This Act may be cited as the 'Rent-To-Own Reform Act of 2006'. Amended Short Title - 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.
This title may be cited as the 'Rent-To-Own Protection Act'.
Sec. 1002. Findings and purposes.
(a) Findings - Congress finds that—
(1) the rent-to-own industry targets its products primarily to low income and minority neighborhoods;
(2) the majority of rent-to-own customers enter into rent-to-own contracts with the intention of owning the goods for which they are contracting;
(3) rent-to-own dealers often fail to disclose key terms of rent-to-own contracts, and engage in unfair collection practices; and
(4) of primary significance, rent-to-own dealers do not provide customers with the protections afforded purchasers in retail installment sales under State and Federal laws, and often charge excessive fees and interest rates.
(b) Purposes - The purposes of this title are—
(1) to provide consumers in rent-to-own transactions the range of protections provided under State and Federal laws to individuals that acquire goods in other consumer credit sales, while recognizing and preserving consumers' unilateral right to terminate;
(2) to require rent-to-own contracts and tags affixed to items available for acquisition in rent-to-own transactions to disclose material terms of those transactions; and
(3) to prohibit rent-to-own dealers and collection agents hired by those dealers from engaging in abusive collection practices.
Sec. 1003. Definitions.
For purposes of this title, the following definitions shall apply:
(1) BOARD - The term 'Board' means the Board of Governors of the Federal Reserve System.
(2) CASH PRICE - The term 'cash price' means the fair market price at which retail sellers, not in the business of renting or leasing such goods, are selling and retail buyers are buying the same or similar property for cash in the same trade area in which the lessor's place of business is located. Any increase in the cash price above such fair market price shall be disclosed to the consumer as a finance charge.
(3) CONSUMER - The term 'consumer'—
(A) when used as an adjective, means for use by an individual primarily for personal, family, or household purposes; and
(B) when used as a noun, means an individual who is the lessee or bailee under a rent-to-own contract.
(4) CREDIT - The term 'credit'—
(A) includes the right granted by a seller to a consumer to obtain possession of an item of consumer goods under a rent-to-own contract before payment of the total amount that is required to be paid to acquire ownership of the item; and
(B) is deemed to be a fixed sum equal to—
(i) the total of payments for the item required to obtain ownership of the item under the contract; minus
(ii) the sum of—
(I) the cash price;
(II) any fees specifically allowable under State law, except finance charges, interest, or a time price differential; and
(III) the termination fee under section 1004.
(5) RENT-TO-OWN CONTRACT - The term 'rent-to-own contract' means—
(A) a contract in the form of a terminable lease or bailment of an item of consumer goods, under which—
(i) a consumer—
(I) has the right of possession and use of the item; and
(II) has the option to renew the contract periodically by making payments specified in the contract; and
(ii) a seller agrees, in writing or orally, to transfer ownership of the item to the consumer upon the fulfillment of all obligations of the consumer under the contract for that transfer; and
(B) any contract which is advertised as or denominated as a rent-to-own contract or lease-purchase contract, or which is in substance a rent-to-own contract, as described in subparagraph (A).
(6) RENT-TO-OWN TRANSACTION - The term 'rent-to-own transaction' means the lease or bailment of an item of consumer goods under a rent-to-own contract.
(7) SELLER - The term 'seller' means—
(A) a person—
(i) who regularly makes consumer goods available under rent-to-own contracts; and
(ii) to whom payments are payable under those contracts; and
(B) an assignee of such a person.
(8) STATE - The term 'State' means any State, the Commonwealth of Puerto Rico, the District of Columbia, and any territory or possession of the United States.
Sec. 1004. Application of state laws regarding fees, charges, guarantees, and warranties to rent-to-own transactions.
(a) In General - Subject to subsection (b), a seller in a rent-to-own transaction may not take, receive, or assess any interest, finance charge, or other fee for the transaction that is in excess of the interest, fees, or finance charges that may be charged under the laws of the State in which the seller is located which—
(1) establish a maximum rate or amount of interest, finance charge, or time-price differential that may be charged in connection with a credit sale or retail installment sale for the same or a similar item;
(2) establish the types of fees and the maximum amount of fees that a seller may charge in connection with a credit sale or retail installment sale for the same or a similar item; or
(3) establish the types of credit insurance and the maximum amount of premiums that can be charged for credit insurance in connection with a credit sale or a retail installment sale for the same or a similar item.
