[House Report 107-590]
[From the U.S. Government Publishing Office]
107th Congress Rept. 107-590
HOUSE OF REPRESENTATIVES
2d Session Part 1
======================================================================
CONSUMER RENTAL PURCHASE AGREEMENT ACT
_______
July 18, 2002.--Ordered to be printed
_______
Mr. Oxley, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
SUPPLEMENTAL VIEWS
[To accompany H.R. 1701]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred the
bill (H.R. 1701) 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, having
considered the same, report favorably thereon with an amendment
and recommend that the bill as amended do pass.
CONTENTS
Page
Amendment........................................................ 2
Purpose and Summary.............................................. 10
Background and Need for Legislation.............................. 11
Hearings......................................................... 11
Committee Consideration.......................................... 11
Committee Votes.................................................. 12
Committee Oversight Findings..................................... 15
Performance Goals and Objectives................................. 16
New Budget Authority, Entitlement Authority, and Tax Expenditures 16
Committee Cost Estimate.......................................... 16
Congressional Budget Office Estimate............................. 16
Federal Mandates Statement....................................... 18
Advisory Committee Statement..................................... 18
Constitutional Authority Statement............................... 18
Applicability to Legislative Branch.............................. 19
Section-by-Section Analysis of the Legislation................... 19
Changes in Existing Law Made by the Bill, as Reported............ 22
Supplemental Views............................................... 35
Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Consumer Rental Purchase Agreement
Act''.
SEC. 2. FINDINGS AND DECLARATION OF PURPOSE.
(a) Findings.--The Congress finds as follows:
(1) The rental-purchase industry provides a service that
meets and satisfies the demands of many consumers.
(2) Each year, approximately 2,300,000 United States
households enter into rental-purchase transactions and over a
5-year period approximately 4,900,000 United States households
will do so.
(3) Competition among the various firms engaged in the
extension of rental-purchase transactions would be strengthened
by informed use of rental-purchase transactions.
(4) The informed use of rental-purchase transactions results
from an awareness of the cost thereof by consumers.
(b) Purpose.--The purpose of this title is to assure the availability
of rental-purchase transactions and to assure simple, meaningful, and
consistent disclosure of rental-purchase terms so that consumers will
be able to more readily compare the available rental-purchase terms and
avoid uninformed use of rental-purchase transactions, and to protect
consumers against unfair rental-purchase practices.
SEC. 3. CONSUMER CREDIT PROTECTION ACT.
The Consumer Credit Protection Act is amended by adding at the end
the following new title:
``TITLE X--RENTAL-PURCHASE TRANSACTIONS
``Sec. 1001. Definitions.
``Sec. 1002. Exempted transactions.
``Sec. 1003. General disclosure requirements.
``Sec. 1004. Rental-purchase disclosures.
``Sec. 1005. Other agreement provisions.
``Sec. 1006. Right to acquire ownership.
``Sec. 1007. Prohibited provisions.
``Sec. 1008. Statement of accounts.
``Sec. 1009. Renegotiations and extensions.
``Sec. 1010. Point-of-rental disclosures.
``Sec. 1011. Rental-purchase advertising.
``Sec. 1012. Civil liability.
``Sec. 1013. Additional grounds for civil liability.
``Sec. 1014. Liability of assignees.
``Sec. 1015. Regulations.
``Sec. 1016. Enforcement.
``Sec. 1017. Criminal liability for willful and knowing
violation.
``Sec. 1018. Relation to other laws.
``Sec. 1019. Effect on government agencies.
``Sec. 1020. Compliance date.
``SEC. 1001. DEFINITIONS.
``For purposes of this title, the following definitions shall apply:
``(1) Advertisement.--The term `advertisement' means a
commercial message in any medium that promotes, directly or
indirectly, a rental-purchase agreement but does not include
price tags, window signs, or other in-store merchandising aids.
``(2) Agricultural purpose.--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) Board.--The term `Board' means the Board of Governors
of the Federal Reserve System.
``(4) Cash price.--The term `cash price' means the price at
which a merchant, in the ordinary course of business, offers to
sell for cash the property that is the subject of the rental-
purchase transaction.
``(5) Consumer.--The term `consumer' means a natural person
who is offered or enters into a rental-purchase agreement.
``(6) Date of consummation.--The term `date of consummation'
means the date on which a consumer becomes contractually
obligated under a rental-purchase agreement.
``(7) Initial payment.--The term `initial payment' means the
amount to be paid before or at the consummation of the
agreement or the delivery of the property if delivery occurs
after consummation, including the rental payment; service,
processing, or administrative charges; delivery fee; refundable
security deposit; taxes; mandatory fees or charges; and any
optional fees or charges agreed to by the consumer.
``(8) Merchant.--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 payment under the agreement is payable.
``(9) Payment schedule.--The term `payment schedule' means
the amount and timing of the periodic payments and the total
number of all periodic payments that the consumer will make if
the consumer acquires ownership of the property by making all
periodic payments.
``(10) Periodic payment.--The term `periodic payment' means
the total payment a consumer will make for a specific rental
period after the initial payment, including the rental payment,
taxes, mandatory fees or charges, and any optional fees or
charges agreed to by the consumer.
``(11) Property.--The term `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.
``(12) Rental payment.--The term `rental payment' means rent
required to be paid by a consumer for the possession and use of
property for a specific rental period, but does not include
taxes or any fees or charges.
``(13) Rental period.--The term `rental period' means a week,
month, or other specific period of time, during which the
consumer has a right to possess and use property that is the
subject of a rental-purchase agreement after paying the rental
payment and any applicable taxes for such period.
``(14) Rental-purchase agreement.--
``(A) In general.--The term `rental-purchase
agreement' means a contract in the form of a bailment
or lease for the use of property by a consumer for an
initial period of 4 months or less, that is renewable
with each payment by the consumer, and that permits but
does not obligate the consumer to become the owner of
the property.
``(B) Exclusions.--The term `rental-purchase
agreement' does not include--
``(i) a credit sale (as defined in section
103(g) of the Truth in Lending Act);
``(ii) a consumer lease (as defined in
section 181(1) of such Act); or
``(iii) a transaction giving rise to a debt
incurred in connection with the business of
lending money or a thing of value.
``(15) Rental-purchase cost.--
``(A) In general.--For purposes of sections 1010 and
1011, the term `rental-purchase cost' means the sum of
all rental payments and mandatory fees or charges
imposed by the merchant as a condition of entering into
a rental-purchase agreement or acquiring ownership of
property under a rental-purchase agreement, such as the
following:
``(i) Service, processing, or administrative
charge.
``(ii) Fee for an investigation or credit
report.
``(iii) Charge for delivery required by the
merchant.
``(B) Excluded items.--The following fees or charges
shall not be taken into account in determining the
rental-purchase cost with respect to a rental-purchase
transaction:
``(i) Fees and charges prescribed by law,
which actually are or will be paid to public
officials or government entities, such as sales
tax.
``(ii) Fees and charges for optional products
and services offered in connection with a
rental-purchase agreement.
``(16) State.--The term `State' means any State of the United
States, the District of Columbia, any territory of the United
States, Puerto Rico, Guam, American Samoa, the Trust Territory
of the Pacific Islands, the Virgin Islands, and the Northern
Mariana Islands.
``(17) Total cost.--The term `total cost' means the sum of
the initial payment and all periodic payments in the payment
schedule to be paid by the consumer to acquire ownership of the
property that is the subject of the rental-purchase agreement.
``SEC. 1002. EXEMPTED TRANSACTIONS.
``This title shall 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) Recipient of Disclosure.--A merchant shall disclose to any
person who will be a signatory to a rental-purchase agreement the
information required by sections 1004 and 1005.
``(b) Timing of Disclosure.--The disclosures required under sections
1004 and 1005 shall be made before the consummation of the rental-
purchase agreement and clearly and conspicuously in writing as part of
the rental-purchase agreement to be signed by the consumer.
``(c) Clearly and conspicuously.--As used in this section, the term
`clearly and conspicuously' means that information required to be
disclosed to the consumer shall be worded plainly and simply, and
appear in a type size, prominence, and location as to be readily
noticeable, readable, and comprehensible to an ordinary consumer.
``SEC. 1004. RENTAL-PURCHASE DISCLOSURES.
``(a) In General.--For each rental-purchase agreement, the merchant
shall disclose to the consumer the following, to the extent applicable:
``(1) The date of the consummation of the rental-purchase
transaction and the identities of the merchant and the
consumer.
``(2) A brief description of the rental property, which shall
be sufficient to identify the property to the consumer,
including an identification or serial number, if applicable,
and a statement indicating whether the property is new or used.
``(3) A description of any fee, charge or penalty, in
addition to the periodic payment, that the consumer may be
required to pay under the agreement, which shall be separately
identified by type and amount.
``(4) A clear and conspicuous statement that the transaction
is a rental-purchase agreement and that the consumer will not
obtain ownership of the property until the consumer has paid
the total dollar amount necessary to acquire ownership.
``(5) The amount of any initial payment, which includes the
first periodic payment, and the total amount of any fees,
taxes, or other charges, required to be paid by the consumer.
``(6) The amount of the cash price of the property that is
the subject of the rental-purchase agreement, and, if the
agreement involves the rental of 2 or more items as a set (as
may be defined by the Board in regulation) a statement of the
aggregate cash price of all items shall satisfy this
requirement.
``(7) The amount and timing of periodic payments, and the
total number of periodic payments necessary to acquire
ownership of the property under the rental-purchase agreement.
``(8) The total cost, using that term, and a brief
description, such as `This is the amount you will pay the
merchant if you make all periodic payments to acquire ownership
of the property.'.
``(9) A statement of the consumer's right to terminate the
agreement without paying any fee or charge not previously due
under the agreement by voluntarily surrendering or returning
the property in good repair upon expiration of any lease term.
``(10) Substantially the following statement: `OTHER
IMPORTANT TERMS: See your rental-purchase agreement for
additional important information on early termination
procedures, purchase option rights, responsibilities for loss,
damage or destruction of the property, warranties, maintenance
responsibilities, and other charges or penalties you may
incur.'.
``(b) Form of Disclosure.--The disclosures required by paragraphs (4)
through (10) of subsection (a) shall be segregated from other
information at the beginning of the rental-purchase agreement and shall
contain only directly related information, and shall be identified in
boldface, upper-case letters as follows: `IMPORTANT RENTAL-PURCHASE
DISCLOSURES'.
``(c) Disclosure Requirements Relating to Insurance Premiums and
Liability Waivers.--
``(1) In general.--A merchant shall clearly and conspicuously
disclose in writing to the consumer before the consummation of
a rental-purchase agreement that the purchase of leased
property insurance or liability waiver coverage is not required
as a condition for entering into the rental-purchase agreement.
