[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3515 Introduced in House (IH)]







104th CONGRESS
  2d Session
                                H. R. 3515

     To amend the consumer lease provisions of the Consumer Credit 
                            Protection Act.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 22, 1996

Mr. LaFalce (for himself, Mr. Schumer, Ms. Roybal-Allard, Mr. Lipinski, 
 and Mr. Frazer) introduced the following bill; which was referred to 
            the Committee on Banking and Financial Services

_______________________________________________________________________

                                 A BILL


 
     To amend the consumer lease provisions of the Consumer Credit 
                            Protection Act.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    (a) Short Title.--This Act may be cited as the ``Consumer 
Automobile Leasing Act of 1996''.
    (b) Reference.--Whenever in this Act (other than section 7(b)) an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Consumer Credit 
Protection Act.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress finds the following:
            (1) There has been a continuing trend toward leasing of 
        automobiles by consumers as an alternative to installment 
        credit sales, with automobile leases now constituting nearly 
        one-third of all new automobile transactions.
            (2) Most consumers are not familiar with the terms used in 
        automobile leases and with the way in which the automobile 
        industry has chosen to structure lease transactions. Important 
        disclosures are not provided to consumers until the signing of 
        the lease and are routinely incorporated within complex and 
        lengthy lease documents.
            (3) Automobile lease advertisements tend to confuse and 
        mislead consumers by highlighting only the most attractive 
        terms of leases, by minimizing less attractive terms and costs, 
        by omitting key interest rate information, by combining terms 
        for sales and leases within advertisements, or by advertising 
        vehicle models or lease terms that may not be available or 
        customarily offered to consumers.
            (4) As leasing becomes more popular, there is increasing 
        need for automobile manufacturers, financial institutions, 
        automobile dealers, and other firms involved in leasing to 
        provide consumers with more appropriate information to allow 
        consumers to evaluate intelligently the attractiveness of a 
        proposed lease, to compare it with other leases offered and 
        advertised, and to compare it with other alternative cash 
        purchase and credit transactions.
    (b) Purpose.--The purpose of the amendments made by this Act is to 
enhance public understanding of automobile leases, to encourage 
competition among businesses engaged in automobile leasing, to provide 
consumers with more relevant and more easily understood information 
regarding the terms and costs of lease offerings, to simplify and 
standardize disclosures in lease advertising and to strengthen 
protections against unfair or misleading leasing practices.

SEC. 3. APPLICABLE CONSUMER LEASES.

    Section 181(1) (15 U.S.C. 1667(1)) is amended--
            (1) by striking ``$25,000'' and inserting ``$50,000''; and
            (2) by adding at the end the following: ``The limit on the 
        contractual obligation which comes within such term shall be 
        adjusted annually based upon the change reported in the 
        Consumer Price Index by the Department of Labor in June of the 
        preceding year.''.

SEC. 4. CONSUMER LEASE DISCLOSURES.

    Section 182 (15 U.S.C. 1667a) is amended--
            (1) by amending the portion preceding paragraph (1) to read 
        as follows: ``Each lessor shall give a lessee prior to the 
        consummation of the lease a statement which is dated and typed 
        or set in type that identifies prominently that the transaction 
        is a lease, that identifies the lessor and lessee, and that 
        sets out accurately and in a clear and conspicuous manner the 
        following information with respect to that lease, as 
        applicable:'';
            (2) by amending paragraph (1) to read as follows:
            ``(1) A full description of the property to be leased, 
        including any alteration, accessory, or other option;'';
            (3) in paragraph (2), by inserting before the semicolon the 
        following: ``, including all charges or fees to be paid at or 
        before lease signing and upon delivery of the leased 
        property'';
            (4) in paragraph (5), by inserting after ``term'' the 
        following: ``, including a description of the lessor's 
        standards for wear and use, which must be reasonable, if a 
        charge for excessive wear and use of the leased property is to 
        be imposed at the end of the lease term,'';
            (5) in paragraph (6), by inserting before the comma the 
        following: ``and disclosing whether such warranties and 
        guarantees are assigned or conveyed to the lessee'';
            (6) by amending paragraph (7) to read as follows:
            ``(7) a statement of whether insurance is provided or paid 
        for by the lessor, the types and amounts of insurance coverage, 
        and the cost to the lessee or, if not provided or paid for by 
        the lessor, the types and amounts of insurance coverage 
        required by the lease;''; and
            (7) in the sentence following paragraph (11), by striking 
        ``may be made in the lease contract to be signed by the 
        lessee'' and inserting ``shall appear together and in a 
        meaningful sequence in which the related disclosures are 
        grouped together and shall appear at the beginning of the lease 
        document or in a separate document presented either before or 
        in conjunction with the lease document''.