(b) Additional Termination Charges and Fees-
(1) CHARGES AND FEES AUTHORIZED - In addition to fees and charges authorized under subsection (a), a seller in a rent-to-own transaction may charge—
(A) a termination fee in accordance with paragraph (2), if in exchange the consumer is given the right to terminate the rent-to-own contract for the transaction at any time without regard to whether the consumer has completed payment of the fee; and
(B) fees that are reasonable in relation to the cash price of the good, for recovery of the items that are the subject of the contract and that are not voluntarily returned to the seller upon the termination of the contract.
(2) TERMINATION FEE - A termination fee under paragraph (1) (A)—
(A) shall not exceed 5 percent of the cash price under the contract;
(B) shall be disclosed in the contract;
(C) may be paid at the time the contract is entered into or over the life of the contract; and
(D) shall be calculated as part of the finance charge as determined under section 106 of the Truth in Lending Act.
(3) RECOVERY FEES - A recovery fee under paragraph (1) (B) shall be disclosed in the contract.
(4) EFFECT OF TERMINATION - The termination of a rent-to-own contract by a consumer in accordance with a right of termination given to the consumer in exchange for a termination fee under subsection (a) (1) is deemed to satisfy the consumer's obligation for all payments and fees due under the contract, except fees and charges under the contract that become due before the date of termination.
(c) Guarantees and Warranties - All guarantees and warranties established or required under the laws of a State for goods sold pursuant to a consumer credit sale or retail installment sale apply to goods which are the subject of a rent-to-own transaction in the State.
Sec. 1005. Application of federal laws to rent-to-own transactions.
The following Federal laws apply to a rent-to-own transaction, as follows:
(1) TRUTH IN LENDING ACT - The Truth in Lending Act applies as such Act applies to a consumer credit transaction that is a credit sale (as that term is defined in that Act).
(2) EQUAL CREDIT OPPORTUNITY ACT - The Equal Credit Opportunity Act applies as such Act applies to credit transactions. For purposes of that application—
(A) a consumer shall be treated as an applicant; and
(B) a seller shall be treated as a creditor.
(3) FAIR DEBT COLLECTION PRACTICES ACT - The Fair Debt Collection Practices Act applies to the collection of payments owed that arise from a rent-to-own transaction, unless those payments are collected by any person specified in subparagraphs (A) through (F) of section 803 (6) of such Act. For purposes of that application, payments owed shall be treated as debt.
(4) FAIR CREDIT REPORTING ACT - The Fair Credit Reporting Act applies as such Act applies to a credit transaction and to any extension or denial of credit.
Sec. 1006. Disclosures.
(a) Disclosures on Goods - A seller shall include on each item in the place of business of the seller that is available for purchase pursuant to a rent-to-own transaction the following information:
(1) The cash price of the item.
(2) An itemization of services offered under a rent-to-own contract for the item, and the cash price of each service.
(3) The annual percentage rate of the item under a rent-to-own contract, determined under section 107 of the Truth in Lending Act.
(4) The weekly, biweekly, monthly, or other incremental payment applicable under the rent-to-own contract for the transaction and the number of payments.
(5) The total of payments required to be paid to acquire ownership of the item under a rent-to-own contract for the transaction, determined under regulations under the Truth in Lending Act.
(6) Specification of whether the item is new or used.
(b) Disclosures Upon Contracting - A seller shall provide to a consumer in writing, at the time the seller and consumer enter into a rent-to-own contract for an item, the information referred to in subsection (a) for the item and the contract.
Sec. 1007. Prohibitions and enforcement.
