Rent-To-Own Reform Act of 1997 - Amends the Consumer Credit Protection Act to designate a new title X as the Rent-To-Own Protection Act to prohibit a seller in a rent-to-own transaction from taking, receiving, or assessing any interest, finance charge, or other fee for the transaction in excess of that which may be charged under State law which establishes in connection with a credit or retail installment sale for the same or a similar item: (1) a maximum rate or amount of interest, finance charge, or time-price differential that may be charged; (2) the types and maximum amount of fees that a seller may charge; or (3) the types of credit insurance and the maximum amount of premiums that can be charged for credit insurance.
Sets forth requirements regarding: (1) termination, recovery, and other fees; (2) the effect of termination; and (3) guarantees and warranties.
Makes the following Federal laws applicable to rent-to-own transactions: (1) the Truth in Lending Act; (2) the Equal Credit Opportunity Act; (3) the Fair Debt Collection Practices Act; and (4) the Fair Credit Reporting Act.
Requires a seller to include the following information on each item in the seller's place of business that is available for purchase pursuant to a rent-to-own transaction: (1) the cash price; (2) an itemization of services offered and the price of each service; (3) the annual percentage rate; (4) any applicable periodic payment and the number of payments; (5) the total number of payments required to acquire ownership; and (6) whether the item is new or used. Requires a seller to provide such information to a consumer in writing at the time the parties enter into the contract.
Prohibits a seller under a rent-to-own contract with a consumer from taking specified actions, such as using threats or coercion to collect amounts alleged due, or unreasonably disclosing information to third parties regarding amounts owed by the consumer.
Makes compliance with the requirements of this Act enforceable by the Federal Trade Commission. Deems a violation of this Act to be an unfair or deceptive act or practice in violation of the Federal Trade Commission Act.
Subjects sellers who violate the requirements of this Act to civil liability.
[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3060 Introduced in House (IH)]
105th CONGRESS
1st Session
H. R. 3060
To amend the Consumer Credit Protection Act to protect consumers from
inadequate disclosures and certain abusive practices in rent-to-own
transactions, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
November 13, 1997
Mr. Kennedy of Massachusetts (for himself, Mr. Barrett of Wisconsin,
Mr. Clay, Mr. Evans, Mr. Filner, Mr. Gutierrez, Mr. Hinchey, Mr. Olver,
Mr. Pallone, Mr. Rush, Mr. Schumer, Mr. Thompson, Mr. Torres, Mr.
Towns, Ms. Waters, and Mr. Watts of Oklahoma) introduced the following
bill; which was referred to the Committee on Banking and Financial
Services
_______________________________________________________________________
A BILL
To amend the Consumer Credit Protection Act to protect consumers from
inadequate disclosures and certain abusive practices in rent-to-own
transactions, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Rent-To-Own Reform Act of 1997''.
SEC. RENT-TO-OWN PROTECTION ACT.
The Consumer Credit Protection Act (15 U.S.C. 1601 et seq.) is
amended by adding at the end the following new title:
``TITLE X--RENT-TO-OWN TRANSACTIONS
``Sec.
``1001. Short title.
``1002. Findings and purposes.
``1003. Definitions.
``1004. Application of State laws regarding fees, charges, guarantees,
and warranties to rent-to-own transactions.
``1005. Application of Federal laws to rent-to-own transactions.
``1006. Disclosures.
``1007. Prohibitions and enforcement.
``1008. Civil liability.
``1009. Application of this title.
``1010. Regulations.
``1011. Relationship to other laws.
``SEC. 1001. SHORT TITLE.
``This title may be cited as the `Rent-to-Own Protection Act'.
``SEC. 1002. FINDINGS AND PURPOSES.
``(a) Findings.--The Congress finds the following:
``(1) The rent-to-own industry targets its products
primarily to low income and minority neighborhoods.
``(2) The majority of rent-to-own customers enter into
rent-to-own contracts with the intention of owning the goods
for which they are contracting.
``(3) Rent-to-own dealers often fail to disclose key terms
of rent-to-own contracts, and engage in unfair collection
practices.
``(4) Of primary significance, rent-to-own dealers do not
provide customers with the protections afforded purchasers in
retail installment sales under State and Federal laws, and
often charge excessive fees and interest rates.
