I
103D CONGRESS
1ST SESSION
H. R. 2803
To amend the Consumer Credit Protection Act to improve disclosures made
to consumers who enter into rental-purchase transactions, to set stand-
ards for collection practices, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 29, 1993
Mr. LAROCCO introduced the following bill; which was referred to the
Committee on Banking, Finance and Urban Affairs
A BILL
To amend the Consumer Credit Protection Act to improve
disclosures made to consumers who enter into rental-
purchase transactions, to set standards for collection
practices, 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 ‘‘Rental-Purchase Re-
form Act of 1993’’.
SEC. 2. REQUIREMENTS FOR RENTAL-PURCHASE TRANS-
ACTIONS.
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—RENTAL-PURCHASE
TRANSACTIONS
‘‘§ 1001. Short title
‘‘This title may be cited as the ‘Rental-Purchase Re-
form Act of 1993’.
‘‘§ 1002. Findings and purposes
‘‘(a) The Congress finds that a significant number
of consumers engage in rental-purchase transactions.
These transactions have taken place, in many instances,
without provision of adequate disclosures and other pro-
tections to consumers.
‘‘(b) The purposes of this title are the following:
‘‘(1) To assure meaningful disclosure of the
terms of rental-purchase agreements, including dis-
closure of all costs to consumers under those agree-
ments.
‘‘(2) To regulate the collection practices of rent-
al-purchase merchants.
‘‘(3) To provide certain substantive rights to
consumers under rental purchase agreements.
chase agreement 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.
‘‘(8) The term ‘rental-purchase agreement’—
‘‘(A) means an agreement between a
consumer and a merchant—
‘‘(i) under which the merchant agrees
to provide to the consumer the use of per-
sonal property for an initial period of 4
months or less,
‘‘(ii) that is automatically renewable
with each payment by the consumer, and
‘‘(iii) that permits but does not obli-
gate the consumer to become the owner of
the property; and
‘‘(B) does not include any credit sale (as
that term is defined in section 103(g)).
‘‘(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.
‘‘(b) REFERENCES
TO
REGULATIONS.—Any ref-
erence to any provision of this title shall be considered
to include reference to the regulations prescribed by the
Board under this title.
‘‘§ 1004. 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 or with organizations.
‘‘§ 1005. General disclosure requirements
‘‘(a) The merchant under a rental-purchase agree-
ment shall disclose to the consumer under the agreement
the information required by this title. In a transaction in-
volving more than 1 merchant, only 1 merchant is required
to make the disclosures.
‘‘(b) The disclosures required under this title shall
be made—
‘‘(1) at or before the date of consummation of
the rental-purchase agreement;
‘‘(2) clearly and conspicuously in writing, in a
form that the consumer may keep; and
‘‘(3) in the case of disclosures required under
section 1006, segregated from all other terms, data,
or information provided to the consumer.
‘‘(c) If a disclosure required to be made by a mer-
chant under this title becomes inaccurate as the result of
any act, occurrence, or agreement occurring after delivery
of the required disclosure, the resulting inaccuracy is not
a violation of this title.
‘‘§ 1006. Rental-purchase disclosures
‘‘For each rental-purchase agreement, the merchant
shall disclose to the consumer under the agreement the
following, as applicable:
‘‘(1) The amount of the initial rental payment,
including any fees, taxes, or other charges which
may be required at or before the date of consumma-
tion of the agreement.
‘‘(2) The amount and timing of rental renewal
payments.
‘‘(3) The total number and the total dollar
amount of rental payments and other charges nec-
essary to acquire ownership of the property.
‘‘(4) A statement that the consumer will not
own the property until the consumer has made the
total dollar amount necessary to acquire ownership.
‘‘(5) A statement that the total dollar amount
of payments does not include other charges, such as
late payment or reinstatement fees, and that the
consumer should examine the rental-purchase agree-
ment for an explanation of these charges, if applica-
ble.
‘‘(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 that a statement that in-
dicates 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 purchase.
‘‘(10) A statement—
‘‘(A) identifying the party that is respon-
sible for maintaining or servicing the property
while it is being rented;
‘‘(B) describing that responsibility; 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
consumer.