``(2) Affirmative written request after cost disclosure.--A
merchant may provide insurance or liability waiver coverage,
directly or indirectly, in connection with a rental-purchase
transaction only if--
``(A) the merchant clearly and conspicuously
discloses to the consumer the cost of each component of
such coverage before the consummation of the rental-
purchase agreement; and
``(B) the consumer signs an affirmative written
request for such coverage after receiving the
disclosures required under subparagraph paragraph (A)
of this paragraph and paragraph (1).
``(d) Accuracy of Disclosure.--
``(1) In general.--The disclosures required to be made under
subsection (a) shall be accurate as of the date the disclosures
are made, based on the information available to the merchant.
``(2) Information subsequently rendered inaccurate.--If
information required to be disclosed under subsection (a) is
subsequently rendered inaccurate as a result of any agreement
between the merchant and the consumer subsequent to the
delivery of the required disclosures, the resulting inaccuracy
shall not constitute a violation of this title.
``SEC. 1005. OTHER AGREEMENT PROVISIONS.
``(a) In General.--Each rental-purchase agreement shall--
``(1) provide a statement specifying whether the merchant or
the consumer is responsible for loss, theft, damage, or
destruction of the property;
``(2) provide a statement specifying whether the merchant or
the consumer is responsible for maintaining or servicing the
property, together with a brief description of the
responsibility;
``(3) provide that the consumer may terminate the agreement
without paying any charges not previously due under the
agreement by voluntarily surrendering or returning the property
that is the subject of the agreement upon expiration of any
rental period;
``(4) contain a provision for reinstatement of the agreement,
which at a minimum--
``(A) permits a consumer who fails to make a timely
rental payment to reinstate the agreement, without
losing any rights or options which exist under the
agreement, by the payment of all past due rental
payments and any other charges then due under the
agreement and a payment for the next rental period
within 7 business days after failing to make a timely
rental payment if the consumer pays monthly, or within
3 business days after failing to make a timely rental
payment 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 60 days after the date of the
return or surrender of the property by the payment of
all amounts previously due under the agreement, any
applicable fees, and a payment for the next rental
period;
``(C) if the consumer has paid 50 percent or more of
the total cost necessary to acquire ownership 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 120 days after the date of the
return of the property by the payment of all amounts
previously due under the agreement, any applicable
fees, and a payment for the next rental period; and
``(D) permits the consumer, upon reinstatement of the
agreement to receive the same property, if available,
that was the subject of the rental-purchase agreement,
or if the same property is not available, a substitute
item of comparable quality and condition may be
provided to the consumer; except that, the Board may,
by regulation or order, exempt any independent small
business (as defined by the Board by regulation) from
the requirement of providing the same or comparable
product during the extended reinstatement period
provided in subparagraph (C), if the Board determines,
taking into account such standards as the Board
determines to be appropriate, that the reinstatement
right provided in such subparagraph would provide
excessive hardship for such independent small business.
``(5) provide a statement specifying the terms under which
the consumer shall acquire ownership of the property that is
the subject of the rental-purchase agreement either by payment
of the total cost to acquire ownership, as provided in section
1006, or by exercise of any early purchase option provided in
the rental-purchase agreement;
``(6) provide a statement 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; and
``(7) provide, to the extent applicable, a description of any
grace period for making any periodic payment, the amount of any
security deposit, if any, to be paid by the consumer upon
initiation of the rental-purchase agreement, and the terms for
refund of such security deposit to the consumer upon return,
surrender or purchase of the property.
``(b) Repossession During Reinstatement Period.--Subsection (a)(4)
shall not be construed so as to prevent a merchant from attempting to
repossess property during the reinstatement period pursuant to
subsection (a)(4)(A), but such a repossession does not affect the
consumer's right to reinstate.
``SEC. 1006. RIGHT TO ACQUIRE OWNERSHIP.
``(a) In General.--The consumer shall acquire ownership of the
property that is the subject of the rental-purchase agreement, and the
rental-purchase agreement shall terminate, upon compliance by the
consumer with the requirements of subsection (b) or any early payment
option provided in the rental purchase agreement, and upon payment of
any past due payments and fees, as permitted in regulation by the
Board.
``(b) Payment of Total Cost.--The consumer shall acquire ownership of
the rental property upon payment of the total cost of the rental-
purchase agreement, as such term is defined in section 1001(17), and as
disclosed to the consumer in the rental-purchase agreement pursuant to
section 1004(a).
``(c) Additional Fees Prohibited.--A merchant shall not require the
consumer to pay, as a condition for acquiring ownership of the property
that is the subject of the rental-purchase agreement, any fee or charge
in addition to, or in excess of, the regular periodic payments required
by subsection (b), or any early purchase option amount provided in the
rental-purchase agreement, as applicable. A requirement that the
consumer pay an unpaid late charge or other fee or charge which the
merchant has previously billed to the consumer shall not constitute an
additional fee or charge for purposes of this subsection.
``(d) Transfer of Ownership Rights.--Upon payment by the consumer of
all payments necessary to acquire ownership under subsection (b) or any
early purchase option amount provided in the rental-purchase agreement,
as appropriate, the merchant shall--
``(1) deliver, or mail to the consumer's last known address,
such documents or other instruments, which the Board has
determined by regulation, are necessary to acknowledge full
ownership by the consumer of the property acquired pursuant to
the rental-purchase agreement; and
``(2) transfer to the consumer the unexpired portion of any
warranties provided by the manufacturer, distributor, or seller
of the property, which shall apply as if the consumer were the
original purchaser of the property, except where such transfer
is prohibited by the terms of the warranty.
``SEC. 1007. PROHIBITED PROVISIONS.
``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;
``(5) a provision requiring the waiver of any legal claim or
remedy created by this title or other provision of Federal or
State law;
``(6) a provision requiring the consumer, in the event the
property subject to the rental-purchase agreement is lost,
stolen, damaged, or destroyed, to pay an amount in excess of
the least of--
``(A) the fair market value of the property, as
determined by the Board in regulation;
``(B) any early purchase option amount provided in
the rental-purchase agreement; or
``(C) the actual cost of repair, as appropriate;
``(7) a provision authorizing the merchant, or a person
acting on behalf of the merchant, to enter the consumer's
dwelling or other premises without obtaining the consumer's
consent or to commit any breach of the peace in connection with
the repossession of the rental property or the collection of
any obligation or alleged obligation of the consumer arising
out of the rental-purchase agreement;
``(8) a provision requiring the purchase of insurance or
liability damage waiver to cover the property that is the
subject of the rental-purchase agreement, except as permitted
by the Board in regulation;
``(9) a provision requiring the consumer to pay more than 1
late fee or charge for an unpaid or delinquent periodic
payment, regardless of the period in which the payment remains
unpaid or delinquent, or to pay a late fee or charge for any
periodic payment because a previously assessed late fee has not
been paid in full.
``SEC. 1008. STATEMENT OF ACCOUNTS.
``Upon request of a consumer, a merchant shall provide a statement of
the consumer's account. If a consumer requests a statement for an
individual account more than 4 times in any 12-month period, the
merchant may charge a reasonable fee for the additional statements.
``SEC. 1009. RENEGOTIATIONS AND EXTENSIONS.
``(a) Renegotiations.--A renegotiation occurs when a rental-purchase
agreement is satisfied and replaced by a new agreement undertaken by
the same consumer. A renegotiation requires new disclosures, except as
provided in subsection (c).
``(b) Extensions.--An extension is an agreement by the consumer and
the merchant, to continue an existing rental-purchase agreement beyond
the original end of the payment schedule, but does not include a
continuation that is the result of a renegotiation.
``(c) Exceptions.--New disclosures are not required for the
following, even if they meet the definition of a renegotiation or an
extension:
``(1) A reduction in payments.
``(2) A deferment of 1 or more payments.
``(3) The extension of a rental-purchase agreement.
``(4) The substitution of property with property that has a
substantially equivalent or greater economic value provided the
rental-purchase cost does not increase.
``(5) The deletion of property in a multiple-item agreement.
``(6) A change in rental period provided the rental-purchase
cost does not increase.
``(7) An agreement resulting from a court proceeding.
``(8) Any other event described in regulations prescribed by
the Board.
``SEC. 1010. POINT-OF-RENTAL DISCLOSURES.
``(a) In General.--For any item of property or set of items displayed
or offered for rental-purchase, the merchant shall display on or next
to the item or set of items a card, tag, or label that clearly and
conspicuously discloses the following:
``(1) A brief description of the property.
``(2) Whether the property is new or used.
``(3) The cash price of the property.
``(4) The amount of each rental payment.
``(5) The total number of rental payments necessary to
acquire ownership of the property.
``(6) The rental-purchase cost.
``(b) Form of Disclosure.--
``(1) In general.--A merchant may make the disclosure
required by subsection (a) in the form of a list or catalog
which is readily available to the consumer at the point of
rental if the merchandise is not displayed in the merchant's
showroom or if displaying a card, tag, or label would be
impractical due to the size of the merchandise.
``(2) Clearly and conspicuously.--As used in this section,
the term `clearly and conspicuously' means that information
required to be disclosed to the consumer shall appear in a type
size, prominence, and location as to be noticeable, readable,
and comprehensible to an ordinary consumer.
``SEC. 1011. RENTAL-PURCHASE ADVERTISING.
``(a) In General.--If an advertisement for a rental-purchase
transaction refers to or states the amount of any payment for any
specific item or set of items, the merchant making the advertisement
shall also clearly and conspicuously state in the advertisement the
following for the item, or set of items, advertised:
``(1) The transaction advertised is a rental-purchase
agreement.
``(2) The amount, timing, and total number of rental payments
necessary to acquire ownership under the rental-purchase
agreement.
``(3) The amount of the rental-purchase cost.
``(4) To acquire ownership of the property the consumer must
pay the rental-purchase cost plus applicable taxes.
``(5) Whether the stated payment amount and advertised
rental-purchase cost is for new or used property.
``(b) Prohibition.--An advertisement for a rental-purchase agreement
shall not state or imply that a specific item, or set of items, is
available at specific amounts or terms unless the merchant usually and
customarily offers, or will offer, the item or set of items at the
stated amounts or terms.
``(c) Clearly and Conspicuously.--
``(1) In general.--For purposes of this section, the term
`clearly and conspicuously' means that required disclosures
shall be presented in a type, size, shade, contrast,
prominence, location, and manner, as applicable to different
mediums for advertising, so as to be readily noticeable and
comprehensible to the ordinary consumer.
``(2) Regulatory guidance.--The Board shall prescribe
regulations on principles and factors to meet the clear and
conspicuous standard as appropriate to print, video, audio, and
computerized advertising, reflecting the principles and factors
typically applied in each medium by the Federal Trade
Commission.
