[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 4037 Introduced in Senate (IS)]








109th CONGRESS
  2d Session
                                S. 4037

 To amend the Consumer Credit Protection Act to protect consumers from 
  inadequate disclosures and certain abusive practices in rent-to-own 
                 transactions, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           September 29, 2006

  Mr. Schumer 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 protect consumers from 
  inadequate disclosures and certain abusive practices in rent-to-own 
                 transactions, 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 ``Rent-To-Own Reform Act of 2006''.

SEC. 2. RENT-TO-OWN PROTECTION ACT.

    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--RENT-TO-OWN TRANSACTIONS

``Sec
``1001. Short title
``1002. Findings and purposes
``1003. Definitions
``1004. Application of State laws regarding fees, charges, guarantees, 
                            and warranties to rent-to-own transactions
``1005. Application of Federal laws to rent-to-own transactions
``1006. Disclosures
``1007. Prohibitions and enforcement
``1008. Civil liability
``1009. Application of this title
``1010. Regulations
``1011. Relationship to other laws

``SEC. 1001. SHORT TITLE.

    ``This title may be cited as the `Rent-To-Own Protection Act'.

``SEC. 1002. FINDINGS AND PURPOSES.

    ``(a) Findings.--Congress finds that--
            ``(1) the rent-to-own industry targets its products 
        primarily to low income and minority neighborhoods;
            ``(2) the majority of rent-to-own customers enter into 
        rent-to-own contracts with the intention of owning the goods 
        for which they are contracting;
            ``(3) rent-to-own dealers often fail to disclose key terms 
        of rent-to-own contracts, and engage in unfair collection 
        practices; and
            ``(4) of primary significance, rent-to-own dealers do not 
        provide customers with the protections afforded purchasers in 
        retail installment sales under State and Federal laws, and 
        often charge excessive fees and interest rates.
    ``(b) Purposes.--The purposes of this title are--
            ``(1) to provide consumers in rent-to-own transactions the 
        range of protections provided under State and Federal laws to 
        individuals that acquire goods in other consumer credit sales, 
        while recognizing and preserving consumers' unilateral right to 
        terminate;
            ``(2) to require rent-to-own contracts and tags affixed to 
        items available for acquisition in rent-to-own transactions to 
        disclose material terms of those transactions; and
            ``(3) to prohibit rent-to-own dealers and collection agents 
        hired by those dealers from engaging in abusive collection 
        practices.

``SEC. 1003. DEFINITIONS.

    ``For purposes of this title, the following definitions shall 
apply:
            ``(1) Board.--The term `Board' means the Board of Governors 
        of the Federal Reserve System.
            ``(2) Cash price.--The term `cash price' means the fair 
        market price at which retail sellers, not in the business of 
        renting or leasing such goods, are selling and retail buyers 
        are buying the same or similar property for cash in the same 
        trade area in which the lessor's place of business is located. 
        Any increase in the cash price above such fair market price 
        shall be disclosed to the consumer as a finance charge.
            ``(3) Consumer.--The term `consumer'--
                    ``(A) when used as an adjective, means for use by 
                an individual primarily for personal, family, or 
                household purposes; and
                    ``(B) when used as a noun, means an individual who 
                is the lessee or bailee under a rent-to-own contract.
            ``(4) Credit.--The term `credit'--
                    ``(A) includes the right granted by a seller to a 
                consumer to obtain possession of an item of consumer 
                goods under a rent-to-own contract before payment of 
                the total amount that is required to be paid to acquire 
                ownership of the item; and
                    ``(B) is deemed to be a fixed sum equal to--
                            ``(i) the total of payments for the item 
                        required to obtain ownership of the item under 
                        the contract; minus
                            ``(ii) the sum of--
                                    ``(I) the cash price;
                                    ``(II) any fees specifically 
                                allowable under State law, except 
                                finance charges, interest, or a time 
                                price differential; and
                                    ``(III) the termination fee under 
                                section 1004.
            ``(5) Rent-to-own contract.--The term `rent-to-own 
        contract' means--
                    ``(A) a contract in the form of a terminable lease 
                or bailment of an item of consumer goods, under which--
                            ``(i) a consumer--
                                    ``(I) has the right of possession 
                                and use of the item; and
                                    ``(II) has the option to renew the 
                                contract periodically by making 
                                payments specified in the contract; and
                            ``(ii) a seller agrees, in writing or 
                        orally, to transfer ownership of the item to 
                        the consumer upon the fulfillment of all 
                        obligations of the consumer under the contract 
                        for that transfer; and
                    ``(B) any contract which is advertised as or 
                denominated as a rent-to-own contract or lease-purchase 
                contract, or which is in substance a rent-to-own 
                contract, as described in subparagraph (A).
            ``(6) Rent-to-own transaction.--The term `rent-to-own 
        transaction' means the lease or bailment of an item of consumer 
        goods under a rent-to-own contract.
            ``(7) Seller.--The term `seller' means--
                    ``(A) a person--
                            ``(i) who regularly makes consumer goods 
                        available under rent-to-own contracts; and
                            ``(ii) to whom payments are payable under 
                        those contracts; and
                    ``(B) an assignee of such a person.
            ``(8) State.--The term `State' means any State, the 
        Commonwealth of Puerto Rico, the District of Columbia, and any 
        territory or possession of the United States.

