I
106TH CONGRESS
1ST SESSION
H. R. 1634
To amend the Consumer Credit Protection Act to assure meaningful disclo-
sures 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.
IN THE HOUSE OF REPRESENTATIVES
APRIL 29, 1999
Mr. JONES of North Carolina introduced the following bill; which was referred
to the Committee on Bankng and Financial Services
A BILL
To amend the Consumer Credit Protection Act to assure
meaningful disclosures of the terms of rental-purchase
agreements, including disclosures of all costs to con-
sumers under such agreements, to provide certain sub-
stantive rights to consumers under such agreements, 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 ‘‘Consumer Disclosure
and Rental Purchase Agreement Act’’.
SEC. 2. FINDINGS AND PURPOSE.
(a) FINDINGS.—The Congress finds that a significant
number of consumers engage in rental-purchase trans-
actions. These transactions have taken place, in many in-
stances, without adequate disclosures and other protec-
tions to consumers.
(b) PURPOSE.—The purpose of the amendment to the
Consumer Credit Protection Act is—
(1) to assure meaningful disclosure of the terms
of rental-purchase agreements, including disclosures
of all costs to consumers under such agreements,
and
(2) to provide certain substantive rights to con-
sumers who enter into rental-purchase agreements.
SEC. 3. CONSUMER CREDIT PROTECTION ACT.
The Consumer Credit Protection Act is amended by
adding at the end the following:
‘‘TITLE X—RENTAL PURCHASE
AGREEMENTS
‘‘SEC. 1001. DEFINITIONS.
‘‘For purposes of this title:
‘‘(1) The term ‘advertisement’ means a com-
mercial message in any medium that promotes, di-
rectly or indirectly, a rental-purchase agreement but
does not include price tags, window signs, or other
in-store merchandising aids.
‘‘(2) The term ‘agricultural purpose’ includes—
‘‘(A) the production, harvest, exhibition,
marketing, transformation, processing, or man-
ufacture 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 farm-
ing.
‘‘(3) The term ‘Board’ means the Board of
Governors of the Federal Reserve System.
‘‘(4) The term ‘consumer’ means a natural per-
son who is offered or enters into a rental-purchase
agreement.
‘‘(5) The term ‘date of consummation’ means
the date on which a consumer becomes contractually
obligated under a rental-purchase agreement.
‘‘(6) The term ‘merchant’ means a person who
provides the use of property through a rental-pur-
chase agreement in the ordinary course of business
and to whom a consumer’s initial obligation under
the agreement is payable.
‘‘(7) The term ‘personal property’ means prop-
erty that is not real property under the laws of the
State where the property is located when it is made
available under a rental-purchase agreement unless
otherwise stated.
‘‘(8) The term ‘rental-purchase agreement’
means a contract between a consumer and a
merchant—
‘‘(A) under which the merchant agrees to
provide the consumer the use of the personal
property for an initial period of 4 months or
less,
‘‘(B) that is automatically renewable with
each payment by the consumer, and
‘‘(C) that permits but does not obligate the
consumer to become the owner of the property.
Such term does not include a credit sale as defined
in section 103(g) of the Truth in Lending Act (15
U.S.C. 1602(g)), a consumer lease as defined in sec-
tion 181(1) of the Truth in Lending Act (15 U.S.C.
1667(1)), or a transaction giving rise to a debt in-
curred in connection with the business of lending
money or a thing of value.
‘‘(9) The term ‘State’ means any State, the
District of Columbia, the Commonwealth of Puerto
Rico, and any territory or possession of the United
States.
‘‘SEC. 1002. EXEMPTED TRANSACTIONS.
‘‘This title does not apply to rental-purchase agree-
ments primarily for business, commercial, or agricultural
purposes, or those made with Government agencies or in-
strumentalities.
‘‘SEC. 1003. GENERAL DISCLOSURE REQUIREMENTS.
‘‘(a) IN GENERAL.—The merchant under a rental-
purchase agreement shall disclose to the consumer under
the agreement the information required by sections 1004,
1005, and 1006. In an agreement involving more than 1
merchant, only 1 merchant is required to make the disclo-
sures.
‘‘(b) DISCLOSURE.—The disclosures required under
sections 1004 and 1005 and the agreement provisions re-
quired to be included under 1006 shall be made or
included—
‘‘(1) at or before the date of consummation of
the rental-purchase agreement;
‘‘(2) clearly and conspicuously in writing and in
a form that the consumer may keep; and
‘‘(3) in a case of disclosures required under sec-
tion 1004, segregated from all other terms, data, or
information provided to the consumer.