``(3) 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, video, or print
technique shall be used that is likely to obscure or detract
significantly from the communication of the disclosures.
``SEC. 1012. CIVIL LIABILITY.
``(a) In General.--Except as otherwise provided in section 1013, any
merchant who fails to comply with any requirement of this title with
respect to any consumer is liable to such consumer as provided for
leases in section 130. For purposes of this section, the term
`creditor' as used in section 130 shall include a `merchant', as
defined in section 1001.
``(b) Jurisdiction of Courts; Limitation on Actions.--
``(1) In general.--Notwithstanding section 130(e), any action
under this section may be brought in any United States district
court, or in any other court of competent jurisdiction, before
the end of the 1-year period beginning on the date the last
payment was made by the consumer under the rental-purchase
agreement.
``(2) Recoupment or set-off.--This subsection shall not bar a
consumer from asserting a violation of this title in an action
to collect an obligation arising from a rental-purchase
agreement, which was brought after the end of the 1-year period
described in paragraph (1) as a matter of defense by recoupment
or set-off in such action, except as otherwise provided by
State law.
``SEC. 1013. ADDITIONAL GROUNDS FOR CIVIL LIABILITY.
``(a) Individual Cases With Actual Damages.--Any merchant who fails
to comply with any requirements imposed under section 1010 or 1011 with
respect to any consumer who suffers actual damage from the violation
shall be liable to such consumer as provided in section 130.
``(b) Pattern or Practice of Violations.--If a merchant engages in a
pattern or practice of violating any requirement imposed under section
1010 or 1011, the Federal Trade Commission or an appropriate State
attorney general, in accordance with section 1016, may initiate an
action to enforce sanctions against the merchant, including--
``(1) an order to cease and desist from such practices; and
``(2) a civil money penalty of such amount as the court may
impose, based on such factors as the court may determine to be
appropriate.
``SEC. 1014. LIABILITY OF ASSIGNEES.
``(a) Assignees Included.--For purposes of section 1013, and this
section, the term `merchant' includes an assignee of a merchant.
``(b) Liabilities of Assignees.--
``(1) Apparent violation.--An action under section 1012 or
1013 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.
``(2) Apparent violation defined.--For purposes of this
subsection, a violation that is 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.
``(3) Involuntary assignment.--An assignee has no liability
in a case in which the assignment is involuntary.
``(4) Rule of construction.--No provision of this section
shall be construed as limiting or altering the liability under
section 1012 or 1013 of a merchant assigning a rental-purchase
agreement.
``(b) Proof of Disclosure.--In an action by or against an assignee,
the consumer's written acknowledgment of receipt of a disclosure, made
as part of the rental-purchase agreement, 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. 1015. REGULATIONS.
``(a) In General.--The Board shall prescribe regulations as necessary
to carry out the purposes of this title, to prevent its circumvention,
and to facilitate compliance with its requirements.
``(b) Model Disclosure Forms.--The Board may publish model disclosure
forms and clauses for common rental-purchase agreements to facilitate
compliance with the disclosure requirements of this title and to aid
the consumer in understanding the transaction by utilizing readily
understandable language to simplify the technical nature of the
disclosures. In devising such forms, the Board shall consider the use
by merchants of data processing or similar automated equipment. Nothing
in this title may be construed to require a merchant to use any such
model form or clause prescribed by the Board under this section. A
merchant shall be deemed to be in compliance with the requirement to
provide disclosure under section 1003(a) if the merchant--
``(1) uses any appropriate model form or clause as published
by the Board; or
``(2) uses any such model form or clause and changes it by--
``(A) deleting any information which is not required
by this title; or
``(B) rearranging the format, if in making such
deletion or rearranging the format, the merchant does
not affect the substance, clarity, or meaningful
sequence of the disclosure.
``(c) Effective Date of Regulations.--Any regulation prescribed by
the Board, or any amendment or interpretation thereof, shall not be
effective before the October 1 that follows the date of publication of
the regulation in final form by at least 6 months. The Board may at its
discretion lengthen that period of time to permit merchants to adjust
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 prescribed disclosure requirement
prior to its effective date.
``SEC. 1016. ENFORCEMENT.
``(a) Federal Enforcement.--Compliance with the requirements imposed
under this title shall be enforced under the Federal Trade Commission
Act (15 U.S.C. 41 et seq.), and a violation of any requirements imposed
under this title shall be deemed a violation of a requirement imposed
under that Act. All of the functions and powers of the Federal Trade
Commission under the Federal Trade Commission Act are available to the
Commission to enforce compliance by any person with the requirements of
this title, irrespective of whether that person is engaged in commerce
or meets any other jurisdictional test in the Federal Trade Commission
Act.
``(b) State Enforcement.--
``(1) In general.--An action to enforce the requirements
imposed by this title may also be brought by the appropriate
State attorney general in any appropriate United States
district court, or any other court of competent jurisdiction.
``(2) Prior written notice.--
``(A) In general.--The State attorney general shall
provide prior written notice of any such civil action
to the Federal Trade Commission and shall provide the
Commission with a copy of the complaint.
``(B) Emergency action.--If prior notice is not
feasible, the State attorney general shall provide
notice to the Commission immediately upon instituting
the action.
``(3) FTC intervention.--The Commission may--
``(A) intervene in the action;
``(B) upon intervening--
``(i) remove the action to the appropriate
United States district court, if it was not
originally brought there; and
``(ii) be heard on all matters arising in the
action; and
``(C) file a petition for appeal.
``SEC. 1017. CRIMINAL LIABILITY FOR WILLFUL AND KNOWING VIOLATION.
``Whoever willfully and knowingly gives false or inaccurate
information or fails to provide information which he is required to
disclose under the provisions of this title or any regulation issued
thereunder shall be subject to the penalty provisions as provided in
section 112.
``SEC. 1018. RELATION TO OTHER LAWS.
``(a) Relation to State Law.--
``(1) No effect on consistent state laws.--Except as
otherwise provided in subsection (b), this title does not
annul, alter, or affect in any manner the meaning, scope or
applicability of the laws of any State relating to rental-
purchase agreements, except to the extent those laws are
inconsistent with any provision of this title, and then only to
the extent of the inconsistency.
``(2) Determination of inconsistency.--Upon its own motion or
upon the request of an interested party, which is submitted in
accordance with procedures prescribed in regulations of the
Board, the Board shall determine whether any such inconsistency
exists. If the Board determines that a term or provision of a
State law is inconsistent, merchants located in that State need
not follow such term or provision and shall incur no liability
under the law of that State for failure to follow such term or
provision, notwithstanding that such determination is
subsequently amended, rescinded, or determined by judicial or
other authority to be invalid for any reason.
``(3) Greater protection under state law.--Except as provided
in subsection (b), for purposes of this section, a term or
provision of a State law is not inconsistent with the
provisions of this title if the term or provision affords
greater protection and benefit to the consumer than the
protection and benefit provided under this title as determined
by the Board, on its own motion or upon the petition of any
interested party.
``(b) State Laws Relating to Characterization of Transaction.--
Notwithstanding the provisions of subsection (a), this title shall
supersede any State law to the extent that such law--
``(1) regulates a rental-purchase agreement as a security
interest, credit sale, retail installment sale, conditional
sale or any other form of consumer credit, or that imputes to a
rental-purchase agreement the creation of a debt or extension
of credit, or
``(2) requires the disclosure of a percentage rate
calculation, including a time-price differential, an annual
percentage rate, or an effective annual percentage rate.
``(c) Relation to Federal Trade Commission Act.--No provision of this
title shall be construed as limiting, superseding, or otherwise
affecting the applicability of the Federal Trade Commission Act to any
merchant or rental-purchase transaction.
``SEC. 1019. 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.
``SEC. 1020. COMPLIANCE DATE.
``Compliance with this title shall not be required until 6 months
after the date of the enactment of the Consumer Rental Purchase
Agreement Act. In any case, merchants may comply with this title at any
time after such date of enactment.''.
Purpose and Summary
The purpose of the Consumer Rental Purchase Agreement Act
is to set a ``Federal floor'' for consumer protection in
rental-purchase transactions. Most States currently regulate
rental-purchase transactions as leases; however, the scope and
consumer protection requirements of these laws vary
significantly by State. The bill improves consumer protections
in 32 States, while allowing other States to adopt more
stringent protections.
Currently, there is no Federal oversight or regulation of
the rent to own industry. This bill amends the Consumer Credit
Protection Act (CCPA) to provide such oversight and regulation.
It provides meaningful and consistent disclosure of all rental-
purchase agreement terms and provides substantive rights to
consumers under these agreements. This legislation provides a
uniform method of disclosing the cost of the rental-purchase
transactions in advertisements, product tags, and rental-
purchase agreements; it would fill disclosure gaps that exist
in many State laws and provide important substantive consumer
protections. It would also ensure consistent treatment of the
transaction as a lease and not a credit sale.
Background and Need for Legislation
In April 2000, the Federal Trade Commission (FTC) issued a
staff report entitled, ``Survey of Rent-to-Own Customers''
which concluded that potential rental-purchase customers should
have clear and accurate information about the total cost of the
transaction in order to allow customers to compare rental-
purchase transactions to other alternatives. The FTC also noted
that inadequacies exist in many State rental-purchase
disclosure laws. This bill cures those inadequacies.
Federal legislation to regulate this industry has been
considered by Congress for more than a decade. Prior attempts
to pass legislation failed largely over the issue of the
appropriate level of consumer protections as part of a package
that classifies these transactions as leases, as opposed to
credit sales. The Consumer Rental Purchase Agreement Act
addresses these concerns by adding consumer protections that
are more substantive than prior bills and are in line with a
majority of the States that have adopted rental-purchase
legislation.
Hearings
The Subcommittee on Financial Institutions and Consumer
Credit held a hearing on July 12, 2001, on the Consumer Rental
Purchase Agreement Act. The following witnesses testified: Ms.
Dolores Smith, Director, Division of Consumer Affairs, Board of
Governors, Federal Reserve System; Mr. Howard Beales, Director,
Bureau of Consumer Protection, Federal Trade Commission; Mr.
David J. Gilles, Assistant Attorney General, Wisconsin
Department of Justice; Mr. James Byrd, Byrd's TV (d/b/a Curtis
Mathes, Inc.); Ms. Mamie Salazar Harper, Secretary, Board of
Directors, Association for Progressive Rental Organizations
(APRO); and Ms. Margot Saunders, Managing Attorney, National
Consumer Law Center.
Committee Consideration
The Subcommittee on Financial Institutions and Consumer
Credit met in open session on September 6 and October 28, 2001,
and approved H.R. 1701 for full Committee consideration, as
amended, by a record vote of 24 yeas and 4 nays, with 1 member
voting present.
