I
104TH CONGRESS
2D SESSION
H. R. 3515
To amend the consumer lease provisions of the Consumer Credit Protection
Act.
IN THE HOUSE OF REPRESENTATIVES
MAY 22, 1996
Mr. LAFALCE (for himself, Mr. SCHUMER, Ms. ROYBAL-ALLARD, Mr. LIPIN-
SKI, and Mr. FRAZER) introduced the following bill; which was referred
to the Committee on Banking and Financial Services
A BILL
To amend the consumer lease provisions of the Consumer
Credit Protection Act.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Consumer Automobile Leasing Act of 1996’’.
(b) REFERENCE.—Whenever in this Act (other than
section 7(b)) an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other
provision, the reference shall be considered to be made to
a section or other provision of the Consumer Credit Pro-
tection Act.
SEC. 2. FINDINGS AND PURPOSE.
(a) FINDINGS.—The Congress finds the following:
(1) There has been a continuing trend toward
leasing of automobiles by consumers as an alter-
native to installment credit sales, with automobile
leases now constituting nearly one-third of all new
automobile transactions.
(2) Most consumers are not familiar with the
terms used in automobile leases and with the way in
which the automobile industry has chosen to struc-
ture lease transactions. Important disclosures are
not provided to consumers until the signing of the
lease and are routinely incorporated within complex
and lengthy lease documents.
(3) Automobile lease advertisements tend to
confuse and mislead consumers by highlighting only
the most attractive terms of leases, by minimizing
less attractive terms and costs, by omitting key in-
terest rate information, by combining terms for sales
and leases within advertisements, or by advertising
vehicle models or lease terms that may not be avail-
able or customarily offered to consumers.
(4) As leasing becomes more popular, there is
increasing need for automobile manufacturers, finan-
cial institutions, automobile dealers, and other firms
involved in leasing to provide consumers with more
appropriate information to allow consumers to evalu-
ate intelligently the attractiveness of a proposed
lease, to compare it with other leases offered and ad-
vertised, and to compare it with other alternative
cash purchase and credit transactions.
(b) PURPOSE.—The purpose of the amendments
made by this Act is to enhance public understanding of
automobile leases, to encourage competition among busi-
nesses engaged in automobile leasing, to provide consum-
ers with more relevant and more easily understood infor-
mation regarding the terms and costs of lease offerings,
to simplify and standardize disclosures in lease advertising
and to strengthen protections against unfair or misleading
leasing practices.
SEC. 3. APPLICABLE CONSUMER LEASES.
Section 181(1) (15 U.S.C. 1667(1)) is amended—
(1) by striking ‘‘$25,000’’ and inserting
‘‘$50,000’’; and
(2) by adding at the end the following: ‘‘The
limit on the contractual obligation which comes with-
in such term shall be adjusted annually based upon
the change reported in the Consumer Price Index by
the Department of Labor in June of the preceding
year.’’.
SEC. 4. CONSUMER LEASE DISCLOSURES.
Section 182 (15 U.S.C. 1667a) is amended—
(1) by amending the portion preceding para-
graph (1) to read as follows: ‘‘Each lessor shall give
a lessee prior to the consummation of the lease a
statement which is dated and typed or set in type
that identifies prominently that the transaction is a
lease, that identifies the lessor and lessee, and that
sets out accurately and in a clear and conspicuous
manner the following information with respect to
that lease, as applicable:’’;
(2) by amending paragraph (1) to read as fol-
lows:
‘‘(1) A full description of the property to be
leased, including any alteration, accessory, or other
option;’’;
(3) in paragraph (2), by inserting before the
semicolon the following: ‘‘, including all charges or
fees to be paid at or before lease signing and upon
delivery of the leased property’’;
(4) in paragraph (5), by inserting after ‘‘term’’
the following: ‘‘, including a description of the les-
sor’s standards for wear and use, which must be
reasonable, if a charge for excessive wear and use of
the leased property is to be imposed at the end of
the lease term,’’;
(5) in paragraph (6), by inserting before the
comma the following: ‘‘and disclosing whether such
warranties and guarantees are assigned or conveyed
to the lessee’’;
(6) by amending paragraph (7) to read as fol-
lows:
‘‘(7) a statement of whether insurance is pro-
vided or paid for by the lessor, the types and
amounts of insurance coverage, and the cost to the
lessee or, if not provided or paid for by the lessor,
the types and amounts of insurance coverage re-
quired by the lease;’’; and
(7) in the sentence following paragraph (11), by
striking ‘‘may be made in the lease contract to be
signed by the lessee’’ and inserting ‘‘shall appear to-
gether and in a meaningful sequence in which the
related disclosures are grouped together and shall
appear at the beginning of the lease document or in
a separate document presented either before or in
conjunction with the lease document’’.