‘‘(c) INACCURACY.—If a disclosure required to be
made by a merchant to a consumer under section 1004
becomes inaccurate as the result of any mutual written
agreement between the merchant and such consumer oc-
curring after delivery of the required disclosure to such
consumer under this title, the resulting inaccuracy is not
a violation of this title.
‘‘SEC. 1004. RENTAL-PURCHASE DISCLOSURES.
‘‘For each rental-purchase agreement, the merchant
shall disclose to the consumer, to the extent applicable,
under the agreement the following:
‘‘(1) The amount of the first periodic payment
and the total amount of fees, taxes, or other charges
which may be required at or before the date of con-
summation of the agreement.
‘‘(2) The amount and timing of rental pay-
ments.
‘‘(3) The total number and total dollar amount
of rental payments necessary to acquire ownership of
the property.
‘‘(4) A statement that the consumer will not
own the property until the consumer has paid the
total dollar amount necessary to acquire ownership.
‘‘(5) A disclosure, to the extent applicable, that
the total dollar amount of payments does not include
other fees or charges, such as a delivery fee, an ini-
tial processing fee, taxes, or other fees or charges
which may be payable under the agreement. Such
fees and charges shall be separately identified in the
agreement.
‘‘(6) A statement that the consumer may be re-
sponsible for the fair market value of the property
if it is lost, stolen, damaged, or destroyed.
‘‘(7) A statement indicating whether the prop-
erty is new or used, except a statement indicating
that new property is used property is not a violation
of this title.
‘‘(8) A statement of—
‘‘(A) the manufacturer’s suggested retail
price, where applicable, or
‘‘(B) the price for which the property is
available from the merchant in a cash sale.
‘‘(9) A clear statement of the terms of the con-
sumer’s option to acquire ownership.
‘‘(10) A statement—
‘‘(A) identifying the party responsible for
maintaining or servicing the property while it is
being rented;
‘‘(B) describing the responsibility for main-
tenance or service; and
‘‘(C) disclosing that if any part of a manu-
facturer’s express warranty 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.
‘‘(11) The date of consummation of the trans-
action and the identities of the merchant and con-
sumer.
‘‘(12) Late fees for past due rental charges.
‘‘SEC. 1005. POINT-OF-RENTAL DISCLOSURES.
‘‘(a) IN GENERAL.—Except as provided in subsection
(b), each item of property or each set of items, if offered
as a set or displayed or offered in connection with a rental-
purchase agreement, shall have displayed on or next to
it a card, tag, or label that clearly and conspicuously dis-
closes only the following:
‘‘(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 nec-
essary to acquire ownership of the property.
‘‘(6) The total dollar amount of the rental pay-
ments necessary to acquire ownership of the prop-
erty.
‘‘(b) EXCEPTION.—A merchant may make the disclo-
sure required by subsection (a) in the form of a list or
catalog which is readily available to the customer if the
merchandise is not displayed in the merchant’s showroom
or if displaying a tag would be impractical due to the size
of the merchandise.
‘‘SEC. 1006. AGREEMENT PROVISIONS.
‘‘(a) IN GENERAL.—Each rental-purchase agreement
shall—
‘‘(1) provide a statement of any obligation of
the consumer and the merchant under the agree-
ment to repair any defect or malfunction of the
property covered by the agreement, and any limita-
tion of those obligations;
‘‘(2) provide that the consumer may terminate
the agreement without penalty by voluntarily surren-
dering or returning the property covered by the
agreement upon expiration of any rental term; and
‘‘(3) contain a provision for reinstatement of
the agreement, which at a minimum—
‘‘(A) permits a consumer who fails to make
a timely rental renewal payment to reinstate
the agreement, without losing any rights or op-
tions which exist under the agreement, by the
payment of all past due rental charges and any
late fee and a payment for the next rental term
within 7 business days after the renewal date if
the consumer pays monthly, or within 3 busi-
ness days after the renewal date if the con-
sumer pays more frequently than monthly;
‘‘(B) if the consumer returns or voluntarily
surrenders the property covered by the agree-
ment, other than through judicial process, dur-
ing the applicable reinstatement period set forth
in subparagraph (A), permits the consumer to
reinstate the agreement during a period of at
least 30 days after the date of the return or
surrender of the property by the payment of all
past due rental charges, and any applicable re-
delivery, repair, or late fees and a payment for
the next rental term; and
‘‘(C) if the consumer has paid 60 percent
or more of the total dollar amount of payments
necessary to acquire ownership of the property
under the agreement and returns or voluntarily
surrenders the property, other than through ju-
dicial process, during the applicable reinstate-
ment period set forth in subparagraph (A), per-
mits the consumer to reinstate the agreement
during a period of at least 90 days after the
date of the return of the property by the pay-
ment of all past due rental charges and any ap-
‘‘SEC. 1009. RENEGOTIATIONS AND EXTENSIONS.