The Committee on Financial Services met in open session on
June 26 and 27, 2002, and ordered H.R. 1701 reported to the
House with a favorable recommendation, with an amendment, by a
record vote of 29 yeas and 9 nays.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. A
motion by Mr. Oxley to report the bill to the House with a
favorable recommendation was agreed to by a record vote of 29
yeas and 9 nays (Record vote no. 51). The names of members
voting for and against follow:
YEAS NAYS
Mr. Oxley Mr. Ferguson
Mr. Leach Mr. LaFalce
Mr. Bereuter Mr. Frank
Mr. Bachus Ms. Waters
Mr. Castle Mr. Sanders
Mrs. Kelly Mrs. Maloney of New York
Mr. Gillmor Mr. Watt of North Carolina
Mr. Weldon of Florida Ms. Lee
Mr. Ryun of Kansas Mr. Capuano
Mr. LaTourette
Mr. Jones of North Carolina
Mrs. Biggert
Mr. Shays
Mr. Shadegg
Mr. Fossella
Mr. Gary G. Miller of California
Mr. Cantor
Mr. Grucci
Ms. Hart
Mr. Rogers of Michigan
Mr. Tiberi
Mr. Ackerman
Mr. Maloney of Connecticut
Ms. Hooley of Oregon
Mr. Sherman
Mr. Ford
Mr. Lucas of Kentucky
Mr. Shows
Mr. Clay
The following amendments were considered by record vote.
The names of Members voting for and against follow:
An amendment to the amendment in the nature of a substitute
by Ms. Waters, no. 1a, addressing the preemption of State law,
was not agreed to by a record vote of 15 yeas and 33 nays
(Record vote no. 46).
YEAS NAYS
Mr. Frank Mr. Oxley
Ms. Waters Mr. Leach
Mr. Sanders Mr. Bachus
Mrs. Maloney of New York Mr. Royce
Mr. Gutierrez Mr. Lucas of Oklahoma
Mr. Watt of North Carolina Mrs. Kelly
Mr. Bentsen Mr. Paul
Ms. Lee Mr. Gillmor
Mr. Mascara Mr. Cox
Ms. Schakowsky Mr. Weldon of Florida
Mr. Gonzalez Mr. Ryun of Kansas
Mrs. Jones of Ohio Mr. LaTourette
Mr. Capuano Mr. Manzullo
Mr. Clay Mr. Jones of North Carolina
Mr. Israel Mr. Ose
Mrs. Biggert
Mr. Toomey
Mr. Shays
Mr. Shadegg
Mr. Fossella
Mr. Gary G. Miller of California
Mr. Cantor
Mr. Grucci
Ms. Hart
Mrs. Capito
Mr. Rogers of Michigan
Mr. Tiberi
Mr. Kanjorski
Mr. Maloney of Connecticut
Ms. Hooley of Oregon
Mr. Sandlin
Mr. Moore
Mr. Lucas of Kentucky
An amendment to the amendment in the nature of a substitute
by Mr. Sanders, 1b, grandfathering existing State laws, was not
agreed to by a record vote of 15 yeas and 27 nays (Record vote
no. 47).
YEAS NAYS
Mr. Ferguson Mr. Oxley
Mr. LaFalce Mr. Leach
Ms. Waters Mr. Bereuter
Mr. Sanders Mr. Bachus
Mrs. Maloney of New York Mr. Castle
Mr. Watt of North Carolina Mr. Royce
Mr. Ackerman Mr. Lucas of Oklahoma
Mr. Bentsen Mrs. Kelly
Ms. Carson of Indiana Mr. Gillmor
Ms. Lee Mr. Weldon of Florida
Mr. Inslee Mr. Ryun of Kansas
Ms. Schakowsky Mr. Jones of North Carolina
Mrs. Jones of Ohio Mrs. Biggert
Mr. Capuano Mr. Shays
Mr. Crowley Mr. Fossella
Mr. Cantor
Mr. Grucci
Ms. Hart
Mrs. Capito
Mr. Rogers of Michigan
Mr. Tiberi
Mr. Kanjorski
Mr. Maloney of Connecticut
Mr. Moore
Mr. Lucas of Kentucky
Mr. Shows
Mr. Ross
An amendment to the amendment in the nature of a substitute
by Ms. Waters, 1c, prohibiting unfair or deceptive acts or
practices, was not agreed to by a record vote of 12 yeas and 20
nays (Record vote no. 48).
YEAS NAYS
Ms. Waters Mr. Oxley
Mr. Sanders Mr. Bereuter
Mrs. Maloney of New York Mr. Bachus
Mr. Watt of North Carolina Mr. Royce
Mr. Maloney of Connecticut Mrs. Kelly
Ms. Carson of Indiana Mr. Weldon of Florida
Ms. Lee Mr. LaTourette
Mr. Inslee Mr. Jones of North Carolina
Ms. Schakowsky Mrs. Biggert
Mr. Moore Mr. Fossella
Mrs. Jones of Ohio Mr. Gary G. Miller of California
Mr. Capuano Mr. Cantor
Mr. Grucci
Ms. Hart
Mr. Ferguson
Mr. Rogers of Michigan
Mr. Tiberi
Mr. Lucas of Kentucky
Mr. Shows
Mr. Ross
An amendment to the amendment in the nature of a substitute
by Ms. Waters, 1d, prohibiting rental-purchase merchants from
contractually allocating the responsibility for due care of the
rental merchandise to the consumer, was not agreed to by a
record vote of 12 yeas and 22 nays (Record vote no. 49).
YEAS NAYS
Ms. Waters Mr. Leach
Mr. Sanders Mr. Bereuter
Mrs. Maloney of New York Mr. Baker
Mr. Watt of North Carolina Mr. Bachus
Ms. Carson of Indiana Mr. Castle
Ms. Lee Mr. Royce
Mr. Inslee Mrs. Kelly
Ms. Schakowsky Mr. Weldon of Florida
Mr. Moore Mr. LaTourette
Mrs. Jones of Ohio Mr. Jones of North Carolina
Mr. Capuano Mrs. Biggert
Mr. Hinojosa Mr. Fossella
Mr. Gary G. Miller of California
Mr. Cantor
Mr. Grucci
Ms. Hart
Mr. Ferguson
Mr. Rogers of Michigan
Mr. Tiberi
Mr. Maloney of Connecticut
Mr. Lucas of Kentucky
Mr. Shows
An amendment to the amendment in the nature of a substitute
by Ms. Waters, no. 1f, requiring the rent to own industry to
disclose the manufacturer's suggested retail price of aproduct,
was not agreed to by a record vote of 10 yeas and 24 nays (Record vote
no. 50).
YEAS NAYS
Mr. LaFalce Mr. Oxley
Mr. Frank Mr. Leach
Ms. Waters Mr. Bereuter
Mr. Sanders Mr. Bachus
Mrs. Maloney of New York Mr. Castle
Mr. Watt of North Carolina Mrs. Kelly
Ms. Carson of Indiana Mr. Gillmor
Ms. Lee Mr. Weldon of Florida
Mr. Capuano Mr. LaTourette
Mr. Clay Mr. Jones of North Carolina
Mrs. Biggert
Mr. Shays
Mr. Shadegg
Mr. Fossella
Mr. Gary G. Miller of California
Mr. Cantor
Mr. Grucci
Ms. Hart
Mr. Ferguson
Mr. Rogers of Michigan
Mr. Tiberi
Mr. Maloney of Connecticut
Mr. Lucas of Kentucky
Mr. Shows
The following amendments were also considered by the
Committee:
An amendment in the nature of a substitute by Mr. Jones, of
North Carolina, no. 1, making various substantive and technical
changes to the bill, was agreed to by a voice vote, as amended.
An amendment to the amendment in the nature of a substitute
by Mr. Watt, no. 1e, clarifying the provision preempting any
State law that treats a rental-purchase transaction as a credit
sale, was agreed to by a voice vote.
An amendment to the amendment in the nature of a substitute
by Mr. LaFalce, no. 1g, making changes to the term ``cash
price'' and the determination of cash price and making changes
to the early purchase option section, was not agreed to by a
voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee held a hearing and made
findings that are reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
After enactment of this legislation, consumers will enjoy
increased protections in rental-purchase transactions through
the establishment of Federal minimum protections.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee finds that this
legislation would result in no new budget authority,
entitlement authority, or tax expenditures or revenues.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, July 10, 2002.
Hon. Michael G. Oxley,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1701, the Consumer
Rental Purchase Agreement Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Ken Johnson
(for federal costs), Greg Waring (for the state and local
impact), and Page Piper/Bach (for the private-sector impact).
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
H.R. 1701--Consumer Rental Purchase Agreement Act
Summary: H.R. 1701 would impose several restriction on
``rent-to-own'' transactions, wherein a consumer rents an item
for a short time and retains the option to buy the item at the
end of the rental period. For example, sellers would be
required to disclose certain information about the terms of the
rent-to-own contract and would be prohibited from assessing
most fees for such contracts.
Regulations to implement H.R. 1701 would be developed by
the Board of Governors of the Federal Reserve System. Also, the
Federal Trade Commission (FTC) would enforce the bill's
provisions under the authority provided by the Federal Trade
Commission Act, which allows the FTC to punish violations with
civil penalties. Finally, H.R. 1701 would create new criminal
penalties for merchants who knowingly fail to provide
information to rent-to-own consumers as required under the
bill.
Assuming appropriation of the necessary amounts, CBO
estimates that implementing H.R. 1701 would cost the FTC about
$650,000 a year. Because the bill would create new civil and
criminal penalties and would impose costs on the Federal
Reserve, we also estimate that the bill would have negligible
effects on both spending and revenues. Therefore, pay-as-you-go
procedures would apply.
H.R. 1701 contains intergovernmental mandates as defined in
the Unfunded Mandates Reform Act (UMRA), but CBO estimates that
complying with the mandates would result in no costs to state,
local, or tribal governments. Therefore, the threshold
established by UMRA ($58 million in 2002, adjusted annually for
inflation) would not be exceeded.
H.R. 1701 would impose private-sector mandates, as defined
by UMRA, but CBO estimates that the direct cost of those
mandates would fall before the annual threshold established by
UMRA ($115 million in 2002, adjusted annually for inflation).
Basis of estimate: According to the FTC, the agency would
need to hire about five new attorneys and investigators to
enforce the restrictions that would be imposed by H.R. 1701.
CBO estimates that these new hires would cost about $650,000 a
year, subject to the availability of appropriated funds.
The regulations to implement this bill would be written by
the Federal Reserve. Budgetary effects on the Federal Reserve
are recorded in the budget as changes in revenues (governmental
receipts). Based on information from the Federal Reserve, CBO
estimates that enacting H.R. 1701 would reduce such revenues by
less than $500,000 a year.