``(b) Purposes.--The purposes of this title are the following:
``(1) Provide consumers in rent-to-own transactions the
range of protections provided under State and Federal laws to
individuals that acquire goods in other consumer credit sales,
while recognizing and preserving consumers' unilateral right to
terminate.
``(2) Require rent-to-own contracts, and tags affixed to
items available for acquisition in rent-to-own transactions, to
disclose material terms of those transactions.
``(3) Prohibit rent-to-own dealers and collection agents
hired by those dealers from engaging in abusive collection
practices.
``SEC. 1003. DEFINITIONS.
``For purposes of this title, the following definitions shall
apply:
``(1) Board.--The term `Board' means the Board of Governors
of the Federal Reserve System.
``(2) Cash price.--The term `cash price' means--
``(A) the bona fide retail price for an item or
service in sales by a seller to consumers who pay the
full price in one payment, respectively--
``(i) before taking possession of the item,
or
``(ii) for receipt of the service other
than in a rent-to-own transaction,
as indicated by actual sales of such item or service by
the seller; and
``(B) in the case of a seller that does not
regularly engage in such sales of the item or service,
respectively--
``(i) the average cash retail price of the
item or a similar item in the community; or
``(ii) the estimated bona fide retail value
of the service.
``(3) Consumer.--The term `consumer'--
``(A) when used as an adjective, means for use by
an individual primarily for personal, family, or
household purposes; and
``(B) when used as a noun, means an individual who
is the lessee or bailee under a rent-to-own contract.
``(4) Credit.--The term `credit'--
``(A) includes the right granted by a seller to a
consumer to obtain possession of an item of consumer
goods under a rent-to-own contract before payment of
the total amount that is required to be paid to acquire
ownership of the item; and
``(B) is deemed to be a fixed sum equal to--
``(i) the total of payments for the item
required to obtain ownership of the item under
the contract; minus
``(ii) the sum of--
``(I) the cash price;
``(II) any fees specifically
allowable under State law, except
finance charges, interest, or a time
price differential; and
``(III) the termination fee under
section 1004.
``(5) Rent-to-own contract.--The term `rent-to-own
contract' means a contract in the form of a terminable lease or
bailment of an item of consumer goods, under which--
``(A) a consumer--
``(i) has the right of possession and use
of the item; and
``(ii) has the option to renew the contract
periodically by making payments specified in
the contract; and
``(B) a seller agrees, in writing or orally, to
transfer ownership of the item to the consumer upon the
fulfillment of all obligations of the consumer under
the contract for that transfer.
``(6) Rent-to-own transaction.--The term `rent-to-own
transaction' means the lease or bailment of an item of consumer
goods under a rent-to-own contract.
``(7) Seller.--The term `seller' means--
``(A) a person--
``(i) who regularly makes consumer goods
available under rent-to-own contracts; and
``(ii) to whom payments are payable under
those contracts; and
``(B) an assignee of such a person.
``(8) State.--The term `State' means any State, the
Commonwealth of Puerto Rico, the District of Columbia, and any
territory or possession of the United States.
``SEC. 1004. APPLICATION OF STATE LAWS REGARDING FEES, CHARGES,
GUARANTEES, AND WARRANTIES TO RENT-TO-OWN TRANSACTIONS.
``(a) In General.--Subject to subsection (b), a seller in a rent-
to-own transaction may not take, receive, or assess any interest,
finance charge, or other fee for the transaction that is in excess of
the interest, fees, or finance charges that may be charged under the
laws of the State in which the seller is located which--
``(1) establish a maximum rate or amount of interest,
finance charge, or time-price differential that may be charged
in connection with a credit sale or retail installment sale for
the same or a similar item;
``(2) establish the types of fees and the maximum amount of
fees that a seller may charge in connection with a credit sale
or retail installment sale for the same or a similar item; or
``(3) establish the types of credit insurance and the
maximum amount of premiums that can be charged for credit
insurance in connection with a credit sale or a retail
installment sale for the same or a similar item.
``(b) Additional Termination Charges and Fees.--
``(1) Charges and fees authorized.--In addition to fees and
charges authorized under subsection (a), a seller in a rent-to-
own transaction may charge--
``(A) a termination fee in accordance with
paragraph (2), if in exchange the consumer is given the
right to terminate the rent-to-own contract for the
transaction at any time without regard to whether the
consumer has completed payment of the fee; and
``(B) fees that are reasonable in relation to the
cash price of the good, for recovery of the items that
are the subject of the contract and that are not
voluntarily returned to the seller upon the termination
of the contract.