SEC. 5. AUTOMOBILE LEASES.

    Section 182 (15 U.S.C. 1667a) is amended by inserting ``(a)'' 
before ``Each lessor'' and by adding at the end the following:
    ``(b)(1) For any lease for personal use of an automobile the lessor 
shall disclose separately and conspicuously, at the same time and in 
the same document as the disclosures required by subsection (a) are 
made, the following information, to the extent applicable:
            ``(A) the amount of the total payments to be made by the 
        lessee at the inception of the lease;
            ``(B) the amount of each monthly payment, the total amount 
        of the monthly payments, and the total amount of monthly 
        payments made under the lease;
            ``(C) the total amount of all predetermined amounts to be 
        paid by the lessee at the end of the lease;
            ``(D) the total amount of all payments to be made by the 
        lessee during the term of the lease, including total payments 
        due at the inception of the lease, and total monthly payments 
        and predetermined amounts due at the end of the lease;
            ``(E) the lease annual percentage rate; and
            ``(F) the automobile residual value used by the lessor in 
        calculating the base monthly payment, which shall represent a 
        reasonable approximation of the anticipated wholesale market 
        value of the automobile at the end of the lease term.
    ``(2) The lessor shall disclose separately in a size and type that 
is easily read and in terminology that is understandable to ordinary 
consumers the following, as applicable:
            ``(A) a statement of whether the lessee does or does not 
        have an option to purchase the leased automobile either upon 
        termination of the lease or before scheduled termination of the 
        lease and, if applicable, the lease-end purchase option price 
        of the leased automobile;
            ``(B) a statement warning that the lessee may be required 
        to pay a substantial penalty for terminating the lease prior to 
        the expiration of the lease term, to include the actual dollar 
        amount of such penalty based on termination of the lease at the 
        end of the first year and explaining that a collision or other 
        event resulting in a total loss of the leased automobile prior 
        to the end of the lease term shall constitute an early 
        termination of the lease;
            ``(C) a statement warning that the lessee may be charged 
        for excessive wear or use of the leased automobile upon the 
        termination of the lease and explaining that the standards for 
        excess wear or use to be imposed by the lessor are described in 
        the lease document including, if appropriate, the maximum 
        mileage permitted each year during the lease term before an 
        excess mileage charge is imposed and the amount per mile of 
        such charge; and
            ``(D) a statement to alert consumers as to other important 
        required disclosures that should be read before signing the 
        lease document.
    ``(3) The lessor shall disclose separately and conspicuously and at 
the same time and in the same document as the disclosures required by 
this subsection a summary of all charges and costs by type and amount 
to be included in--
            ``(A) the amount due at lease inception, including all 
        charges or fees to be paid by the lessee at or before lease 
        signing and upon delivery of the leased automobile; and
            ``(B) the total capitalized cost of the automobile to be 
        leased, including the agreed upon acquisition value of the 
        automobile and any other costs or charges to be added to the 
        total cost of the leased automobile and which are not paid 
        separately by the lessee.
    ``(4) Information required to be disclosed under paragraphs (1) and 
(2) shall be provided under the heading `Important Information for the 
Consumer' at the same time and at the beginning of the same document in 
which the required disclosures are made.
    ``(c)(1) For any lease for personal use of an automobile the lessor 
shall provide disclosure under this subsection at the earlier of either 
the consummation of the lease or, if the automobile is ordered and a 
security deposit or other charge is required of the lessee, at the time 
the lessee incurs any legal obligation on the lease transaction.
    ``(2) If the lessee is obligated on the lease prior to consummation 
of the lease contract, the lessor may not change or modify the terms of 
the lease prior to consummation, except that if the lessor has 
knowledge of, or anticipates, significant delay for delivery of the 
automobile and consummation of the lease, the lessor shall make an 
affirmative statement that identifies the date on which the terms of 
the lease may expire and become subject to change and states that after 
such date the security deposit or charge shall be returned to the 
lessee if the terms of the lease are changed or modified.''.