Because those who violate the provisions of H.R. 1701 could
be subject to civil and criminal fines, the federal government
might collect additional fines if the bill is enacted.
Collections of civil and criminal penalties are classified in
the budget as governmental receipts (revenues). Based on
information from the FTC, however, CBO estimates that any such
increase in collections would be less than $500,000 per year.
Collections of criminal fines are deposited in the Crime
Victims Fund and spent in subsequent years. Because any
increase in direct spending would equal the amount of fines
collected (with a lag), the additional direct spending also
would be negligible.
Pay-as-you-go considerations: The Balanced Budget and
Emergency Deficit Control Act sets up pay-as-you-go procedures
for legislation affecting direct spending or receipts. Although
H.R. 1701 would affect both direct spending and receipts, CBO
estimates that the net effects would be insignificant.
Estimated impact on state, local, and tribal governments:
H.R. 1701 would annul state laws that are inconsistent with
federal regulations for rental-purchase agreements. Merchants
would be held harmless from liability under the state law in
question. The bill also would supersede any state law that
treats a rental-purchase agreement as a form of consumer credit
or a creation of debt, and states would no longer be able to
make an independent determination of the nature of the rental-
purchase agreement. Such preemptions would be intergovernmental
mandates as defined in UMRA. CBO estimates, however, that the
preemptions would not affect the budgets of state, local, or
tribal governments because they would impose no duty on states
that would result in additional spending. Therefore, the
threshold established by UMRA ($58 million in 2002, adjusted
annually for inflation) would not be exceeded.
Estimated impact on the private sector: H.R. 1701 would
impose private-sector mandates, as defined by UMRA, but CBO
estimates that the direct cost of those mandates would fall
below the annual threshold established by UMRA ($115 million in
2002, adjusted annually for inflation).
The bill would require merchants who provide the use of
property through a rental-purchase agreement to make certain
disclosures to consumers in the rental-purchase agreements and
in advertisements. Under the bill, such merchants also would be
required to provide merchandise labeling and to furnish
statements of account to customers. In addition, the bill would
prohibit those merchants from charging certain additional fees
and from entering the premises of customers to reclaim property
without the customer's permission. Currently, 47 states require
some type of disclosure and labeling for such merchants.
According to industry representatives, the additional cost for
all such merchants to provide the required disclosures and
adhere to the prohibitions in the bill would be small.
Therefore, CBO estimates that the direct cost to comply with
the mandates would fall below the annual threshold established
by UMRA ($115 million in 2002, adjusted annually for
inflation).
Estimate prepared by: Federal costs: Ken Johnson; impact on
the Federal Reserve: Andrew Shaw; impact on state, local, and
tribal governments: Greg Waring; impact on the private sector:
Paige Piper/Bach.
Estimate approved by: Robert A. Sunshine, Assistant
Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
general welfare of the United States) and clause 3 (relating to
the power to regulate interstate commerce).
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section establishes the short title of the bill, the
``Consumer Rental Purchase Agreement Act.''
Section 2. Findings and declaration of purpose
This section sets forth certain facts concerning the
rental-purchase industry and also declares the purposes of the
Act.
Section 3. Consumer Credit Protection Act
This section places the Act in The Consumer Credit
Protection Act by adding a new Title X to The Consumer Credit
Protection Act.
TITLE X--RENTAL PURCHASE TRANSACTIONS
Section 1001. Definitions
This section defines the following terms that are used in
the Act: advertisement, agricultural purpose, board, cash
price, consumer, date of consummation, initial payment,
merchant, payment schedule, periodic payment, property, rental
payment, rental period, rental purchase agreement, rental
purchase cost, State, and total cost.
Section 1002. Exempted transactions
This section clarifies that the Act applies to consumer
rental-purchase transactions, not transactions for business,
commercial, agricultural purposes, or those involving the
government.
Section 1003. General disclosure requirements
This section requires that the disclosures called for in
the Act be made to any person who signs a rental-purchase
agreement. It provides that the required disclosures be made
before the consummation of the rental-purchase agreement and
clearly and conspicuously in writing as part of the rental-
purchase agreement to be signed by the consumer.
Section 1004. Rental-purchase disclosures
This section enumerates the 10 disclosures that must be
made to consumers in a rental purchase agreement. It also
requires that the financial disclosures must be segregated from
the other disclosures and labeled ``Important Rental Purchase
Disclosures'' in boldface and uppercase.
In addition, the section requires a disclosure that
insurance or liability damage waiver is not mandatory. However,
a merchant may offer insurance or liability damage waiver if
the merchant discloses the cost of the coverage and the
consumer agrees to the coverage in writing after receiving the
disclosure.
This section provides that a disclosure that becomes
inaccurate in the future is not a violation unless it is the
result of merchant conduct without the consumer's consent and
not otherwise allowed by the rental-purchase agreement.
Section 1005. Other agreement provisions
This section enumerates additional items that must be
included in each rental-purchase agreement, including
termination terms, reinstatement rights, manufacturers warranty
and disclosure of late fees.
Section 1006. Right to acquire ownership
This section provides that if certain conditions are met,
the consumer shall acquire ownership of the property that is
the subject of the rental-purchase agreement. A merchant is
prohibited from requiring the consumer to pay additional fees
as a condition for acquiring ownership. Upon payment by the
consumer of all amounts necessary to acquire ownership, the
merchant shall transfer ownership rights.
Section 1007. Prohibited provisions
This section prohibits a rental-purchase agreement from
containing: a confession of judgment; a negotiable instrument;
a security interest in other property; a wage assignment; a
waiver of any claims or defenses. This section also prohibits
provisions requiring the consumer, in the event the rental-
purchase property is lost, stolen, damaged, or destroyed, to
pay an amount in excess of the least of: the fair market value
of the property; the early purchase-option amount; or the
actual cost of repair.
This section also prohibits a rental-purchase agreement
from containing provisions that: authorize the merchant, or a
person acting on behalf of the merchant, to enter the
consumer's dwelling without obtaining the consumer's consent or
to commit any breach of the peace in connection with the
repossession of the rental property or the collection of any
obligation or alleged obligation of the consumer arising out of
the rental-purchase agreement; require the purchase of
insurance or liability damage waiver to cover the property that
is the subject of the rental-purchase agreement; require the
consumer to pay more than 1 late fee or charge for an unpaid or
delinquent periodic payment, regardless of the period in which
the payment remains unpaid or delinquent, or to pay a late fee
or charge for any periodic payment because a previously
assessed late fee has not been paid in full.
Section 1008. Statement of accounts
This section requires the merchant to give the consumer a
statement of account four times every 12 months, without
charge, upon the consumer's request.
Section 1009. Renegotiations and extensions
This section provides that a renegotiation of a rental-
purchase agreement requires new disclosures. It also defines
the term ``extension'' to be an agreement by the consumer and
the merchant to continue an existing rental-purchase agreement
beyond the original end of the payment schedule. The section
also provides exceptions to the requirement that new
disclosures be made as a result of a renegotiation or
extension.
Section 1010. Point-of-rental disclosures
This section requires certain disclosures on price tags in
the store. It also allows disclosures to be made in the form of
a list or catalog if the rental-purchase merchandise is not
displayed in the store or if displaying a card, tag, or label
would be impractical due to the size of the merchandise.
Section 1011. Rental-purchase advertising
This section enumerates certain disclosures that are
required to be made in rental-purchase advertising if the
amount of any payment for any specific item appears in the
advertisement.
Section 1012. Civil liability
This section adopts criminal and civil liability provisions
modeled after the Truth in Lending Act's liability provisions.
Section 1013. Additional grounds for civil liability
This section provides that a merchant is liable for price
tag and advertising violations, if a consumer suffers actual
damages. In instances where a merchant engages in a pattern or
practice of price tag or advertising violations, the FTC and
State Attorney's General are authorized to enforce sanctions
against such merchant.
Section 1014. Liability of assignees
This section provides that the term ``merchant,'' includes
an assignee, but limits an assignee's liability to violations
apparent on the face of a rental-purchase agreement, and
provides that there is no liability when the assignment is
involuntary.
Section 1015. Regulations
This section directs the Federal Reserve Board to prescribe
regulations as necessary to carry out the purposes of the Act,
including publishing model forms. This section provides that a
merchant shall be deemed in compliance with the disclosure
requirements of the Act if the merchant uses the FRB's model
forms. The section establishes an effective date for any FRB
regulations.
Section 1016. Enforcement
This section provides that the FTC has enforcement
authority and declares that a violation of the Act is also a
violation of the FTC Act. It also allows States' Attorneys
General to enforce the Act in State or Federal court. In
addition, it allows the Federal Reserve Board to intervene in
any suit filed by a State Attorney General.
Section 1017. Criminal liability for willful and knowing violation
This section provides criminal liability for willful and
knowing violations of the Act.
Section 1018. Relation to other laws
This section provides a ``Federal floor.'' This Act does
not supersede any State laws relating to rental-purchase
agreements, except to the extent that they are inconsistent
with the provisions of this Act, and then only to the extent of
the inconsistency. A term or provision of a State law is not
inconsistent with the provisions of this Act if the protection
and benefit such law affords any consumer is greater than the
protection and benefit provided under this Act. It allows State
rental-purchase laws to provide greater consumer protection,
provided that no State law can characterize a rental-purchase
transaction as a credit sale, security interest, retail
installment sale, conditional sale, or any other form of
consumer credit, or require the disclosure of an interest rate
or similar calculation.
Section 1019. Effect on government agencies
This section provides that no civil liabilities shall arise
under this Act for Federal or State government entities.
Section 1020. Compliance date
This section requires compliance with the Act six months
after enactment.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
TITLE X OF THE CONSUMER CREDIT PROTECTION ACT
TITLE X--RENTAL-PURCHASE TRANSACTIONS
Sec. 1001. Definitions.
Sec. 1002. Exempted transactions.
Sec. 1003. General disclosure requirements.
Sec. 1004. Rental-purchase disclosures.
Sec. 1005. Other agreement provisions.
Sec. 1006. Right to acquire ownership.
Sec. 1007. Prohibited provisions.
Sec. 1008. Statement of accounts.
Sec. 1009. Renegotiations and extensions.
Sec. 1010. Point-of-rental disclosures.
Sec. 1011. Rental-purchase advertising.
Sec. 1012. Civil liability.
Sec. 1013. Additional grounds for civil liability.
Sec. 1014. Liability of assignees.
Sec. 1015. Regulations.
Sec. 1016. Enforcement.
Sec. 1017. Criminal liability for willful and knowing violation.
Sec. 1018. Relation to other laws.
