I
104TH CONGRESS
2D SESSION
H. R. 3003
To establish requirements applicable to rent-to-own transactions.
IN THE HOUSE OF REPRESENTATIVES
MARCH 5, 1996
Mr. GONZALEZ introduced the following bill; which was referred to the
Committee on Banking and Financial Services
A BILL
To establish requirements applicable to rent-to-own
transactions.
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 1996’’.
SEC. 2. 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 follow-
ing 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.
‘‘§ 1001. Short title
‘‘This title may be cited as the ‘Rent-to-Own Protec-
tion Act’.
‘‘§ 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.
‘‘(3) Rent-to-own dealers often fail to disclose
key terms of rent-to-own contracts, and engage in
unfair collection practices.
‘‘(4) Of primary significance, rent-to-own deal-
ers do not provide customers with the protections af-
forded purchasers in retail installment sales under
State and Federal laws, and often charge excessive
fees and interest rates.
‘‘(b) PURPOSES.—The purposes of this title are the
following:
‘‘(1) Provide consumers in rent-to-own trans-
actions the range of protections provided under
State and Federal laws to individuals that acquire
goods in other consumer credit sales, while recogniz-
ing and preserving consumers’ unilateral right to
terminate.
‘‘(2) Require rent-to-own contracts, and tags
affixed to items available for acquisition in rent-to-
own transactions, to disclose material terms of those
transactions.
‘‘(3) Prohibit rent-to-own dealers and collection
agents hired by those dealers from engaging in abu-
sive collection practices.
‘‘§ 1003. Definitions
‘‘In this title:
‘‘(1) The term ‘Board’ means the Board of
Governors of the Federal Reserve System.
‘‘(2) 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, respec-
tively—
‘‘(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) 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) 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 allowable under
State law, except finance charges, interest,
or a time price differential, and (III) the
termination fee under section 1004.
‘‘(5) The term ‘rent-to-own contract’ means a
contract in the form of a terminable lease or bail-
ment of an item of consumer 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) The term ‘rent-to-own transaction’ means
the lease or bailment of an item of consumer goods
under a rent-to-own contract.
‘‘(7) 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) The term ‘‘State’’ means any State, the
Commonwealth of Puerto Rico, the District of Co-
lumbia, and any territory or possession of the
United States.
‘‘§ 1004. Application of State laws regarding fees,
charges, guarantees, and warranties 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 maxi-
mum 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 completion or termination of the con-
tract.
‘‘(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.
‘‘§ 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 it applies to a consumer
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 it applies
to credit transactions. For purposes of that applica-
tion—
‘‘(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 sec-
tion 803(6) (A) through (F) of that Act. For pur-
poses of that application, payments owed shall be
treated as debt.
‘‘(4) FAIR CREDIT REPORTING ACT.—The Fair
Credit Reporting Act applies as it applies to a credit
transaction and to any extension or denial of credit.
‘‘§ 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.
‘‘§ 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
consumer;
‘‘(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);