SEC. 6. AUTOMOBILE LEASE ADVERTISING.

    (a) General Requirements.--
            (1) Amendments.--Section 184(a) (15 U.S.C. 1667c) is 
        amended--
                    (A) by striking ``(a) No'' and inserting ``(a)(1) 
                Except as otherwise provided in this section, no'', and
                    (B) by redesignating paragraphs (1) through (5) as 
                subparagraphs (A) through (E), respectively, and by 
                adding at the end the following:
            ``(F) The lease annual interest rate.
    ``(2) Information required to be disclosed under paragraph (1) 
shall be in the same language that principally is used in the 
advertisement. Identification in a television advertisement of the 
advertised transaction as a lease, as required by paragraph (1)(A), 
shall be included in both the audio and video portions of the 
television advertisement.
    ``(3) The requirements of this subsection shall apply to all 
aspects of advertising, including television, radio, and videotaped 
advertisements, print advertisements in publications, newsletters, and 
fliers, advertisements on computer programs and on the internet, and 
advertisements by toll-free telephone numbers.''.
            (2) Conforming amendments.--Section 184(b) (15 U.S.C. 
        1667c(b)) is amended by striking ``subsection (a)'' each time 
        it occurs and inserting ``subsection (a)(1)'' and in paragraph 
        (1) by striking ``paragraphs (1) and (2)'' and inserting 
        ``subparagraphs (A) and (B)''.
    (b) Advertisement for Automobile Lease.--Section 184 (15 U.S.C. 
1667c) is amended by adding at the end the following:
    ``(d) Advertisement for Automobile Lease.--No advertisement to 
promote or assist, directly or indirectly, any consumer lease for 
personal use of an automobile shall--
            ``(1) state that no downpayment is required on the lease 
        when the lessor requires a capitalized cost reduction payment, 
        acquisition fee, vehicle trade-in, or other payment upon 
        initiation of the lease, except that payment of the first 
        monthly payment on the lease and any refundable deposit shall 
        not be considered a downpayment;
            ``(2) incorporate within the same advertisement the amounts 
        of any payment, downpayment, interest rate, or other term 
        pertaining to both a lease transaction and to an alternative 
        installment credit transaction;
            ``(3) include the amounts of any payment, downpayment, 
        interest rate, or other term of leases that the lessor does not 
        customarily provide or will offer only to selected consumers, 
        or the amounts of any payment, downpayment, interest rate, or 
        other term of leases of automobile models that the lessor does 
        not have in sufficient quantities to meet reasonably 
        anticipated consumer demand for the vehicle at such advertised 
        terms; and
            ``(4) display any lease term, including the amount of any 
        monthly payment, interest rate, or downpayment or no 
        downpayment more prominently than the term `lease' or more 
        prominently than the amount of the total payment required to be 
        paid at the inception of the lease.
    ``(e) Lease Box.--
            ``(1) In general.--A written advertisement to promote a 
        lease for personal use of an automobile that--
                    ``(A) appears in a general circulation publication, 
                printed newsletter, commercial mailing, or printed 
                flier, and
                    ``(B) includes a statement about the payment 
                required for such lease,
        shall not be required to include the information required by 
        subsection (a)(1) but shall state clearly and conspicuously 
        that the transaction advertised is a lease and shall provide 
        separately for each automobile which is promoted in such 
        advertisement and for which a payment amount, downpayment 
        amount, or other payment is stated the following items of 
        information, as applicable:
                    ``(A) The amount due at lease signing which amount 
                shall include all charges and fees to be paid by the 
                lessee at or before the lease signing and upon delivery 
                of the automobile.
                    ``(B) The automobile capitalized cost which cost 
                shall--
                            ``(i) include the automobile price for the 
                        advertised automobile model with the most 
                        common options offered or leased by the 
                        advertiser or lessor and all charges for taxes, 
                        insurance, service contracts, and other costs 
                        to be added to the automobile price and not 
                        paid separately by the lessee; and
                            ``(ii) be stated as a dollar amount that 
                        represents the average capitalized cost as a 
                        percentage of manufacturer's suggested retail 
                        price of all similar automobiles leased by the 
                        advertiser or lessor during the most recent 6 
                        month period ending either December 31 or June 
                        30.
                    ``(C) The amount financed by the lease which amount 
                shall be a dollar amount representing the automobile 
                capatalized cost as set forth in subparagraph (B) 
                reduced by--
                            ``(i) the amount of any downpayment amount, 
                        capitalized cost reduction payment, or trade-in 
                        amount required to be paid by the lessee at 
                        lease signing; and
                            ``(ii) the residual value of the model 
                        advertised as established by the Automotive 
                        Lease Guide or other industry publication which 
                        the Board shall stipulate in regulation for 
