[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 1956 Introduced in Senate (IS)]

103d CONGRESS
  2d Session
                                S. 1956

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.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

             March 22 (legislative day, February 22), 1994

Mr. Shelby (for himself, Mr. Conrad, Mr. Johnston, Mr. Breaux, and Mr. 
  Faircloth) introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, 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 Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Rental-Purchase Reform Act of 
1994''.

SEC. 2. REQUIREMENTS FOR RENTAL-PURCHASE TRANSACTIONS.

    The Consumer Credit Protection Act (15 U.S.C. 1601 et seq.) is 
amended by adding at the end the following new title:

                ``TITLE X--RENTAL-PURCHASE TRANSACTIONS

``Sec. 1001. Short title
    ``This title may be cited as the `Rental-Purchase Reform Act of 
1994'.
``Sec. 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 protections to consumers.
    ``(b) The purposes of this title are the following:
            ``(1) To assure meaningful disclosure of the terms of 
        rental-purchase agreements, including disclosure of all costs 
        to consumers under those agreements.
            ``(2) To regulate the collection practices of rental-
        purchase merchants.
            ``(3) To provide certain substantive rights to consumers 
        under rental purchase agreements.
``Sec. 1003. Definitions
    ``(a) For purposes of this title:
            ``(1) The term `advertisement' means a commercial message 
        in any medium intended to aid, promote, or assist, directly or 
        indirectly, a rental-purchase agreement.
            ``(2) The term `agricultural purpose' includes--
                    ``(A) the production, harvest, exhibition, 
                marketing, transportation, processing, or manufacture 
                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 farming.
            ``(3) The term `Board' means the Board of Governors of the 
        Federal Reserve System.
            ``(4) The term `consumer' means an individual that, as a 
        party to a rental-purchase agreement, is provided use of 
        personal property.
            ``(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-purchase agreement and to whom 
        a consumer's initial obligation under the agreement is payable.
            ``(7) The term `personal property' means property 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 personal 
                        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 obligate 
                        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 reference to any provision of 
this title shall be considered to include reference to the regulations 
prescribed by the Board under this title.
``Sec. 1004. Exempted transactions
    ``This title does not apply to rental-purchase agreements primarily 
for business, commercial, or agricultural purposes, or those made with 
government agencies or instrumentalities or with organizations.
``Sec. 1005. General disclosure requirements
    ``(a) The merchant under a rental-purchase agreement shall disclose 
to the consumer under the agreement the information required by this 
title. In a transaction involving more than one merchant, only one 
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 merchant 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.
``Sec. 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 consummation 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 necessary 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 agreement for an explanation of these charges, 
        if applicable.
            ``(6) A statement that the consumer may be responsible for 
        the fair market value of the property if it is lost, stolen, 
        damaged, or destroyed.
            ``(7) A statement indicating whether the property is new or 
        used, except that a statement that indicates 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 consumer's 
        option to purchase.
            ``(10) A statement--
                    ``(A) identifying the party that is responsible for 
                maintaining or servicing the property while it is being 
                rented;
                    ``(B) describing that responsibility; and
                    ``(C) disclosing that if any part of a 
                manufacturer'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 transaction and the 
        identities of the merchant and consumer.
``Sec. 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 conspicuously 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 necessary to 
        acquire ownership of the property under the agreement.
            ``(5) The total dollar amount of rental payments necessary 
        to acquire ownership of the property under the agreement.
``Sec. 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 pursuant to the agreement;
            ``(4) a wage assignment; or
            ``(5) a waiver by the consumer of a claim or defense.
    ``(b) Each rental-purchase agreement shall--
            ``(1) provide a statement of any obligation of the consumer 
        and the merchant under the agreement to repair any defect or 
        malfunction of the property covered by the agreement, and any 
        limitation of those obligations;
            ``(2) provide that the consumer may terminate the agreement 
        without penalty by voluntarily surrendering 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 options 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 agreement, other 
                than through judicial process, during 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 
                redelivery, 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 judicial process, during the 
                applicable reinstatement period set forth in 
                subparagraph (A), permits 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 payment 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 affect the consumer's right to 