‘‘§ 1007. Point-of-sale disclosures
‘‘Each item of property displayed or offered pursuant
to a rental-purchase agreement shall have affixed to it a
point-of-sale card, tag, or label that clearly and conspicu-
ously discloses only the following:
‘‘(1) Whether the property is new or used.
‘‘(2) The price of the property in a cash sale.
‘‘(3) The amount of each rental payment under
the agreement.
‘‘(4) The total number of rental payments nec-
essary to acquire ownership of the property under
the agreement.
‘‘(5) The total dollar amount of rental pay-
ments necessary to acquire ownership of the prop-
erty under the agreement.
‘‘§ 1008. Prohibited practices
‘‘(a) A rental-purchase agreement may not contain—
‘‘(1) a confession of judgment;
‘‘(2) a negotiable instrument;
‘‘(3) a security interest or any other claim of a
property interest in any goods except those goods
the use of which is provided by the merchant pursu-
ant to the agreement;
‘‘(4) a wage assignment; or
‘‘(5) a waiver by the consumer of a claim or de-
fense.
‘‘(b) 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, within 7 days after the renewal date;
‘‘(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
‘‘(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
applicable redelivery, repair, or late fees.
‘‘(c) Subsection (b) shall not be construed to prevent
a merchant from attempting to repossess property during
the reinstatement period, but such a repossession does not
‘‘(c) A merchant may not communicate, in connection
with a rental-purchase agreement, with any person other
than the consumer, the consumer’s attorney, or the mer-
chant’s attorney, except—
‘‘(1) as reasonably necessary to acquire location
information concerning the consumer in accordance
with subsection (a);
‘‘(2) after receiving prior consent from the
consumer given directly to the merchant;
‘‘(3) after receiving express permission of a
court of competent jurisdiction; or
‘‘(4) as reasonably necessary to effectuate a
post-judgment judicial remedy.
‘‘(d) If a consumer notifies the merchant in writing
that the consumer desires the merchant to cease further
communication with the consumer, the merchant shall not
communicate further with the consumer with respect to
the rental-purchase agreement, except—
‘‘(1) to advise the consumer that the mer-
chant’s further efforts to communicate are being ter-
minated;
‘‘(2) to notify the consumer that the merchant
may invoke specified remedies allowable under law
which are ordinarily invoked by the merchant; or
‘‘(3) as necessary to effectuate any post-judg-
ment remedy.
‘‘(e) A merchant shall not—
‘‘(1) use or threaten to use violence or criminal
means to harm the physical person, reputation, or
property of any person;
‘‘(2) use obscene, profane, or abusive language;
‘‘(3) cause a telephone to ring, or engage any
person in telephone conversation, repeatedly or con-
tinuously with intent to annoy, abuse, or harass any
person;
‘‘(4) place any telephone call without disclosing
the caller’s identity; or
‘‘(5) perform any other act intended to harass
or abuse a consumer.
‘‘§ 1010. Receipts and accounts
‘‘A merchant shall provide the consumer a written re-
ceipt for each payment made by cash or money order.
‘‘§ 1011. 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. A renegotiation shall be consid-
ered 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 proceed-
ing.
‘‘(5) Any other event described in regulations
prescribed by the Board.
‘‘§ 1012. Rental-purchase advertising
‘‘(a) If an advertisement refers to or states the
amount of any payment or the right to acquire ownership,
the merchant that makes the advertisement shall also
clearly and conspicuously state in the advertisement the
following items, as applicable:
‘‘(1) That the transaction advertised is to occur
under a rental-purchase agreement.
‘‘(2) The total number and total dollar amount
of rental payments necessary to acquire ownership
under the agreement.
‘‘(3) That 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) The owner or personnel of any medium in which
an advertisement appears or through which it is dissemi-
nated shall not be liable for a violation of this section.
‘‘(c) Subsection (a) does not apply to an advertise-
ment which—
‘‘(1) does not refer to or state the amount of
any payment,
‘‘(2) is published in the yellow pages of a tele-
phone directory or in any similar directory of busi-
nesses, or
‘‘(3) is displayed in the merchant’s place of
business.