                        comparable automobile models with a lease term 
                        as set forth in subparagraph (E) and a maximum 
                        mileage allowance of 12,000 miles per year for 
                        such lease term for determining excess mileage 
                        charges, if any.
                    ``(D) The lease annual interest rate.
                    ``(E) The term of the lease which shall be either 
                24 months or 36 months whichever is offered by the 
                lessor or whichever is more typical for leases for the 
                automobile model advertised.
                    ``(F) The amount of each monthly payment under the 
                lease which shall be a dollar amount calculated using 
                the amounts stated pursuant to subparagraphs (C), (D), 
                and (E).
            ``(2) Separation of information.--The information required 
        to be provided under paragraph (1) shall be separated 
        conspicuously from other information in the advertisement, be 
        presented in close proximity to any monthly payment amount, 
        downpayment amount, or other payment amounts stated for each 
        automobile model promoted, and be of sufficient type size to be 
        legible to and easily read by consumers.
            ``(3) Advertisement requirement.--A written advertisement 
        described in paragraph (1) shall--
                    ``(A) disclose separately and in close proximity to 
                the information required by paragraph (1) the amount of 
                any additional charge, fee, or penalty to be paid by 
                the lessee that are not included in the automobile 
                capitalized cost or paid separately by the lessee at 
                lease signing;
                    ``(B) include a statement that the lessee may be 
                required to pay a substantial penalty for terminating 
                the lease prior to the expiration of the lease term; 
                and
                    ``(C) include no monthly payment amount, 
                downpayment amount, interest rate, or other payment for 
                a automobile model that is different from any amount 
                required to be stated under paragraph (1) or used to 
                compute any amount required to be stated under 
                paragraph (1).''.
    (c) Alternative Disclosures.--Section 184(b) (15 U.S.C. 1667c(b)) 
is amended--
            (1) by striking ``Radio'' in the subsection heading and 
        inserting ``Broadcast'';
            (2) by striking ``radio broadcast'' each place it occurs 
        and inserting ``radio or television broadcast'';
            (3) in paragraph (1)(A), by striking ``paragraphs (1) and 
        (2)'' and inserting ``subparagraphs (A), (B), and (F) of 
        subsection (a)(1)'';
            (4) in paragraph (2)(A)(iii), by striking ``provide the'' 
        and inserting the following: ``provide a recorded message which 
        provides, in a uniform manner and in a form which is easily 
        understood and capable of being repeated, the'';
            (5) in paragraph (2)(A), by striking ``and'' at the end of 
        clause (ii), by striking the period at the end of clause (iii) 
        and inserting ``; and'', and by adding after clause (iii) the 
        following:
                            ``(iv) exclude from the information 
                        provided by such toll-free telephone 
all marketing and sales promotional information.''; and
            (6) by amending paragraph (2)(B) to read as follows:
                    ``(B) Written information.--A toll-free number 
                established in accordance with subparagraph (A) shall 
                include an option that permits consumers to request the 
                information required to be provided under subparagraph 
                (A)(iii) in written form and by mail.''.
    (d) Definition.--Section 184 (15 U.S.C. 1667c), as amended by 
subsection (b), is amended by adding at the end the following:
    ``(f) Clearly and Conspicuously.--
            ``(1) In general.--For purposes of this section, the term 
        `clearly and conspicuously' means--
                    ``(A) in print advertisements, the required 
                disclosure shall appear in a type size, shade, 
                contrast, prominence, and location as to be readily 
                noticeable, readable, and comprehensible to an ordinary 
                consumer;
                    ``(B) in the video portion of television or 
                videotaped advertisements, the required disclosures 
                shall appear on the screen in a type size, shade, 
                contrast, prominence, and location and for a duration 
                as to be readily noticeable, readable, and 
                comprehensible to an ordinary consumer;
                    ``(C) in the audio portion of television, 
                videotaped, and radio advertisements, the required 
                disclosures shall be delivered in a volume, cadence, 
                and location and for a duration as to be readily 
                noticeable, hearable, and comprehensible to an ordinary 
                consumer; and
                    ``(D) in advertisements on the internet, the 
                required disclosures shall appear in a type size, 
                shade, contrast, prominence, and location as to be 
                readily readable and comprehensible to users and shall 
                be separated from marketing and promotional information 
                and easily accessible under the label or heading 
                `Important Information for Consumers'.
            ``(2) Limitation.--Nothing contrary to, inconsistent with, 
        or in mitigation of, the required disclosures shall be used in 
        any advertisement in any medium and no audio, videos, or print 
        technique shall be used that is likely to obscure or detract 
        significantly from the communication of the disclosures.''.

