of the violation;
‘‘(2) $2,500 for each violation; and
‘‘(3) all costs of the action and reasonable at-
torney fees, as determined by the court.
‘‘(c) JURISDICTION
AND LIMITATION.—An action
under this title may be brought in any United States dis-
trict court or in any other court of competent jurisdiction,
within 24 months after the date of the violation or failure
that is the subject of the action. This subsection does not
bar a person from asserting a violation of this title in an
action to collect amounts alleged to be due from the person
which is brought more than 2 years after the date of the
occurrence of the violation as a matter of defense by
recoupment or set-off in such action.
‘‘SEC. 1009. APPLICATION OF THIS TITLE.
‘‘(a) IN GENERAL.—This title shall apply to rent-to-
own contracts entered into after the date of the issuance
of regulations by the Board under section 1010.
‘‘(b) MOTOR VEHICLES.—This title shall not apply
to any lease or sale of a motor vehicle entered into after
the date of the enactment of the Rent-To-Own Reform Act
of 2001 that, if entered into on the day before that date
of enactment, would have been subject to chapter 5 of the
Truth in Lending Act.
‘‘SEC. 1010. REGULATIONS.
‘‘The Board shall issue such regulations as may be
necessary to implement this Act (including regulations
under section 1007(c)(1)), by not later than 12 months
after the date of the enactment of the Rent-To-Own Re-
form Act of 2001.
‘‘SEC. 1011. RELATIONSHIP TO OTHER LAWS.
‘‘(a) STATE LAW.—This title does not annul, alter,
or affect, or exempt any person subject to the provisions
of this title from complying with, the laws of any State
with respect to rent-to-own transactions, except to the ex-
tent that those laws are inconsistent with any provision
of this title, and then only to the extent of the inconsist-
ency.
‘‘(b) CONSUMER LEASE PROVISIONS OF TRUTH IN
LENDING ACT.—Chapter 5 of the Truth in Lending Act,
relating to consumer leases, shall not apply to a rent-to-
own transaction except the lease or sale of a motor vehicle
that, if entered into on the day before the date of the en-
actment of the Rent-To-Own Reform Act of 2001, would
have been subject to that chapter.’’.
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