reinstate. Upon reinstatement, the merchant shall provide the consumer 
with the same property, or substitute property of comparable quality 
and condition.
``Sec. 1009. Collection practices
    ``(a) A merchant under a rental-purchase agreement, in 
communicating with any person other than the consumer for the purpose 
of acquiring information as to the location of a consumer--
            ``(1) shall identify himself or herself and state that he 
        or she is confirming or correcting location information 
        concerning the consumer;
            ``(2) shall not communicate with any person more than once, 
        unless--
                    ``(A) requested to do so by the person; or
                    ``(B) the merchant reasonably believes that the 
                earlier response is erroneous or incomplete and that 
                the person now has correct or complete location 
                information;
            ``(3) shall not communicate by postcard;
            ``(4) shall not use any language or symbol on any envelope 
        or in the contents of any communication which indicates that 
        the communication relates to the recovery or repossession of 
        property; and
            ``(5) shall not communicate with any person other than the 
        consumer's attorney, after the merchant knows the consumer is 
        represented by an attorney with regard to the rental-purchase 
        agreement and has knowledge of, or can readily ascertain, the 
        attorney's name and address, unless the attorney fails to 
        respond within a reasonable period of time to communication 
        from the merchant or unless the attorney consents to direct 
        communication with the consumer.
    ``(b)(1) Without the prior consent of the consumer given directly 
to the merchant or the express permission of a court of competent 
jurisdiction, a merchant shall not communicate with a consumer in 
connection with the recovery or repossession of property--
            ``(A) at the consumer's place of employment;
            ``(B) at any unusual time or place or a time; or
            ``(C) at any place known or which should be known to be 
        inconvenient to the consumer.
    ``(2) In the absence of knowledge of circumstances to the contrary, 
a merchant shall assume that the convenient time for communicating with 
a consumer is after 8:00 a.m. and before 9:00 p.m., local time at the 
consumer's location.
    ``(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 merchant'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 merchant's further 
        efforts to communicate are being terminated;
            ``(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-judgment 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 continuously 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.
``Sec. 1010. Receipts and accounts
    ``A merchant shall provide the consumer a written receipt for each 
payment made by cash or money order.
``Sec. 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 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 property, 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 payment.
            ``(3) A reduction in charges in the agreement.
            ``(4) An agreement involving a court proceeding.
            ``(5) Any other event described in regulations prescribed 
        by the Board.
``Sec. 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 disseminated shall not be 
liable for a violation of this section.
    ``(c) Subsection (a) does not apply to an advertisement which--
            ``(1) does not refer to or state the amount of any payment,
            ``(2) is published in the yellow pages of a telephone 
        directory or in any similar directory of businesses, or
            ``(3) is displayed in the merchant's place of business.
``Sec. 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 compliance by any person with the 
requirements imposed by this title.
``Sec. 1014. Civil liability
    ``(a) Except as otherwise provided 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 consumer as a 
                result of the violation; and
                    ``(B) not less than $100.
            ``(2) In a class action, the amount the court determines to 
        be appropriate with no minimum recovery as to each member.
    ``(b)(1) An action under this section may be brought in any United 
States district court of competent jurisdiction, by not later than one 
year of the date of the occurrence 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 counterclaim to an action brought by the 
merchant to collect amounts owed by the consumer.
``Sec. 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 notice 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 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 promulgated 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 judicial 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 calculated to prevent the 
violation.
``Sec. 1016. Liability of assignees
    ``(a) For purposes of sections 1014 and 1015, the term `merchant' 
includes an assignee of a merchant. However, an action under section 
1014 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 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 consumer'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.
``Sec. 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 regulations 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 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 automated 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) Any regulation issued by the Board, or any amendment or 
interpretation thereof, that requires a disclosure 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 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 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, merchants may 
comply with any newly promulgated disclosure requirement prior to its 
effective date.
``Sec. 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.
``Sec. 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.''.

                                 <all>

S 1956 IS----2