SEC. 7. CIVIL LIABILITY.

    (a) Section 185.--Section 185 (15 U.S.C. 1667d) is amended by 
adding at the end the following:
    ``(d) No stipulation, provision, or term of any lease contract may 
waive any liability of a lessor under this section or deprive a lessee 
of any other right or benefit under Federal or State law.''.
    (b) Section 130.--Section 130(a)(2) of the Truth in Lending Act (15 
U.S.C. 1640) is amended by striking ``or'' at the end of subparagraph 
(A), by inserting ``or'' at the end of subparagraph (B), and by adding 
after subparagraph (B) the following:
            ``(C) in the case of calculating the total civil liability 
        for violation of any requirement of chapter 5, the liability 
        under this subparagraph shall not be greater than $10,000;''.

SEC. 8. REGULATIONS.

    (a) In General.--The Federal Reserve Board, not later than 12 
months after the date of the enactment of this Act, shall issue 
regulations to implement the amendments made by this Act. The Board 
shall also issue regulations, together with staff commentary if 
appropriate, to update and clarify the requirements and definitions for 
lease disclosures and any other issue relating to consumer leasing to 
carry out the intent of the amendments made by this Act, to implement 
any initiative which the Board shall recommend pursuant to the study 
required by section 9, to prevent the circumvention of the amendments 
made by this Act, and to facilitate compliance with the requirements in 
the amendments.
    (b) Model Forms.--The Federal Reserve Board shall publish model 
disclosure forms and clauses to facilitate and simplify compliance with 
the disclosure requirements in the amendments made by this Act, to aid 
the consumer in understanding lease transactions, and to assist the 
consumer in comparing different leases and lease and credit purchase 
options. The Board shall require that such model forms be used by 
lessors to meet the requirements of sections 182 and 184 of the 
Consumer Credit Protection Act. Lessors that properly use the model 
forms in providing disclosure shall be deemed in compliance with the 
requirements of sections 182 and 184 of the Consumer Credit Protection 
Act, except that use of such forms shall not exempt the lessor from 
liability for penalties or administrative sanctions for false or 
inaccurate disclosures under sections 108 and 112 of the Truth in 
Lending Act or from civil liability under section 185 of the Consumer 
Credit Protection Act.
    (c) Effective Date.--Any regulation of the Federal Reserve Board 
which requires changes in disclosures to be made under the Consumer 
Credit Protection Act shall become effective no sooner than 6 months 
following the promulgation of a final rule, except that the Board may 
shorten the effective date if the Board determines that such shorter 
date is necessary to prevent unfair or deceptive practices or to comply 
with a court ruling. A lessor may comply with a new regulation of the 
Board before its effective date.

SEC. 9. STUDY.

    (a) In General.--The Board of Governors of the Federal Reserve 
System shall conduct a study on the feasibility of instituting, for 
purposes of consumer disclosures under section 182 and 184 of the 
Consumer Credit Protection Act, a procedure for standardizing the terms 
and costs of automobile leases to be disclosed in automobile promotions 
and advertising that would be similar in intent to the unit pricing 
concept used for consumer perishable goods in providing uniform 
standards of pricing and disclosure that permit comparison of the basic 
or core costs to a lease transaction with other similar lease offerings 
and that enhance consumer understanding and comparison of costs 
associated with additional lease options and financial arrangements.
    (b) Consultations.--For purposes of the study authorized by 
subsection (a), the Board shall consult with State officials, 
businesses involved in automobile leasing, and consumer organizations 
and shall conduct consumer research to assess consumer attitudes and 
responses to standardized lease disclosure concepts.
    (c) Report.--Not later than 12 months after the date of the 
enactment of this Act, the Board shall submit to the Congress a written 
report of its findings and recommendations from the study.
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