Sec. 1019. Effect on government agencies.
Sec. 1020. Compliance date.
SEC. 1001. DEFINITIONS.
For purposes of this title, the following definitions shall
apply:
(1) Advertisement.--The term ``advertisement'' means
a commercial message in any medium that promotes,
directly or indirectly, a rental-purchase agreement but
does not include price tags, window signs, or other in-
store merchandising aids.
(2) Agricultural purpose.--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) Board.--The term ``Board'' means the Board of
Governors of the Federal Reserve System.
(4) Cash price.--The term ``cash price'' means the
price at which a merchant, in the ordinary course of
business, offers to sell for cash the property that is
the subject of the rental-purchase transaction.
(5) Consumer.--The term ``consumer'' means a natural
person who is offered or enters into a rental-purchase
agreement.
(6) Date of consummation.--The term ``date of
consummation'' means the date on which a consumer
becomes contractually obligated under a rental-purchase
agreement.
(7) Initial payment.--The term ``initial payment''
means the amount to be paid before or at the
consummation of the agreement or the delivery of the
property if delivery occurs after consummation,
including the rental payment; service, processing, or
administrative charges; delivery fee; refundable
security deposit; taxes; mandatory fees or charges; and
any optional fees or charges agreed to by the consumer.
(8) Merchant.--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 payment under the
agreement is payable.
(9) Payment schedule.--The term ``payment schedule''
means the amount and timing of the periodic payments
and the total number of all periodic payments that the
consumer will make if the consumer acquires ownership
of the property by making all periodic payments.
(10) Periodic payment.--The term ``periodic payment''
means the total payment a consumer will make for a
specific rental period after the initial payment,
including the rental payment, taxes, mandatory fees or
charges, and any optional fees or charges agreed to by
the consumer.
(11) Property.--The term ``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.
(12) Rental payment.--The term ``rental payment''
means rent required to be paid by a consumer for the
possession and use of property for a specific rental
period, but does not include taxes or any fees or
charges.
(13) Rental period.--The term ``rental period'' means
a week, month, or other specific period of time, during
which the consumer has a right to possess and use
property that is the subject of a rental-purchase
agreement after paying the rental payment and any
applicable taxes for such period.
(14) Rental-purchase agreement.--
(A) In general.--The term ``rental-purchase
agreement'' means a contract in the form of a
bailment or lease for the use of property by a
consumer for an initial period of 4 months or
less, that is renewable with each payment by
the consumer, and that permits but does not
obligate the consumer to become the owner of
the property.
(B) Exclusions.--The term ``rental-purchase
agreement'' does not include--
(i) a credit sale (as defined in
section 103(g) of the Truth in Lending
Act);
(ii) a consumer lease (as defined in
section 181(1) of such Act); or
(iii) a transaction giving rise to a
debt incurred in connection with the
business of lending money or a thing of
value.
(15) Rental-purchase cost.--
(A) In general.--For purposes of sections
1010 and 1011, the term ``rental-purchase
cost'' means the sum of all rental payments and
mandatory fees or charges imposed by the
merchant as a condition of entering into a
rental-purchase agreement or acquiring
ownership of property under a rental-purchase
agreement, such as the following:
(i) Service, processing, or
administrative charge.
(ii) Fee for an investigation or
credit report.
(iii) Charge for delivery required by
the merchant.
(B) Excluded items.--The following fees or
charges shall not be taken into account in
determining the rental-purchase cost with
respect to a rental-purchase transaction:
(i) Fees and charges prescribed by
law, which actually are or will be paid
to public officials or government
entities, such as sales tax.
(ii) Fees and charges for optional
products and services offered in
connection with a rental-purchase
agreement.
(16) State.--The term ``State'' means any State of
the United States, the District of Columbia, any
territory of the United States, Puerto Rico, Guam,
American Samoa, the Trust Territory of the Pacific
Islands, the Virgin Islands, and the Northern Mariana
Islands.
(17) Total cost.--The term ``total cost'' means the
sum of the initial payment and all periodic payments in
the payment schedule to be paid by the consumer to
acquire ownership of the property that is the subject
of the rental-purchase agreement.
SEC. 1002. EXEMPTED TRANSACTIONS.
This title shall 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) Recipient of Disclosure.--A merchant shall disclose to
any person who will be a signatory to a rental-purchase
agreement the information required by sections 1004 and 1005.
(b) Timing of Disclosure.--The disclosures required under
sections 1004 and 1005 shall be made before the consummation of
the rental-purchase agreement and clearly and conspicuously in
writing as part of the rental-purchase agreement to be signed
by the consumer.
(c) Clearly and conspicuously.--As used in this section, the
term ``clearly and conspicuously'' means that information
required to be disclosed to the consumer shall be worded
plainly and simply, and appear in a type size, prominence, and
location as to be readily noticeable, readable, and
comprehensible to an ordinary consumer.
SEC. 1004. RENTAL-PURCHASE DISCLOSURES.
(a) In General.--For each rental-purchase agreement, the
merchant shall disclose to the consumer the following, to the
extent applicable:
(1) The date of the consummation of the rental-
purchase transaction and the identities of the merchant
and the consumer.
(2) A brief description of the rental property, which
shall be sufficient to identify the property to the
consumer, including an identification or serial number,
if applicable, and a statement indicating whether the
property is new or used.
(3) A description of any fee, charge or penalty, in
addition to the periodic payment, that the consumer may
be required to pay under the agreement, which shall be
separately identified by type and amount.
(4) A clear and conspicuous statement that the
transaction is a rental-purchase agreement and that the
consumer will not obtain ownership of the property
until the consumer has paid the total dollar amount
necessary to acquire ownership.
(5) The amount of any initial payment, which includes
the first periodic payment, and the total amount of any
fees, taxes, or other charges, required to be paid by
the consumer.
(6) The amount of the cash price of the property that
is the subject of the rental-purchase agreement, and,
if the agreement involves the rental of 2 or more items
as a set (as may be defined by the Board in regulation)
a statement of the aggregate cash price of all items
shall satisfy this requirement.
(7) The amount and timing of periodic payments, and
the total number of periodic payments necessary to
acquire ownership of the property under the rental-
purchase agreement.
(8) The total cost, using that term, and a brief
description, such as ``This is the amount you will pay
the merchant if you make all periodic payments to
acquire ownership of the property.''.
(9) A statement of the consumer's right to terminate
the agreement without paying any fee or charge not
previously due under the agreement by voluntarily
surrendering or returning the property in good repair
upon expiration of any lease term.
(10) Substantially the following statement: ``OTHER
IMPORTANT TERMS: See your rental-purchase agreement for
additional important information on early termination
procedures, purchase option rights, responsibilities
for loss, damage or destruction of the property,
warranties, maintenance responsibilities, and other
charges or penalties you may incur.''.
(b) Form of Disclosure.--The disclosures required by
paragraphs (4) through (10) of subsection (a) shall be
segregated from other information at the beginning of the
rental-purchase agreement and shall contain only directly
related information, and shall be identified in boldface,
upper-case letters as follows: ``IMPORTANT RENTAL-PURCHASE
DISCLOSURES''.
(c) Disclosure Requirements Relating to Insurance Premiums
and Liability Waivers.--
(1) In general.--A merchant shall clearly and
conspicuously disclose in writing to the consumer
before the consummation of a rental-purchase agreement
that the purchase of leased property insurance or
liability waiver coverage is not required as a
condition for entering into the rental-purchase
agreement.
(2) Affirmative written request after cost
disclosure.--A merchant may provide insurance or
liability waiver coverage, directly or indirectly, in
connection with a rental-purchase transaction only if--
(A) the merchant clearly and conspicuously
discloses to the consumer the cost of each
component of such coverage before the
consummation of the rental-purchase agreement;
and
(B) the consumer signs an affirmative written
request for such coverage after receiving the
disclosures required under subparagraph
paragraph (A) of this paragraph and paragraph
(1).
(d) Accuracy of Disclosure.--
(1) In general.--The disclosures required to be made
under subsection (a) shall be accurate as of the date
the disclosures are made, based on the information
available to the merchant.
(2) Information subsequently rendered inaccurate.--If
information required to be disclosed under subsection
(a) is subsequently rendered inaccurate as a result of
any agreement between the merchant and the consumer
subsequent to the delivery of the required disclosures,
the resulting inaccuracy shall not constitute a
violation of this title.
SEC. 1005. OTHER AGREEMENT PROVISIONS.
(a) In General.--Each rental-purchase agreement shall--
(1) provide a statement specifying whether the
merchant or the consumer is responsible for loss,
theft, damage, or destruction of the property;
(2) provide a statement specifying whether the
merchant or the consumer is responsible for maintaining
or servicing the property, together with a brief
description of the responsibility;
(3) provide that the consumer may terminate the
agreement without paying any charges not previously due
under the agreement by voluntarily surrendering or
returning the property that is the subject of the
agreement upon expiration of any rental period;
(4) contain a provision for reinstatement of the
agreement, which at a minimum--
(A) permits a consumer who fails to make a
timely rental payment to reinstate the
agreement, without losing any rights or options
which exist under the agreement, by the payment
of all past due rental payments and any other
charges then due under the agreement and a
payment for the next rental period within 7
business days after failing to make a timely
rental payment if the consumer pays monthly, or
within 3 business days after failing to make a
timely rental payment 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 60 days after the date of the return
or surrender of the property by the payment of
all amounts previously due under the agreement,
any applicable fees, and a payment for the next
rental period;
(C) if the consumer has paid 50 percent or
more of the total cost necessary to acquire
ownership 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 120 days after the date of
the return of the property by the payment of
all amounts previously due under the agreement,
any applicable fees, and a payment for the next
rental period; and
(D) permits the consumer, upon reinstatement
of the agreement to receive the same property,
if available, that was the subject of the
rental-purchase agreement, or if the same
property is not available, a substitute item of
comparable quality and condition may be
provided to the consumer; except that, the
Board may, by regulation or order, exempt any
independent small business (as defined by the
Board by regulation) from the requirement of
providing the same or comparable product during
the extended reinstatement period provided in
subparagraph (C), if the Board determines,
taking into account such standards as the Board
determines to be appropriate, that the
reinstatement right provided in such
subparagraph would provide excessive hardship
for such independent small business;
(5) provide a statement specifying the terms under
which the consumer shall acquire ownership of the
property that is the subject of the rental-purchase
agreement either by payment of the total cost to
acquire ownership, as provided in section 1006, or by
exercise of any early purchase option provided in the
rental-purchase agreement;
(6) provide a statement 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; and
(7) provide, to the extent applicable, a description
of any grace period for making any periodic payment,
the amount of any security deposit, if any, to be paid
by the consumer upon initiation of the rental-purchase
agreement, and the terms for refund of such security
deposit to the consumer upon return, surrender or
purchase of the property.