``SEC. 1004. APPLICATION OF STATE LAWS REGARDING FEES, CHARGES, 
              GUARANTEES, AND WARRANTIES TO RENT-TO-OWN TRANSACTIONS.

    ``(a) In General.--Subject to subsection (b), a seller in a rent-
to-own transaction may not take, receive, or assess any interest, 
finance charge, or other fee for the transaction that is in excess of 
the interest, fees, or finance charges that may be charged under the 
laws of the State in which the seller is located which--
            ``(1) establish a maximum rate or amount of interest, 
        finance charge, or time-price differential that may be charged 
        in connection with a credit sale or retail installment sale for 
        the same or a similar item;
            ``(2) establish the types of fees and the maximum amount of 
        fees that a seller may charge in connection with a credit sale 
        or retail installment sale for the same or a similar item; or
            ``(3) establish the types of credit insurance and the 
        maximum amount of premiums that can be charged for credit 
        insurance in connection with a credit sale or a retail 
        installment sale for the same or a similar item.
    ``(b) Additional Termination Charges and Fees.--
            ``(1) Charges and fees authorized.--In addition to fees and 
        charges authorized under subsection (a), a seller in a rent-to-
        own transaction may charge--
                    ``(A) a termination fee in accordance with 
                paragraph (2), if in exchange the consumer is given the 
                right to terminate the rent-to-own contract for the 
                transaction at any time without regard to whether the 
                consumer has completed payment of the fee; and
                    ``(B) fees that are reasonable in relation to the 
                cash price of the good, for recovery of the items that 
                are the subject of the contract and that are not 
                voluntarily returned to the seller upon the termination 
                of the contract.
            ``(2) Termination fee.--A termination fee under paragraph 
        (1)(A)--
                    ``(A) shall not exceed 5 percent of the cash price 
                under the contract;
                    ``(B) shall be disclosed in the contract;
                    ``(C) may be paid at the time the contract is 
                entered into or over the life of the contract; and
                    ``(D) shall be calculated as part of the finance 
                charge as determined under section 106 of the Truth in 
                Lending Act.
            ``(3) Recovery fees.--A recovery fee under paragraph (1)(B) 
        shall be disclosed in the contract.
            ``(4) Effect of termination.--The termination of a rent-to-
        own contract by a consumer in accordance with a right of 
        termination given to the consumer in exchange for a termination 
        fee under subsection (a)(1) is deemed to satisfy the consumer's 
        obligation for all payments and fees due under the contract, 
        except fees and charges under the contract that become due 
        before the date of termination.
    ``(c) Guarantees and Warranties.--All guarantees and warranties 
established or required under the laws of a State for goods sold 
pursuant to a consumer credit sale or retail installment sale apply to 
goods which are the subject of a rent-to-own transaction in the State.