``(2) Termination fee.--A termination fee under paragraph
(1)(A)--
``(A) shall not exceed 5 percent of the cash price
under the contract;
``(B) shall be disclosed in the contract;
``(C) may be paid at the time the contract is
entered into or over the life of the contract; and
``(D) shall be calculated as part of the finance
charge as determined under section 106 of the Truth in
Lending Act.
``(3) Recovery fees.--A recovery fee under paragraph (1)(B)
shall be disclosed in the contract.
``(4) Effect of termination.--The termination of a rent-to-
own contract by a consumer in accordance with a right of
termination given to the consumer in exchange for a termination
fee under subsection (a)(1) is deemed to satisfy the consumer's
obligation for all payments and fees due under the contract, except
fees and charges under the contract that become due before the date of
termination.
``(c) Guarantees and Warranties.--All guarantees and warranties
established or required under the laws of a State for goods sold
pursuant to a consumer credit sale or retail installment sale apply to
goods which are the subject of a rent-to-own transaction in the State.
``SEC. 1005. APPLICATION OF FEDERAL LAWS TO RENT-TO-OWN TRANSACTIONS.
``The following Federal laws apply to a rent-to-own transaction, as
follows:
``(1) Truth in lending act.--The Truth in Lending Act
applies as such Act applies to a consumer credit transaction
that is a credit sale (as that term is defined in that Act).
``(2) Equal credit opportunity act.--The Equal Credit
Opportunity Act applies as such Act applies to credit
transactions. For purposes of that application--
``(A) a consumer shall be treated as an applicant;
and
``(B) a seller shall be treated as a creditor.
``(3) Fair debt collection practices act.--The Fair Debt
Collection Practices Act applies to the collection of payments
owed that arise from a rent-to-own transaction, unless those
payments are collected by any person specified in section
803(6) (A) through (F) of that Act. For purposes of that
application, payments owed shall be treated as debt.
``(4) Fair credit reporting act.--The Fair Credit Reporting
Act applies as such Act applies to a credit transaction and to
any extension or denial of credit.
``SEC. 1006. DISCLOSURES.
``(a) Disclosures on Goods.--A seller shall include on each item in
the place of business of the seller that is available for purchase
pursuant to a rent-to-own transaction the following information:
``(1) The cash price of the item.
``(2) An itemization of services offered under a rent-to-
own contract for the item, and the cash price of each service.
``(3) The annual percentage rate of the item under a rent-
to-own contract, determined under section 107 of the Truth in
Lending Act.
``(4) The weekly, biweekly, monthly, or other incremental
payment applicable under the rent-to-own contract for the
transaction and the number of payments.
``(5) The total of payments required to be paid to acquire
ownership of the item under a rent-to-own contract for the
transaction, determined under regulations under the Truth in
Lending Act.
``(6) Specification of whether the item is new or used.
``(b) Disclosures Upon Contracting.--A seller shall provide to a
consumer in writing, at the time the seller and consumer enter into a
rent-to-own contract for an item, the information referred to in
subsection (a) for the item and the contract.
``SEC. 1007. PROHIBITIONS AND ENFORCEMENT.
``(a) Prohibitions.--A person who is a seller under a rent-to-own
contract with a consumer shall not--
``(1) threaten or invoke criminal prosecution of a consumer
for any matter related to the contract, unless there is clear
and convincing evidence that the goods that are the subject of
the contract are being held by the consumer with an intent to
defraud the seller;
``(2) use threats or coercion to collect or attempt to
collect any amounts alleged to be due from the consumer;
``(3) engage in any conduct, the natural consequence of
which is to oppress, harass, or abuse any person in connection
with an attempt to collect amounts owed by the consumer under
the contract;
``(4) unreasonably disclose information to third parties
regarding amounts owed by the consumer;
``(5) make any fraudulent, deceptive, or misleading
representation to obtain information about the consumer or to
collect amounts owed by the consumer;
``(6) use any unconscionable means to collect or attempt to
collect a debt owed to the seller;
``(7) advertise, announce, solicit, or otherwise represent
as free or available without charge (including by use of other
words of similar meaning) any service under the contract for
which the seller charges the consumer, including any service
for which a charge is collected by inclusion in the amount
required to be paid under the contract;
``(8) use, for purposes of complying with any State or
Federal law governing rent-to-own transactions (other than a
State or Federal tax law) any definition of the term `cash
price' other than the definition under section 1003(2);
``(9) engage in any act or practice which is unfair or
deceptive in connection with a rent-to-own transaction; or
``(10) violate any regulation issued by the Board under
subsection (c)(1).
