[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2820 Introduced in House (IH)]

  1st Session
                                H. R. 2820

   To amend the Consumer Credit Protection Act to assure meaningful 
   disclosures 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 consumers 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 Representatives 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 transactions. These transactions 
have taken place, in many instances, without adequate disclosures and 
other protections 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 consumers 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 commercial message 
        in any medium that promotes, directly or indirectly, a rental-
        purchase agreement.
            ``(2) The term `agricultural purpose' includes--
                    ``(A) the production, harvest, exhibition, 
                marketing, transformation, 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 a natural person 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-purchase 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 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 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 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 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 agreements primarily 
for business, commercial, or agricultural purposes, or those made with 
Government agencies or instrumentalities.

``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 
disclosures.
    ``(b) Disclosure.--The disclosures required under sections 1004 and 
1005 and the agreement provisions required 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 section 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 occurring 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 consummation of the 
        agreement.
            ``(2) The amount and timing of rental 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 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 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 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 consumer'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 maintenance 
                or service; 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.
            ``(12) Late fees for past due rental charges.

``SEC. 1005. POINT-OF-RENTAL DISCLOSURES.

    ``Each item of property displayed or offered in connection with a 
rental-purchase agreement shall have affixed to it a 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.
            ``(4) The total number of rental payments necessary to 
        acquire ownership of the property.
            ``(5) The total dollar amount of rental payments necessary 
        to acquire ownership of the property.

``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 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 business days after 
                the renewal date if the consumer pays monthly, or 
                within 3 business days after the renewal date if the 
                consumer pays more frequently than monthly;
                    ``(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.
    ``(b) Construction.--Subsection (a) shall not be construed to 
prevent a merchant from attempting to repossess 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 
reinstatement, the merchant shall provide the consumer with the same 
property, if available; if it is not available the merchant 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 pursuant to the agreement;
            ``(4) a wage assignment; or
            ``(5) a waiver by the consumer of a claim defense.

``SEC. 1008. RECEIPTS AND ACCOUNTS.

    ``A merchant shall provide the consumer a written receipt 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 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. 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 advertisement shall also clearly and conspicuously state 
in the advertisement 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 medium in which an 
advertisement appears or through which it is disseminated shall not be 
liable for a violation of subsection (a).
    ``(c) Construction.--Subsection (a) does not apply to an 
advertisement which--
            ``(1) is published in the yellow pages of a telephone 
        directory or in any similar directory of businesses, or
            ``(2) is displayed in the merchant's place of business.

``SEC. 1011. CIVIL LIABILITY.

    ``(a) Liability Amount.--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. 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 constitution.--An action 
        under this section may be brought in any United States district 
        court of competent jurisdiction, 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 violation 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 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) 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 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;
            ``(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 merchant 
        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 approval 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 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) Consumer Acknowledgment.--In an action by or against an 
assignee, the consumer's written acknowledgment 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 regulations to carry out 
the purposes of this title, to prevent its circumvention, and to 
facilitate compliance with its requirements. 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 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) Effective Date of Regulations.--Any regulation issued by the 
Board, or any amendment or interpretation 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 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.
    ``(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 transactions 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 departments or agencies, any 
State or political subdivision, or any agency of a State or political 
subdivision.''.
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HR 2820 IH----2