``SEC. 1005. APPLICATION OF FEDERAL LAWS TO RENT-TO-OWN TRANSACTIONS.

    ``The following Federal laws apply to a rent-to-own transaction, as 
follows:
            ``(1) Truth in lending act.--The Truth in Lending Act 
        applies as such Act applies to a consumer credit transaction 
        that is a credit sale (as that term is defined in that Act).
            ``(2) Equal credit opportunity act.--The Equal Credit 
        Opportunity Act applies as such Act applies to credit 
        transactions. For purposes of that application--
                    ``(A) a consumer shall be treated as an applicant; 
                and
                    ``(B) a seller shall be treated as a creditor.
            ``(3) Fair debt collection practices act.--The Fair Debt 
        Collection Practices Act applies to the collection of payments 
        owed that arise from a rent-to-own transaction, unless those 
        payments are collected by any person specified in subparagraphs 
        (A) through (F) of section 803(6) of such Act. For purposes of 
        that application, payments owed shall be treated as debt.
            ``(4) Fair credit reporting act.--The Fair Credit Reporting 
        Act applies as such Act applies to a credit transaction and to 
        any extension or denial of credit.

``SEC. 1006. DISCLOSURES.

    ``(a) Disclosures on Goods.--A seller shall include on each item in 
the place of business of the seller that is available for purchase 
pursuant to a rent-to-own transaction the following information:
            ``(1) The cash price of the item.
            ``(2) An itemization of services offered under a rent-to-
        own contract for the item, and the cash price of each service.
            ``(3) The annual percentage rate of the item under a rent-
        to-own contract, determined under section 107 of the Truth in 
        Lending Act.
            ``(4) The weekly, biweekly, monthly, or other incremental 
        payment applicable under the rent-to-own contract for the 
        transaction and the number of payments.
            ``(5) The total of payments required to be paid to acquire 
        ownership of the item under a rent-to-own contract for the 
        transaction, determined under regulations under the Truth in 
        Lending Act.
            ``(6) Specification of whether the item is new or used.
    ``(b) Disclosures Upon Contracting.--A seller shall provide to a 
consumer in writing, at the time the seller and consumer enter into a 
rent-to-own contract for an item, the information referred to in 
subsection (a) for the item and the contract.

``SEC. 1007. PROHIBITIONS AND ENFORCEMENT.

    ``(a) Prohibitions.--A person who is a seller under a rent-to-own 
contract with a consumer shall not--
            ``(1) threaten or invoke criminal prosecution of a consumer 
        for any matter related to the contract, unless there is clear 
        and convincing evidence that the goods that are the subject of 
        the contract are being held by the consumer with an intent to 
        defraud the seller;
            ``(2) use threats or coercion to collect or attempt to 
        collect any amounts alleged to be due from the consumer;
            ``(3) engage in any conduct, the natural consequence of 
        which is to oppress, harass, or abuse any person in connection 
        with an attempt to collect amounts owed by the consumer under 
        the contract;
            ``(4) unreasonably disclose information to third parties 
        regarding amounts owed by the consumer;
            ``(5) make any fraudulent, deceptive, or misleading 
        representation to obtain information about the consumer or to 
        collect amounts owed by the consumer;
            ``(6) use any unconscionable means to collect or attempt to 
        collect a debt owed to the seller;
            ``(7) advertise, announce, solicit, or otherwise represent 
        as free or available without charge (including by use of other 
        words of similar meaning) any service under the contract for 
        which the seller charges the consumer, including any service 
        for which a charge is collected by inclusion in the amount 
        required to be paid under the contract;
            ``(8) use, for purposes of complying with any State or 
        Federal law governing rent-to-own transactions (other than a 
        State or Federal tax law) any definition of the term `cash 
        price' other than the definition under section 1003(2);
            ``(9) engage in any act or practice which is unfair or 
        deceptive in connection with a rent-to-own transaction; or
            ``(10) violate any regulation issued by the Board under 
        subsection (c)(1).
    ``(b) Enforcement.--
            ``(1) Enforcement.--Compliance with the requirements under 
        this title shall be enforced by the Federal Trade Commission. 
        All functions and powers of the Federal Trade Commission under 
        the Federal Trade Commission Act shall be available to the 
        Commission to enforce compliance with this title by any person, 
        irrespective of whether the person is engaged in commerce or 
        meets any other jurisdictional tests in the Federal Trade 
        Commission Act, including the power to enforce the provisions 
        of this title in the same manner as if the violation had been a 
        violation of a Federal Trade Commission trade regulation rule.
            ``(2) Treatment of violations.--For the purpose of the 
        exercise by the Federal Trade Commission of the functions and 
        powers of such Commission under the Federal Trade Commission 
        Act, a violation of any requirement or prohibition under this 
        title is deemed to be an unfair or deceptive act or practice in 
        commerce in violation of that Act.
    ``(c) Regulations.--
            ``(1) Board.--The Board shall issue such regulations as are 
        necessary or appropriate for implementing subsection (a), 
        including regulations describing specific practices by a seller 
        that are prohibited by paragraphs (1) through (9) of that 
        subsection.
            ``(2) Federal trade commission.--The Federal Trade 
        Commission shall issue regulations implementing subsection (b).