SEC. 5. AUTOMOBILE LEASES.
Section 182 (15 U.S.C. 1667a) is amended by insert-
ing ‘‘(a)’’ before ‘‘Each lessor’’ and by adding at the end
the following:
‘‘(b)(1) For any lease for personal use of an auto-
mobile the lessor shall disclose separately and conspicu-
ously, at the same time and in the same document as the
disclosures required by subsection (a) are made, the fol-
lowing information, to the extent applicable:
‘‘(A) the amount of the total payments to be
made by the lessee at the inception of the lease;
‘‘(B) the amount of each monthly payment, the
total amount of the monthly payments, and the total
amount of monthly payments made under the lease;
‘‘(C) the total amount of all predetermined
amounts to be paid by the lessee at the end of the
lease;
‘‘(D) the total amount of all payments to be
made by the lessee during the term of the lease, in-
cluding total payments due at the inception of the
lease, and total monthly payments and predeter-
mined amounts due at the end of the lease;
‘‘(E) the lease annual percentage rate; and
‘‘(F) the automobile residual value used by the
lessor in calculating the base monthly payment,
which shall represent a reasonable approximation of
the anticipated wholesale market value of the auto-
mobile at the end of the lease term.
‘‘(2) The lessor shall disclose separately in a size and
type that is easily read and in terminology that is under-
standable to ordinary consumers the following, as applica-
ble:
‘‘(A) a statement of whether the lessee does or
does not have an option to purchase the leased auto-
mobile either upon termination of the lease or before
scheduled termination of the lease and, if applicable,
the lease-end purchase option price of the leased
automobile;
‘‘(B) a statement warning that the lessee may
be required to pay a substantial penalty for termi-
nating the lease prior to the expiration of the lease
term, to include the actual dollar amount of such
penalty based on termination of the lease at the end
of the first year and explaining that a collision or
other event resulting in a total loss of the leased
automobile prior to the end of the lease term shall
constitute an early termination of the lease;
‘‘(C) a statement warning that the lessee may
be charged for excessive wear or use of the leased
automobile upon the termination of the lease and ex-
plaining that the standards for excess wear or use
to be imposed by the lessor are described in the
lease document including, if appropriate, the maxi-
mum mileage permitted each year during the lease
term before an excess mileage charge is imposed and
the amount per mile of such charge; and
‘‘(D) a statement to alert consumers as to other
important required disclosures that should be read
before signing the lease document.
‘‘(3) The lessor shall disclose separately and con-
spicuously and at the same time and in the same docu-
ment as the disclosures required by this subsection a sum-
mary of all charges and costs by type and amount to be
included in—
‘‘(A) the amount due at lease inception, includ-
ing all charges or fees to be paid by the lessee at
or before lease signing and upon delivery of the
leased automobile; and
‘‘(B) the total capitalized cost of the automobile
to be leased, including the agreed upon acquisition
value of the automobile and any other costs or
charges to be added to the total cost of the leased
automobile and which are not paid separately by the
lessee.
‘‘(4) Information required to be disclosed under para-
graphs (1) and (2) shall be provided under the heading
‘Important Information for the Consumer’ at the same
time and at the beginning of the same document in which
the required disclosures are made.
‘‘(c)(1) For any lease for personal use of an auto-
mobile the lessor shall provide disclosure under this sub-
section at the earlier of either the consummation of the
lease or, if the automobile is ordered and a security deposit
or other charge is required of the lessee, at the time the
lessee incurs any legal obligation on the lease transaction.
‘‘(2) If the lessee is obligated on the lease prior to
consummation of the lease contract, the lessor may not
change or modify the terms of the lease prior to con-
summation, except that if the lessor has knowledge of, or
anticipates, significant delay for delivery of the automobile
and consummation of the lease, the lessor shall make an
affirmative statement that identifies the date on which the
terms of the lease may expire and become subject to
change and states that after such date the security deposit
or charge shall be returned to the lessee if the terms of
the lease are changed or modified.’’.
SEC. 6. AUTOMOBILE LEASE ADVERTISING.
(a) GENERAL REQUIREMENTS.—
(1) AMENDMENTS.—Section 184(a) (15 U.S.C.
1667c) is amended—