‘‘§ 1013. Administrative enforcement
‘‘(a) The requirements imposed by this title shall be
enforced by the Board.
‘‘(b) All of the functions and powers of the Board
under this Act are available to the Board to enforce com-
pliance by any person with the requirements imposed by
this title.
‘‘§ 1014. Civil liability
‘‘(a) Except as otherwise provided in this title, a mer-
chant 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
consumer 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.
‘‘(b)(1) An action under this section may be brought
in any United States district court of competent jurisdic-
tion, by not later than one year of the date of the occur-
rence of the violation.
‘‘(2) 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 violation as a matter of defense by
recoupment or set off, except as otherwise provided by
State law.
‘‘(c)(1) A consumer may not take any action to offset
any amount for which a merchant is potentially liable
under subsection (a) against any amount owed by the
consumer, unless the amount of the merchant’s liability
has been determined by judgment of a court of competent
jurisdiction in an action in which the merchant was a
party.
‘‘(2) 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 or coun-
terclaim to an action brought by the merchant to collect
amounts owed by the consumer.
‘‘§ 1015. Defenses
‘‘(a) A merchant is not liable under section 1014 for
a violation of the requirements of section 1006 if within
15 days after first having knowledge of the violation, and
before an action under section 1014 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 as-
sure that the consumer will not be required to pay an
amount in excess of the amounts actually disclosed.
‘‘(b)(1) A merchant is not liable under this title for
any act done or omitted in good faith in conformity with
any rule, regulation, interpretation, or approval promul-
gated by the Board or by an official duly authorized by
the Board.
‘‘(2) Paragraph (1) applies even if, after the act or
omission has occurred, the rule, regulation, interpretation,
or approval is amended, rescinded, or determined by judi-
cial or other authority to be invalid for any reason.
‘‘(c) A merchant is not liable under this title for a
violation if the merchant establishes, and at the time of
the violation is implementing, procedures reasonably cal-
culated to prevent the violation.
‘‘§ 1016. Liability of assignees
‘‘(a) For purposes of sections 1014 and 1015, the
term ‘merchant’ includes an assignee of a merchant. How-
ever, an action under section 1014 for a violation of this
title may be brought against an assignee only if the viola-
tion is apparent on the face of the rental-purchase agree-
ment to which it relates. A violation apparent on the face
of a rental-purchase agreement 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 assignment is involuntary.
‘‘(b) In an action by or against an assignee, the con-
sumer’s written acknowledgement 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.
‘‘§ 1017. Regulations
‘‘(a) The Board shall issue regulations to carry out
the purposes of this title, to prevent its circumvention, and
to facilitate compliance with its requirements. The regula-
tions may contain classifications and differentiations and
may provide for adjustments and exceptions for any class
of transaction.
‘‘(b) The Board shall publish model disclosure forms
and clauses to facilitate compliance with the disclosure re-
quirements of this title and to aid consumers in under-
standing transactions under rental-purchase agreements.
In designing forms, the Board shall consider the use by
merchants of data processing or similar automated equip-
ment. 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 require-
ments.
‘‘(c) Any regulation issued by the Board, or any
amendment or interpretation thereof, that requires a dis-
closure different from the disclosures previously required
by regulations of the Board 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 length-
en 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
sentence, if it makes a specific finding that such action
is necessary to comply with the findings of a court or to
prevent unfair or deceptive practices. In any case, mer-
chants may comply with any newly promulgated disclosure
requirement prior to its effective date.
‘‘§ 1018. Relation to state laws
‘‘This title does not annul, alter, affect, or exempt
any person subject to this title from complying with the
laws of any State with respect to a matter covered by this
title, except to the extent that those laws—
‘‘(1) are inconsistent with this title; and
‘‘(2) provide a lesser degree of protection for
consumers.
‘‘§ 1019. Effect on government agencies
‘‘No civil liability under this title may be imposed on
the United States or any of its departments or agencies,
any State or political subdivision, or any agency of a State
or political subdivision.’’.
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HR 2803 IH——2