``(b) Enforcement.--
``(1) Enforcement.--Compliance with the requirements under
this title shall be enforced by the Federal Trade Commission.
All functions and powers of the Federal Trade Commission under
the Federal Trade Commission Act shall be available to the
Commission to enforce compliance with this title by any person,
irrespective of whether the person is engaged in commerce or
meets any other jurisdictional tests in the Federal Trade
Commission Act, including the power to enforce the provisions
of this title in the same manner as if the violation had been a
violation of a Federal Trade Commission trade regulation rule.
``(2) Treatment of violations.--For the purpose of the
exercise by the Federal Trade Commission of the functions and
powers of such Commission under the Federal Trade Commission
Act, a violation of any requirement or prohibition under this
title is deemed to be an unfair or deceptive act or practice in
commerce in violation of that Act.
``(c) Regulations.--
``(1) Board.--The Board shall issue such regulations as are
necessary or appropriate for implementing subsection (a),
including regulations describing specific practices by a seller
that are prohibited by paragraphs (1) through (9) of that
subsection.
``(2) Federal trade commission.--The Federal Trade
Commission shall issue regulations implementing subsection (b).
``SEC. 1008. CIVIL LIABILITY.
``(a) Liability for Failure To Properly Disclose Terms.--Any seller
who fails to comply with a requirement under section 1006 is liable to
the consumer in an amount equal to the sum of--
``(1) actual damages sustained by the consumer as a result
of the failure;
``(2) $250 for each failure; and
``(3) all costs of the action and reasonable attorney fees,
as determined by the court.
``(b) Other Liability.--A seller that violates this title or fails
to comply with any requirement imposed under this title, other than
under section 1006, shall be liable to the consumer in an amount equal
to the sum of--
``(1) actual damages sustained by the consumer as a result
of the violation;
``(2) $2,500 for each violation; and
``(3) all costs of the action and reasonable attorney fees,
as determined by the court.
``(c) Jurisdiction and Limitation.--An action under this title may
be brought in any United States district court or in any other court of
competent jurisdiction, within 24 months after the date of the
violation or failure that is the subject of the action. This subsection
does not bar a person from asserting a violation of this title in an
action to collect amounts alleged to be due from the person which is
brought more than 2 years after the date of the occurrence of the
violation as a matter of defense by recoupment or set-off in such
action.
``SEC. 1009. APPLICATION OF THIS TITLE.
``(a) In General.--This title shall apply to rent-to-own contracts
entered into after the date of the issuance of regulations by the Board
under section 1010.
``(b) Motor Vehicles.--This title shall not apply to any lease or
sale of a motor vehicle entered into after the date of the enactment of
the Rent-to-Own Reform Act of 1997 that, if entered into on the day
before that date of enactment, would have been subject to chapter 5 of
the Truth in Lending Act.
``SEC. 1010. REGULATIONS.
``The Board shall issue such regulations as may be necessary to
implement this Act (including regulations under section 1007(c)(1)), by
not later than 12 months after the date of the enactment of the Rent-
To-Own Reform Act of 1997.
``SEC. 1011. RELATIONSHIP TO OTHER LAWS.
``(a) State Law.--This title does not annul, alter, or affect, or
exempt any person subject to the provisions of this title from
complying with, the laws of any State with respect to rent-to-own
transactions, except to the extent that those laws are inconsistent
with any provision of this title, and then only to the extent of the
inconsistency.
``(b) Consumer Lease Provisions of Truth in Lending Act.--Chapter 5
of the Truth in Lending Act, relating to consumer leases, shall not
apply to a rent-to-own transaction except the lease or sale of a motor
vehicle that, if entered into on the day before the date of the
enactment of the Rent-To-Own Reform Act of 1997, would have been
subject to that chapter.''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Banking and Financial Services.
Referred to the Subcommittee on Financial Institutions and Consumer Credit.
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