article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Rent-To-Own Consumer Credit Protection Act of 1993''. SEC. 2. RENT-TO-OWN PROTECTION ACT. The Consumer Credit Protection Act (15 U.S.C. 1601 et seq.) is amended by adding at the end the following new title: ``TITLE X--RENT-TO-OWN TRANSACTIONS ``Sec. ``1001. Short title. ``1002. Findings and purposes. ``1003. Definitions. ``1004. Application of State laws regarding fees, charges, guarantees, and warranties. ``1005. Application of Federal laws. ``1006. Disclosures on goods. ``1007. Prohibitions; enforcement. ``1008. Civil liability. ``1009. Regulations. ``1010. Relationship to other laws. ``Sec. 1001. Short title ``This title may be cited as the `Rent-To-Own Consumer Credit Protection Act'. ``Sec. 1002. Findings and purposes ``(a) Findings.--The Congress finds that-- ``(1) the rent-to-own industry targets its products primarily to low-income and minority neighborhoods; ``(2) the majority of rent-to-own customers enter into rent-to-own contracts with the intention of owning the goods for which they are contracting; ``(3) rent-to-own dealers often fail to disclose key terms of rent-to-own contracts, and engage in unfair debt collection practices; and ``(4) rent-to-own dealers do not provide customers with the protections afforded purchasers in retail installment sales under State and Federal laws, and often charge excessive fees and interest rates. ``(b) Purposes.--The purposes of this title are-- ``(1) to provide consumers in rent-to-own transactions the range of protections provided under State and Federal laws to individuals who acquire goods in other consumer credit sales; ``(2) to require rent-to-own contracts, and tags affixed to items available for acquisition in rent-to-own transactions, to disclose the material terms of those transactions; and ``(3) to prohibit rent-to-own dealers and collection agents hired by such dealers from engaging in abusive collection practices. ``Sec. 1003. Definitions ``As used in this title-- ``(1) the term `cash price' means-- ``(A) with respect to any item of consumer goods-- ``(i) the bona fide retail price for the item as offered for sale by a seller to a consumer who pays the full price in one payment before taking possession of the item, as indicated by actual sales of such item; or ``(ii) the average cash retail price of the item or a similar item in the community; and ``(B) with respect to a service-- ``(i) the bona fide retail value of the service if provided independently to a consumer; or ``(ii) the estimated bona fide retail value of the service; ``(2) the term `Commission' means the Federal Trade Commission; ``(3) 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) 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 the difference of-- ``(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) the term `organization' means a corporation, trust, estate, partnership, cooperative, or association; ``(6) the term `person' means a natural person or an organization; ``(7) 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) the 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) the seller agrees, orally or in writing, to transfer ownership of the item to the consumer upon the fulfillment of all obligations of the consumer under the contract for that transfer; ``(8) the term `rent-to-own transaction' means the lease or bailment of an item of consumer goods under a rent-to-own contract; ``(9) 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; and ``(10) 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 ``(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 that-- ``(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; ``(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; or ``(3) establish the types of credit insurance and the maximum amount of premiums that may be charged for credit insurance in connection with a credit sale or a retail installment sale. ``(b) Additional Termination Charges and Fees.-- ``(1) Charges and fees authorized.--In addition to charges and fees 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) reasonable fees for recovery of the items that are the subject of the contract and that are not voluntarily returned to the seller upon the completion or termination of the contract. ``(2) Termination fee.--A termination fee under paragraph (1)(A)-- ``(A) shall not exceed 5 percent of the cash price disclosed under the contract; ``(B) shall be disclosed in the contract; and ``(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 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) shall be deemed to satisfy the consumer's obligations for all payments and fees due under the contract, except for payments and fees under the contract that were due prior to 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 shall apply to goods that are the subject of a rent-to-own transaction in the State. ``Sec. 1005. Application of Federal laws ``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 it applies to consumer credit transactions other than consumer credit transactions under an open end credit plan. ``(2) Equal credit opportunity act.--The Equal Credit Opportunity Act applies as it applies to credit transactions. For purposes of this 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 overdue payments arising from a rent-to-own transaction, unless the payments are collected by any person specified in subparagraphs (A) through (F) of section 803(6) of such Act. For purposes of this application, overdue payments shall be treated as debt. ``(4) Fair credit reporting act.--The Fair Credit Reporting Act applies as it applies to a credit transaction and to any extension or denial of credit. ``Sec. 1006. 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-- ``(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; and ``(6) specification of whether the item is new or used. ``Sec. 1007. Prohibitions; 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 publicize 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) engage in any act or practice that is unfair or deceptive in making, servicing, or collecting payment pursuant to a rent-to-own contract; ``(8) 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; ``(9) 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); or ``(10) attempt to evade the provisions of this title by any devise or subterfuge. ``(b) Enforcement.-- ``(1) In general.--Compliance with the requirements under this title shall be enforced by the Commission. All functions and powers of the 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 Commission trade regulation rule. ``(2) Treatment of violations.--For the purpose of the exercise by the Commission of its functions and powers 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. ``Sec. 1008. Civil liability ``(a) Liability for Failure to Properly Disclose Terms.--A seller who fails to comply with a requirement 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 failure; ``(2) $500 for each failure; and ``(3) all costs of the action and reasonable attorney fees, as determined by the court. ``(b) Other Liability.--A seller who violates this title or fails to comply with any requirement imposed under this title, other than under section 1005, 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) $5,000 for each violation; and ``(3) all costs of the action and reasonable attorney fees, as determined by the court. ``(c) Jurisdiction; Limitation.-- ``(1) In general.--An action under this title may be brought in any United States district court or in any other court of competent jurisdiction, not later than 2 years after the date of the violation or failure that is the subject of the action. ``(2) Other actions.--The 2-year statute of limitations in paragraph (1) shall not prohibit any person from asserting a violation of this title as a defense in an action to collect amounts alleged to be due from such person, if such action is brought more than 2 years after the date of the occurrence of the violation. ``(d) Remedies.--Nothing in this title shall be construed to limit any remedy otherwise available under State or Federal law. ``Sec. 1009. Regulations ``Not later than 6 months after the date of enactment of this title, the Commission shall issue such regulations as may be necessary to implement this title. ``Sec. 1010. Relationship to other laws ``(a) State Law.--This title does not annul, alter, 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 such 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 to the extent application of that Act to the transaction is inconsistent with this title.''. SEC. 3. RECOMMENDATIONS TO CONGRESS. Not later than 2 years after the date of enactment of this Act, the Federal Trade Commission shall submit to the Congress any recommendations for further legislative or administrative action with respect to the regulation of rent-to-own transactions. SEC. 4. EFFECTIVE DATE. The provisions of this Act and the amendments made by this Act shall take effect on the date of enactment of this Act. S 1566 IS----2
summary: Rent-To-Own Consumer Credit Protection Act of 1993 - Amends the Consumer Credit 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.