I
104TH CONGRESS
1ST SESSION
H. R. 2820
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
DECEMBER 20, 1995
Mr. WATTS of Oklahoma introduced the following bill; which was referred to
the Committee on Banking 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 consum-
ers under such agreements, to provide certain substantive
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.
‘‘(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) a contract between a consumer and a
merchant—
‘‘(i) under which the merchant agrees
to provide the consumer the use of the 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
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.
‘‘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 in-
cluded—
‘‘(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 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 paid the
total dollar amount necessary to acquire ownership.
‘‘(5) A disclosure that the total dollar amount
payments does not include certain other charges.
‘‘(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 purchase.
‘‘(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
consumer.
‘‘(12) Late fees for past due rental charges.
‘‘SEC. 1005. POINT-OF-RENTAL DISCLOSURES.
‘‘Each item of property displayed or offered in con-
nection with a rental-purchase agreement shall have af-
fixed to it a 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.
‘‘(4) The total number of rental payments nec-
essary to acquire ownership of the property.
‘‘(5) The total dollar amount of rental pay-
ments necessary to acquire ownership of the prop-
erty.
‘‘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, within 7 business days after the re-
newal date if the consumer pays monthly, or
within 3 business days after the renewal date if
the consumer pays more frequently than month-
ly;
‘‘(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 ap-
plicable redelivery, repair, or late fees.
‘‘(b) CONSTRUCTION.—Subsection (a) shall not be
construed to prevent a merchant from attempting to re-
possess property during the reinstatement period pursuant
to subsection (a)(3)(A), but such a repossession does not
affect the consumer’s right to reinstate. Upon reinstate-
ment, the merchant shall provide the consumer with the
same property, if available; if it is not available the mer-
chant shall substitute property of comparable quality and
condition.
‘‘SEC. 1007. PROHIBITED INCLUSION.
‘‘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 de-
fense.
‘‘SEC. 1008. RECEIPTS AND ACCOUNTS.
‘‘A merchant shall provide the consumer a written re-
ceipt for each payment made by cash, check, or money
order, the date, the total number of rental payments made,
and the total number of payments necessary to acquire
ownership of the property.
‘‘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 proceed-
ing.
‘‘(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 or the right to
acquire ownership, the merchant that makes the advertise-
ment shall also clearly and conspicuously state in the ad-
vertisement the following items:
‘‘(1) 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) 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
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
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.
‘‘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;
‘‘(2) provide a lesser degree of protection for
consumers; or
‘‘(3) attempt to regulate rental-purchase trans-
actions as a credit, retail, conditional, or installment
sale.
‘‘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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