I
105TH CONGRESS
1ST SESSION
H. R. 3060
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
NOVEMBER 13, 1997
Mr. KENNEDY of Massachusetts (for himself, Mr. BARRETT of Wisconsin, Mr.
CLAY, Mr. EVANS, Mr. FILNER, Mr. GUTIERREZ, Mr. HINCHEY, Mr.
OLVER, Mr. PALLONE, Mr. RUSH, Mr. SCHUMER, Mr. THOMPSON, Mr.
TORRES, Mr. TOWNS, Ms. WATERS, and Mr. WATTS of Oklahoma) intro-
duced the following bill; which was referred to the Committee on Banking
and 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 1997’’.
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 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.
‘‘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.
‘‘(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.
‘‘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, 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) 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
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) 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 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 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.
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 1997 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 1997.