(b) Repossession During Reinstatement Period.--Subsection
(a)(4) shall not be construed so as to prevent a merchant from
attempting to repossess property during the reinstatement
period pursuant to subsection (a)(4)(A), but such a
repossession does not affect the consumer's right to reinstate.
SEC. 1006. RIGHT TO ACQUIRE OWNERSHIP.
(a) In General.--The consumer shall acquire ownership of the
property that is the subject of the rental-purchase agreement,
and the rental-purchase agreement shall terminate, upon
compliance by the consumer with the requirements of subsection
(b) or any early payment option provided in the rental purchase
agreement, and upon payment of any past due payments and fees,
as permitted in regulation by the Board.
(b) Payment of Total Cost.--The consumer shall acquire
ownership of the rental property upon payment of the total cost
of the rental-purchase agreement, as such term is defined in
section 1001(17), and as disclosed to the consumer in the
rental-purchase agreement pursuant to section 1004(a).
(c) Additional Fees Prohibited.--A merchant shall not require
the consumer to pay, as a condition for acquiring ownership of
the property that is the subject of the rental-purchase
agreement, any fee or charge in addition to, or in excess of,
the regular periodic payments required by subsection (b), or
any early purchase option amount provided in the rental-
purchase agreement, as applicable. A requirement that the
consumer pay an unpaid late charge or other fee or charge which
the merchant has previously billed to the consumer shall not
constitute an additional fee or charge for purposes of this
subsection.
(d) Transfer of Ownership Rights.--Upon payment by the
consumer of all payments necessary to acquire ownership under
subsection (b) or any early purchase option amount provided in
the rental-purchase agreement, as appropriate, the merchant
shall--
(1) deliver, or mail to the consumer's last known
address, such documents or other instruments, which the
Board has determined by regulation, are necessary to
acknowledge full ownership by the consumer of the
property acquired pursuant to the rental-purchase
agreement; and
(2) transfer to the consumer the unexpired portion of
any warranties provided by the manufacturer,
distributor, or seller of the property, which shall
apply as if the consumer were the original purchaser of
the property, except where such transfer is prohibited
by the terms of the warranty.
SEC. 1007. PROHIBITED PROVISIONS.
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;
(5) a provision requiring the waiver of any legal
claim or remedy created by this title or other
provision of Federal or State law;
(6) a provision requiring the consumer, in the event
the property subject to the rental-purchase agreement
is lost, stolen, damaged, or destroyed, to pay an
amount in excess of the least of--
(A) the fair market value of the property, as
determined by the Board in regulation;
(B) any early purchase option amount provided
in the rental-purchase agreement; or
(C) the actual cost of repair, as
appropriate;
(7) a provision authorizing the merchant, or a person
acting on behalf of the merchant, to enter the
consumer's dwelling or other premises without obtaining
the consumer's consent or to commit any breach of the
peace in connection with the repossession of the rental
property or the collection of any obligation or alleged
obligation of the consumer arising out of the rental-
purchase agreement;
(8) a provision requiring the purchase of insurance
or liability damage waiver to cover the property that
is the subject of the rental-purchase agreement, except
as permitted by the Board in regulation;
(9) a provision requiring the consumer to pay more
than 1 late fee or charge for an unpaid or delinquent
periodic payment, regardless of the period in which the
payment remains unpaid or delinquent, or to pay a late
fee or charge for any periodic payment because a
previously assessed late fee has not been paid in full.
SEC. 1008. STATEMENT OF ACCOUNTS.
Upon request of a consumer, a merchant shall provide a
statement of the consumer's account. If a consumer requests a
statement for an individual account more than 4 times in any
12-month period, the merchant may charge a reasonable fee for
the additional statements.
SEC. 1009. RENEGOTIATIONS AND EXTENSIONS.
(a) Renegotiations.--A renegotiation occurs when a rental-
purchase agreement is satisfied and replaced by a new agreement
undertaken by the same consumer. A renegotiation requires new
disclosures, except as provided in subsection (c).
(b) Extensions.--An extension is an agreement by the consumer
and the merchant, to continue an existing rental-purchase
agreement beyond the original end of the payment schedule, but
does not include a continuation that is the result of a
renegotiation.
(c) Exceptions.--New disclosures are not required for the
following, even if they meet the definition of a renegotiation
or an extension:
(1) A reduction in payments.
(2) A deferment of 1 or more payments.
(3) The extension of a rental-purchase agreement.
(4) The substitution of property with property that
has a substantially equivalent or greater economic
value provided the rental-purchase cost does not
increase.
(5) The deletion of property in a multiple-item
agreement.
(6) A change in rental period provided the rental-
purchase cost does not increase.
(7) An agreement resulting from a court proceeding.
(8) Any other event described in regulations
prescribed by the Board.
SEC. 1010. POINT-OF-RENTAL DISCLOSURES.
(a) In General.--For any item of property or set of items
displayed or offered for rental-purchase, the merchant shall
display on or next to the item or set of items a card, tag, or
label that clearly and conspicuously discloses the following:
(1) A brief description of the property.
(2) Whether the property is new or used.
(3) The cash price of the property.
(4) The amount of each rental payment.
(5) The total number of rental payments necessary to
acquire ownership of the property.
(6) The rental-purchase cost.
(b) Form of Disclosure.--
(1) In general.--A merchant may make the disclosure
required by subsection (a) in the form of a list or
catalog which is readily available to the consumer at
the point of rental if the merchandise is not displayed
in the merchant's showroom or if displaying a card,
tag, or label would be impractical due to the size of
the merchandise.
(2) Clearly and conspicuously.--As used in this
section, the term ``clearly and conspicuously'' means
that information required to be disclosed to the
consumer shall appear in a type size, prominence, and
location as to be noticeable, readable, and
comprehensible to an ordinary consumer.
SEC. 1011. RENTAL-PURCHASE ADVERTISING.
(a) In General.--If an advertisement for a rental-purchase
transaction refers to or states the amount of any payment for
any specific item or set of items, the merchant making the
advertisement shall also clearly and conspicuously state in the
advertisement the following for the item, or set of items,
advertised:
(1) The transaction advertised is a rental-purchase
agreement.
(2) The amount, timing, and total number of rental
payments necessary to acquire ownership under the
rental-purchase agreement.
(3) The amount of the rental-purchase cost.
(4) To acquire ownership of the property the consumer
must pay the rental-purchase cost plus applicable
taxes.
(5) Whether the stated payment amount and advertised
rental-purchase cost is for new or used property.
(b) Prohibition.--An advertisement for a rental-purchase
agreement shall not state or imply that a specific item, or set
of items, is available at specific amounts or terms unless the
merchant usually and customarily offers, or will offer, the
item or set of items at the stated amounts or terms.
(c) Clearly and Conspicuously.--
(1) In general.--For purposes of this section, the
term ``clearly and conspicuously'' means that required
disclosures shall be presented in a type, size, shade,
contrast, prominence, location, and manner, as
applicable to different mediums for advertising, so as
to be readily noticeable and comprehensible to the
ordinary consumer.
(2) Regulatory guidance.--The Board shall prescribe
regulations on principles and factors to meet the clear
and conspicuous standard as appropriate to print,
video, audio, and computerized advertising, reflecting
the principles and factors typically applied in each
medium by the Federal Trade Commission.
(3) 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, video, or print technique shall be used that
is likely to obscure or detract significantly from the
communication of the disclosures.
SEC. 1012. CIVIL LIABILITY.
(a) In General.--Except as otherwise provided in section
1013, any merchant who fails to comply with any requirement of
this title with respect to any consumer is liable to such
consumer as provided for leases in section 130. For purposes of
this section, the term ``creditor'' as used in section 130
shall include a ``merchant'', as defined in section 1001.
(b) Jurisdiction of Courts; Limitation on Actions.--
(1) In general.--Notwithstanding section 130(e), any
action under this section may be brought in any United
States district court, or in any other court of
competent jurisdiction, before the end of the 1-year
period beginning on the date the last payment was made
by the consumer under the rental-purchase agreement.
(2) Recoupment or set-off.--This subsection shall not
bar a consumer from asserting a violation of this title
in an action to collect an obligation arising from a
rental-purchase agreement, which was brought after the
end of the 1-year period described in paragraph (1) as
a matter of defense by recoupment or set-off in such
action, except as otherwise provided by State law.
SEC. 1013. ADDITIONAL GROUNDS FOR CIVIL LIABILITY.
(a) Individual Cases With Actual Damages.--Any merchant who
fails to comply with any requirements imposed under section
1010 or 1011 with respect to any consumer who suffers actual
damage from the violation shall be liable to such consumer as
provided in section 130.
(b) Pattern or Practice of Violations.--If a merchant engages
in a pattern or practice of violating any requirement imposed
under section 1010 or 1011, the Federal Trade Commission or an
appropriate State attorney general, in accordance with section
1016, may initiate an action to enforce sanctions against the
merchant, including--
(1) an order to cease and desist from such practices;
and
(2) a civil money penalty of such amount as the court
may impose, based on such factors as the court may
determine to be appropriate.
SEC. 1014. LIABILITY OF ASSIGNEES.
(a) Assignees Included.--For purposes of section 1013, and
this section, the term ``merchant'' includes an assignee of a
merchant.
(b) Liabilities of Assignees.--
(1) Apparent violation.--An action under section 1012
or 1013 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.
(2) Apparent violation defined.--For purposes of this
subsection, a violation that is 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.
(3) Involuntary assignment.--An assignee has no
liability in a case in which the assignment is
involuntary.
(4) Rule of construction.--No provision of this
section shall be construed as limiting or altering the
liability under section 1012 or 1013 of a merchant
assigning a rental-purchase agreement.
(b) Proof of Disclosure.--In an action by or against an
assignee, the consumer's written acknowledgment of receipt of a
disclosure, made as part of the rental-purchase agreement,
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. 1015. REGULATIONS.
(a) In General.--The Board shall prescribe regulations as
necessary to carry out the purposes of this title, to prevent
its circumvention, and to facilitate compliance with its
requirements.
(b) Model Disclosure Forms.--The Board may publish model
disclosure forms and clauses for common rental-purchase
agreements to facilitate compliance with the disclosure
requirements of this title and to aid the consumer in
understanding the transaction by utilizing readily
understandable language to simplify the technical nature of the
disclosures. In devising such forms, the Board shall consider
the use by merchants of data processing or similar automated
equipment. Nothing in this title may be construed to require a
merchant to use any such model form or clause prescribed by the
Board under this section. A merchant shall be deemed to be in
compliance with the requirement to provide disclosure under
section 1003(a) if the merchant--
(1) uses any appropriate model form or clause as
published by the Board; or
(2) uses any such model form or clause and changes it
by--
(A) deleting any information which is not
required by this title; or
(B) rearranging the format, if in making such
deletion or rearranging the format, the
merchant does not affect the substance,
clarity, or meaningful sequence of the
disclosure.