``SEC. 1008. CIVIL LIABILITY.

    ``(a) Liability for Failure To Properly Disclose Terms.--Any seller 
who fails to comply with a requirement under section 1006 is liable to 
the consumer in an amount equal to the sum of--
            ``(1) actual damages sustained by the consumer as a result 
        of the failure;
            ``(2) $250 for each failure; and
            ``(3) all costs of the action and reasonable attorney fees, 
        as determined by the court.
    ``(b) Other Liability.--A seller that violates this title or fails 
to comply with any requirement imposed under this title, other than 
under section 1006, shall be liable to the consumer in an amount equal 
to the sum of--
            ``(1) actual damages sustained by the consumer as a result 
        of the violation;
            ``(2) $2,500 for each violation; and
            ``(3) all costs of the action and reasonable attorney fees, 
        as determined by the court.
    ``(c) Jurisdiction and Limitation.--An action under this title may 
be brought in any United States district court or in any other court of 
competent jurisdiction, within 24 months after the date of the 
violation or failure that is the subject of the action. This subsection 
does not bar a person from asserting a violation of this title in an 
action to collect amounts alleged to be due from the person which is 
brought more than 2 years after the date of the occurrence of the 
violation as a matter of defense by recoupment or set-off in such 
action.

``SEC. 1009. APPLICATION OF THIS TITLE.

    ``(a) In General.--This title shall apply to rent-to-own contracts 
entered into after the date of the issuance of regulations by the Board 
under section 1010.
    ``(b) Motor Vehicles.--This title shall not apply to any lease or 
sale of a motor vehicle entered into after the date of enactment of the 
Rent-To-Own Reform Act of 2006 that, if entered into on the day before 
that date of enactment, would have been subject to chapter 5 of the 
Truth in Lending Act.

``SEC. 1010. REGULATIONS.

    ``The Board shall issue such regulations as may be necessary to 
implement this title (including regulations under section 1007(c)(1)), 
not later than 12 months after the date of enactment of the Rent-To-Own 
Reform Act of 2006.

``SEC. 1011. RELATIONSHIP TO OTHER LAWS.

    ``(a) State Law.--This title does not annul, alter, or affect, or 
exempt any person subject to the provisions of this title from 
complying with, the laws of any State with respect to rent-to-own 
transactions, except to the extent that those laws are inconsistent 
with any provision of this title, and then only to the extent of the 
inconsistency. A State law is not inconsistent with this title solely 
because the protection afforded by such provision of law to any 
consumer is greater than the protection afforded by this title.
    ``(b) Consumer Lease Provisions of Truth in Lending Act.--Chapter 5 
of the Truth in Lending Act, relating to consumer leases, shall not 
apply to a rent-to-own transaction except the lease or sale of a motor 
vehicle that, if entered into on the day before the date of enactment 
of the Rent-To-Own Reform Act of 2006, would have been subject to that 
chapter.''.
                                 <all>