‘‘A renegotiation of a rental-purchase agreement is
deemed to be a new agreement for purposes of this title,
requiring new disclosures under section 1004. A renegoti-
ation shall be considered to occur when an existing rental
purchase agreement is satisfied and replaced by a new
agreement undertaken by the same merchant. Events such
as the following shall not be treated as renegotiations:
‘‘(1) The addition or return of property in a
multiple-item agreement or the substitution of prop-
erty, if in either case the average payment allocable
to a payment period is not changed by more than 25
percent.
‘‘(2) A deferral or extension of one or more
periodic payments, or portions of a periodic pay-
ment.
‘‘(3) A reduction in charges in the agreement.
‘‘(4) An agreement involving a court pro-
ceeding.
‘‘(5) Any other event described in regulations
prescribed by the Board.
‘‘SEC. 1010. RENTAL-PURCHASE ADVERTISING.
‘‘(a) ADVERTISEMENTS.—If an advertisement refers
to or states the amount of any payment and the right to
acquire ownership for any specific item, the merchant that
makes the advertisement shall also clearly and conspicu-
ously state in the advertisement the following items:
‘‘(1) The transaction advertised is a rental-pur-
chase agreement.
‘‘(2) The total number and total dollar amount
of rental payments necessary to acquire ownership
under the agreement.
‘‘(3) The consumer acquires no ownership
rights in the property if the total dollar amount of
rental payments necessary to acquire ownership is
not paid.
‘‘(b) LIABILITY.—The owner or personnel of any me-
dium in which an advertisement appears or through which
it is disseminated shall not be liable for a violation of sub-
section (a).
‘‘(c) CONSTRUCTION.—Subsection (a) does not apply
to an advertisement which—
‘‘(1) is published in the yellow pages of a tele-
phone directory or in any similar directory of busi-
nesses, or
‘‘(2) is displayed in the merchant’s place of
business.
‘‘SEC. 1011. CIVIL LIABILITY.
‘‘(a) LIABILITY AMOUNT.—Except as otherwise pro-
vided in this title, a merchant who willfully violates this
title with respect to a consumer is liable to the consumer
in an amount equal to the following:
‘‘(1) In an action by an individual consumer,
the sum of—
‘‘(A) actual damages sustained by the con-
sumer as a result of the violation; and
‘‘(B) Not less than $100.
‘‘(2) In a class action, the amount the court de-
termines to be appropriate with no minimum recov-
ery as to each member. The total recovery in any
class action or series of class actions arising out of
the same violation shall not be more than the lesser
of $500,000 or 1 percent of the net worth of the
merchant.
‘‘(b) STATUTE OF LIMITATIONS.—
‘‘(1) ACTIONS IN UNITED STATES CONSTITU-
TION.—An action under this section may be brought
in any United States district court of competent ju-
risdiction, but not later than one year of the date of
the occurrence of the violation.
‘‘(2) CONSTRUCTION.—This subsection does not
bar a consumer from asserting a violation of this
title in an action to collect a debt brought more than
one year after the date of the occurrence of the vio-
lation as a matter of defense by recoupment or set
off, except as otherwise provided by State law.
‘‘(c) OFFSET.—
‘‘(1) LIMITATION.—A consumer may not take
any action to offset any amount for which a mer-
chant is potentially liable under subsection (a)
against any amount owed by the consumer, unless
the amount of the merchant’s liability has been de-
termined by judgment of a court of competent juris-
diction in an action in which the merchant was a
party.
‘‘(2) CONSTRUCTION.—This subsection does not
bar a consumer who is in default on the obligation
from asserting a violation of this title as an original
action, or as a defense of counterclaim to an action
brought by the merchant to collect amounts owed by
the consumer.
‘‘SEC. 1012. DEFENSES.