(c) Effective Date of Regulations.--Any regulation prescribed
by the Board, or any amendment or interpretation thereof, shall
not be effective before the October 1 that follows the date of
publication of the regulation in final form by at least 6
months. The Board may at its discretion lengthen that period of
time to permit merchants to adjust 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
prescribed disclosure requirement prior to its effective date.
SEC. 1016. ENFORCEMENT.
(a) Federal Enforcement.--Compliance with the requirements
imposed under this title shall be enforced under the Federal
Trade Commission Act (15 U.S.C. 41 et seq.), and a violation of
any requirements imposed under this title shall be deemed a
violation of a requirement imposed under that Act. All of the
functions and powers of the Federal Trade Commission under the
Federal Trade Commission Act are available to the Commission to
enforce compliance by any person with the requirements of this
title, irrespective of whether that person is engaged in
commerce or meets any other jurisdictional test in the Federal
Trade Commission Act.
(b) State Enforcement.--
(1) In general.--An action to enforce the
requirements imposed by this title may also be brought
by the appropriate State attorney general in any
appropriate United States district court, or any other
court of competent jurisdiction.
(2) Prior written notice.--
(A) In general.--The State attorney general
shall provide prior written notice of any such
civil action to the Federal Trade Commission
and shall provide the Commission with a copy of
the complaint.
(B) Emergency action.--If prior notice is not
feasible, the State attorney general shall
provide notice to the Commission immediately
upon instituting the action.
(3) FTC intervention.--The Commission may--
(A) intervene in the action;
(B) upon intervening--
(i) remove the action to the
appropriate United States district
court, if it was not originally brought
there; and
(ii) be heard on all matters arising
in the action; and
(C) file a petition for appeal.
SEC. 1017. CRIMINAL LIABILITY FOR WILLFUL AND KNOWING VIOLATION.
Whoever willfully and knowingly gives false or inaccurate
information or fails to provide information which he is
required to disclose under the provisions of this title or any
regulation issued thereunder shall be subject to the penalty
provisions as provided in section 112.
SEC. 1018. RELATION TO OTHER LAWS.
(a) Relation to State Law.--
(1) No effect on consistent state laws.--Except as
otherwise provided in subsection (b), this title does
not annul, alter, or affect in any manner the meaning,
scope or applicability of the laws of any State
relating to rental-purchase agreements, except to the
extent those laws are inconsistent with any provision
of this title, and then only to the extent of the
inconsistency.
(2) Determination of inconsistency.--Upon its own
motion or upon the request of an interested party,
which is submitted in accordance with procedures
prescribed in regulations of the Board, the Board shall
determine whether any such inconsistency exists. If the
Board determines that a term or provision of a State
law is inconsistent, merchants located in that State
need not follow such term or provision and shall incur
no liability under the law of that State for failure to
follow such term or provision, notwithstanding that
such determination is subsequently amended, rescinded,
or determined by judicial or other authority to be
invalid for any reason.
(3) Greater protection under state law.--Except as
provided in subsection (b), for purposes of this
section, a term or provision of a State law is not
inconsistent with the provisions of this title if the
term or provision affords greater protection and
benefit to the consumer than the protection and benefit
provided under this title as determined by the Board,
on its own motion or upon the petition of any
interested party.
(b) State Laws Relating to Characterization of Transaction.--
Notwithstanding the provisions of subsection (a), this title
shall supersede any State law to the extent that such law--
(1) regulates a rental-purchase agreement as a
security interest, credit sale, retail installment
sale, conditional sale or any other form of consumer
credit, or that imputes to a rental-purchase agreement
the creation of a debt or extension of credit, or
(2) requires the disclosure of a percentage rate
calculation, including a time-price differential, an
annual percentage rate, or an effective annual
percentage rate.
(c) Relation to Federal Trade Commission Act.--No provision
of this title shall be construed as limiting, superseding, or
otherwise affecting the applicability of the Federal Trade
Commission Act to any merchant or rental-purchase transaction.
SEC. 1019. 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.
SEC. 1020. COMPLIANCE DATE.
Compliance with this title shall not be required until 6
months after the date of the enactment of the Consumer Rental
Purchase Agreement Act. In any case, merchants may comply with
this title at any time after such date of enactment.
SUPPLEMENTAL VIEWS OF HON. JOHN J. LaFALCE
The Consumer Rental Purchase Agreement Act adopted by the
Financial Services Committee differs significantly from the
industry drafted bill introduced in Committee and reflects
serious movement in a pro-consumer direction. The bill is an
important first step toward providing a uniform national
standard for regulation of rent-to-own transactions.
The Rent-to-Own industry has had a somewhat troubled
history. But it is an important industry that, in many cases,
offers a service to consumers that they want and need, and many
have no other way to obtain. While a few states offer rent-to-
own consumers some important protections, the vast majority of
states offer no, or minimal, protection. This industry has
become too important to lack uniform national regulation. For
that reason, I support the development of a Federal standard.
But it must be a strong standard. And it must provide only a
floor, allowing states to be more protective if they choose to
be.
As amended by the Committee, H.R. 1701 comes much closer to
meeting that standard. However, I am reluctant to support a
bill that the consumer groups and attorneys general continue to
oppose. It is unfortunate that we have not had the opportunity
to get the views of both of these groups on what is now a
substantially different draft.
While I understand the desire of supporters of the bill to
move the legislative process along, we need to recognize that
the Senate calendar is such that there will be little time for
the Senate Committee to initiate a legislative process on this
matter, nor is the Senate Banking Committee leadership disposed
to do so. The only way we can hope to enact legislation is if
the House product has such broad bipartisan support that the
Senate might seriously consider taking up the House bill.
Unfortunately, this product does not yet take us to that point.
The amendments adopted in Full Committee make a number of
important and needed improvements to the bill. The amended bill
provides for clearer and more relevant disclosure of costs to
consumers, particularly the total to the consumer of acquiring
ownership of rented merchandise. It adds a number of new
substantive protections for consumers and it enhances
enforcement by eliminating a number of legal loopholes that
would have permitted rent-to-own merchants to avoid liability
for violations.
However, other problems remain unresolved. The bill does
not provide adequate ownership rights for consumers. It does
nothing to limit the exorbitant costs that some consumers must
pay over time to acquire rental-purchase merchandise. And it
continues to preempt states from applying the legal principles
and cost standards that they consider most appropriate for
rent-to-own transactions.
H.R. 1701 is an important first step in providing uniform
protections for rent-to-own customers. But we need to do more
before H.R. 1701 constitutes a suitable Federal standard.
John J. LaFalce.
SUPPLEMENTAL VIEWS OF HON. MAXINE WATERS ET AL.
The Consumer Rental Purchase Agreement Act is special
interest legislation at its very worst. The bill is falsely
presented by its industry proponents as pro-consumer and as not
pre-emptive of state law. Neither is true. The bill has one
purpose and one purpose only: to circumvent stronger consumer
protections in the Federal Truth-in-Lending Act and in the
statutes of a handful of States that the rent-to-own industry
has not been able to overturn.
As originally introduced, H.R. 1701 sought to preempt all
inconsistent State laws. This included all current or future
State laws that attempt to regulate rent-to-own transactions as
credit or installment sales, as well as any industry-enacted
State rent-to-own statutes that provide stronger, but
inconsistent protections for consumers. Although the amended
Committee bill has narrowed the scope of the bill's preemption,
the bill would still preempt the best of the State laws in New
Jersey, Minnesota, Wisconsin, and Vermont that seek to provide
meaningful protections against unfair predatory practices. And
it would still prevent these and other states from
strengthening consumer protections in the future by treating
rent-to-own transactions as credit sales.
What is behind this bill? Not a desire to create a
``Federal floor'' of consumer protections for rent-to-own
customers, as the majority views allege. It is an effort to
avoid hundreds of millions of dollars in legal penalties
imposed by courts in precisely those States whose laws would be
preempted. Since 1997, legal actions responding to State
consumer law violations have produced legal judgments or
settlements against the nation's largest rent-to-own chain,
Rent-A-Center, Inc., amounting to $30 million in Minnesota, $16
million in Wisconsin and more than $60 million in New Jersey.
Unable to win under these State laws, or to overturn them at
the State level, the rent-to-own industry is simply calling on
Congress to preempt them.
All national consumer organizations oppose H.R. 1701 as an
inadequate standard to protect vulnerable consumers from
misleading lease arrangements that really mask installment
sales at exorbitant rates of interest. Consumer advocates
object to rent-to-own operations as enticing vulnerable
consumers to acquire electronic equipment, appliances,
furniture and other household items with promises to no credit
checks, no qualification and low payments that disguise the
true cost of the transaction. Most rent-to-own stores encourage
consumers to focus only on the affordability of the low weekly
or monthly lease payment and ignore the total cost of actually
acquiring merchandise over the term of the rental-purchase
contract.
Every market comparison done by consumer organizations of
the cost of acquiring comparable merchandise under rent-to-own
contracts and alternative credit or installment sales typically
show the total rent-to-own cost as averaging three to five
times higher than both the retain price of the merchandise and
the comparable credit price. This imposes an excessive cost
burden on low-income families who have no other means of
acquiring basic household items other than local rent-to-own
stores.
Rent-to-own merchants are not the only ones targeting this
same group of vulnerable consumers. Low-income communities are
besieged by predatory mortgage companies, payday lenders, check
cashiers, pawnshops and other quasi-financial companies that
are all trying to rob the same families of their merger
dollars. The results have been devastating for struggling
families and for entire neighborhoods.
H.R. 1701 does nothing to restrict the exorbitant costs of
acquiring merchandise for rent-to-own contracts. Moreover, it
fails to meet the basic standard for full cost disclosure under
the Truth-in-Lending Act by preventing consumers from using
annual percentage rate (APR) calculations or other common
market measures of total costs to compare the total cost of
rent-to-own transactions with alternative credit and
installment sales options.
The Consumer Rental Puchase Agreement Act should be
defeated for several important reasons. It contradicts all
arguments of States' rights and denies States the opportunity
to regulation commercial transactions as they think best. It
promotes and encourages business transactions that target and
prey upon our most vulnerable citizens. And, it seeks to impose
an industry-approved standard of consumer protection in place
of long-established principles of Federal and State laws that
have proven effective over four decades.
Maxine Waters.
Janice D. Schakowsky.
Stephanie Tubbs-Jones.
Carolyn B. Maloney.
Barbara Lee.
Bernard Sanders.
Julia Carson.