(a) Prohibitions - A person who is a seller under a rent-to-own contract with a consumer shall not—
(1) threaten or invoke criminal prosecution of a consumer for any matter related to the contract, unless there is clear and convincing evidence that the goods that are the subject of the contract are being held by the consumer with an intent to defraud the seller;
(2) use threats or coercion to collect or attempt to collect any amounts alleged to be due from the consumer;
(3) engage in any conduct, the natural consequence of which is to oppress, harass, or abuse any person in connection with an attempt to collect amounts owed by the consumer under the contract;
(4) unreasonably disclose information to third parties regarding amounts owed by the consumer;
(5) make any fraudulent, deceptive, or misleading representation to obtain information about the consumer or to collect amounts owed by the consumer;
(6) use any unconscionable means to collect or attempt to collect a debt owed to the seller;
(7) advertise, announce, solicit, or otherwise represent as free or available without charge (including by use of other words of similar meaning) any service under the contract for which the seller charges the consumer, including any service for which a charge is collected by inclusion in the amount required to be paid under the contract;
(8) use, for purposes of complying with any State or Federal law governing rent-to-own transactions (other than a State or Federal tax law) any definition of the term 'cash price' other than the definition under section 1003 (2);
(9) engage in any act or practice which is unfair or deceptive in connection with a rent-to-own transaction; or
(10) violate any regulation issued by the Board under subsection (c) (1).
(b) Enforcement-
(1) ENFORCEMENT - Compliance with the requirements under this title shall be enforced by the Federal Trade Commission. All functions and powers of the Federal Trade Commission under the Federal Trade Commission Act shall be available to the Commission to enforce compliance with this title by any person, irrespective of whether the person is engaged in commerce or meets any other jurisdictional tests in the Federal Trade Commission Act, including the power to enforce the provisions of this title in the same manner as if the violation had been a violation of a Federal Trade Commission trade regulation rule.
(2) TREATMENT OF VIOLATIONS - For the purpose of the exercise by the Federal Trade Commission of the functions and powers of such Commission under the Federal Trade Commission Act, a violation of any requirement or prohibition under this title is deemed to be an unfair or deceptive act or practice in commerce in violation of that Act.
(c) Regulations-
(1) BOARD - The Board shall issue such regulations as are necessary or appropriate for implementing subsection (a), including regulations describing specific practices by a seller that are prohibited by paragraphs (1) through (9) of that subsection.
(2) FEDERAL TRADE COMMISSION - The Federal Trade Commission shall issue regulations implementing subsection (b).
Sec. 1008. Civil liability.
(a) Liability for Failure To Properly Disclose Terms - Any seller who fails to comply with a requirement under section 1006 is liable to the consumer in an amount equal to the sum of—
(1) actual damages sustained by the consumer as a result of the failure;
(2) $250 for each failure; and
(3) all costs of the action and reasonable attorney fees, as determined by the court.
(b) Other Liability - A seller that violates this title or fails to comply with any requirement imposed under this title, other than under section 1006, shall be liable to the consumer in an amount equal to the sum of—
(1) actual damages sustained by the consumer as a result of the violation;
(2) $2,500 for each violation; and
(3) all costs of the action and reasonable attorney fees, as determined by the court.
(c) Jurisdiction and Limitation - An action under this title may be brought in any United States district court or in any other court of competent jurisdiction, within 24 months after the date of the violation or failure that is the subject of the action. This subsection does not bar a person from asserting a violation of this title in an action to collect amounts alleged to be due from the person which is brought more than 2 years after the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action.
Sec. 1009. Application of this title.
(a) In General - This title shall apply to rent-to-own contracts entered into after the date of the issuance of regulations by the Board under section 1010.
(b) Motor Vehicles - This title shall not apply to any lease or sale of a motor vehicle entered into after the date of enactment of the Rent-To-Own Reform Act of 2006 that, if entered into on the day before that date of enactment, would have been subject to chapter 5 of the Truth in Lending Act.
sec. 1010. Regulations.
The Board shall issue such regulations as may be necessary to implement this title (including regulations under section 1007 (c) (1), not later than 12 months after the date of enactment of the Rent-To-Own Reform Act of 2006.
Sec. 1011. Relationship to other laws.
(a) State Law - This title does not annul, alter, or affect, or exempt any person subject to the provisions of this title from complying with, the laws of any State with respect to rent-to-own transactions, except to the extent that those laws are inconsistent with any provision of this title, and then only to the extent of the inconsistency. A State law is not inconsistent with this title solely because the protection afforded by such provision of law to any consumer is greater than the protection afforded by this title.
(b) Consumer Lease Provisions of Truth in Lending Act - Chapter 5 of the Truth in Lending Act, relating to consumer leases, shall not apply to a rent-to-own transaction except the lease or sale of a motor vehicle that, if entered into on the day before the date of enactment of the Rent-To-Own Reform Act of would have been subject to that chapter.'.
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