‘‘A merchant is not liable—
‘‘(1) under section 1011 for a violation of the
requirements of section 1004 if within 15 days after
first having knowledge of the violation, and before
an action under section 1011 is filed or written no-
tice of the violation is received from the consumer,
the merchant notifies the consumer of the violation
and makes whatever adjustments in the account are
necessary to assure that the consumer will not be re-
quired to pay an amount in excess of the amounts
actually disclosed;
‘‘(2) under this title for any act done or omitted
in good faith in conformity with any rule, regulation,
interpretation, or approval promulgated by the
Board or by an official duly authorized by the
Board; or
‘‘(3) under this title for a violation if the mer-
chant establishes, and at the time of the violation is
implementing, procedures reasonably calculated to
prevent the violation.
Paragraph (2) applies even if, after the act or omission
has occurred, the rule, regulation, interpretation, or ap-
proval is amended, rescinded, or determined by judicial or
other authority to be invalid for any reason.
‘‘SEC. 1013. LIABILITY OF ASSIGNEES.
‘‘(a) ASSIGNEES.—For purposes of sections 1011 and
1012 and this section, the term ‘‘merchant’’ includes an
assignee of a merchant. However, an action under section
1011 for a violation of this title may be brought against
an assignee only if the violation is apparent on the face
of the rental-purchase agreement to which it relates. A
violation apparent in the face of a rental purchase agree-
ment includes a disclosure that can be determined to be
incomplete or inaccurate from the face of the agreement.
An assignee has no liability in a case in which the assign-
ment is involuntary.
‘‘(b) CONSUMER ACKNOWLEDGMENT.—In an action
by or against an assignee, the consumer’s written acknowl-
edgment of receipt of a disclosure shall be conclusive proof
that the disclosure was made, if the assignee had no
knowledge that the disclosure had not been made when
the assignee acquired the rental-purchase agreement to
which it relates.
‘‘SEC. 1014. REGULATIONS AND ENFORCEMENT.
‘‘(a) IN GENERAL.—The Board shall issue regula-
tions to carry out the purposes of this title, to prevent
its circumvention, and to facilitate compliance with its re-
quirements. The regulations may contain classification
and differentiations and may provide for adjustments and
exceptions for any class of transaction.
‘‘(b) MODELS.—The Board shall publish model dis-
closure forms and clauses to facilitate compliance with the
disclosure requirements of this title and to aid consumers
in understanding transactions under rental-purchase
agreements. In designing forms, the Board shall consider
the use by merchants of data processing or similar auto-
mated equipment. Use of the models shall be optional. A
merchant who properly uses the model disclosure forms
shall be deemed to be in compliance with the disclosure
requirements.
‘‘(c) EFFECTIVE DATE OF REGULATIONS.—Any reg-
ulation issued by the Board, or any amendment or inter-
pretation thereof, shall not be effective before the October
1 that follows the date of promulgation by at least 6
months. The Board may at its discretion lengthen that
period of time to permit merchants to adjust their forms
to accommodate new requirements. The Board may also
shorten that period of time, notwithstanding the first sen-
tence, if it makes a specific finding that such action is
necessary to comply with the findings of a court or to pre-
vent unfair or deceptive practices. In any case, merchants
may comply with any newly promulgated disclosure re-
quirement prior to its effective date.
‘‘(d) ENFORCEMENT.—The Board shall enforce the
requirements of this title. The authority of section 108
shall apply with respect to the Board’s enforcement of
such requirements.
‘‘SEC. 1015. RELATION TO STATE LAWS.
‘‘Except as provided in section 129 of the Truth in
Lending Act (15 U.S.C. 1639) nothing in this title shall
be construed to annul, alter, affect, or exempt any person
subject to this title from complying with the laws of any
State relating to rental-purchase agreement, except to the
extent that those laws—
‘‘(1) are inconsistent with this title;
‘‘(2) attempt to regulate rental-purchase trans-
actions as consumer credit, retail installment, or
conditional sales; or
‘‘(3) attempt to impute to such transactions the
creation of debt or an extension of credit or require
the disclosure of a time-price differential, annual
percentage rate, or other similar disclosures which
might suggest the existence of a debt, and extension
of credit, or the payment of interest.
‘‘SEC. 1016. EFFECT ON GOVERNMENT AGENCIES.
‘‘No civil liability or criminal penalty under this title
may be imposed on the United States or any of its depart-
ments or agencies, any State or political subdivision, or
any agency of a State or political subdivision.’’.
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