AB849: Bill Text

(5) The amount of any payment due when the rent-to-own agreement is executed or the rental property is delivered.

(6) The total dollar amount, total number and timing of all rental payments necessary to acquire ownership of the rental property.

(7) A statement indicating that the total dollar amount of all rental payments necessary to acquire ownership does not include other, separately identified, charges that the rental-purchase company may assess.

(8) A summary of the lessee's early purchase option.

(9) A description of the lessee's responsibility in the event of theft of or damage to the rental property.

(10) A statement identifying the party that is responsible for service and maintenance of the rental property and a statement regarding any warranty that covers the rental property.

(11) A statement that the lessee may terminate the rental-purchase agreement at any time, without penalty, by surrendering the rental property in good repair.

(12) A description of the lessee's right to reinstate the rental-purchase agreement.

(13) A statement indicating that the lessee does not own the rental property and will not own the property until exercising an early-purchase option or making all rental payments necessary to acquire ownership.

The bill also prohibits certain provisions from being placed in a rent-to-own agreement. For example, under the bill, a rent-to-own agreement may not include a confession of judgment, a provision granting the rental-purchase company a security interest in property other than the rental property, a provision granting the rental-purchase company permission to enter the lessee's premises or commit a breach of the peace in repossessing the rental property, a waiver of any defense or counterclaim or any provision of the new chapter, a provision requiring rental payments totaling more than the total dollar amount of all rental payments necessary to acquire ownership or a provision requiring the purchase of insurance from the rental-purchase company to insure the rental property. Several of these prohibitions are similar to prohibitions contained in the consumer act.

Disclosure

All required provisions of a rent-to-own agreement must be clearly and conspicuously disclosed to the lessee in at least eight-point standard type on the face of the rent-to-own agreement. As under the consumer act, the bill requires the rental-purchase company to provide the lessee, or one lessee if there are multiple lessees under the same agreement, with a copy of the executed rent-to-own agreement. In addition, upon the request of a lessee, a rental-purchase company must provide the lessee with a receipt for any payment made by the lessee. Under the consumer act, a payment receipt must be provided without request, unless the method of payment itself is evidence of payment. With certain exceptions, upon the request of a lessee, a rental-purchase company must also provide the lessee or a person designated by the lessee with a copy of the lessee's payment history.

Related transactions

Under the bill, a rental-purchase company must offer an early-purchase option to a lessee and may offer a liability waiver to a lessee. The terms of a liability waiver and the fact that the lessee is not required to purchase the waiver must be disclosed to the lessee in writing. The fee for the liability waiver may not equal more than 10% of the rental payment due under the rent-to-own agreement.

Marketing activities

With certain exceptions, the bill requires a rental-purchase company to display a card or tag on or next to any property offered for rent, indicating whether the property is new or used and indicating the cash price of the property, the amount of the rental payment and the term over which the rental payment must be made and the total number and total dollar amount of all rental payments necessary to acquire ownership of the property. In addition, a rental-purchase company must ensure that an advertisement for a rent-to-own agreement that refers to the amount of a payment for any property, and to the right to acquire ownership of that property, also states that the advertisement is for a rent-to-own agreement and that the lessee does not acquire ownership of the property if the lessee fails to make all rental payments necessary to acquire ownership. The advertisement must also include the total number and total dollar amount of all rental payments necessary to acquire ownership of the property. The provisions relating to advertising, however, do not apply to an in-store display or an advertisement published in the yellow pages or similar business directory. The consumer act does not contain a similar provision regulating the manner in which consumer credit is marketed, although the consumer act does prohibit false, misleading and deceptive advertising of certain products.

Similar to the consumer act, the bill prohibits a rental-purchase company from inducing an individual to enter into a rent-to-own agreement by giving or offering to give the individual a rebate or discount in consideration of the individual's giving the rental-purchase company the names of prospective lessees, if the earning of the rebate or discount is contingent upon the occurrence of any event that takes place after the time that the individual enters into the rent-to-own agreement. The bill, however, specifically allows a rental-purchase company to give or offer to give a rebate or discount to a current lessee, in consideration of the lessee's giving the rental-purchase company the names of prospective lessees.

Right to reduced amount of rental payments and right to reinstatement

Under the bill, if a lessee who has paid more than 50% of the total dollar amount of rental payments necessary to acquire ownership provides the rental-purchase company with reasonable evidence that the lessee's monthly income is reduced by at least 25% due to certain specified events, the rental-purchase company must reduce the amount of each rental payment by the same percentage that the lessee's monthly income is reduced or by 50%, whichever is less. The events that may trigger a reduced rental payment are pregnancy, disability, an involuntary job loss or an involuntary reduction in the amount of hours worked or wages earned by the lessee. The reduced rental payment must remain in effect until the lessee's monthly income is no longer reduced, except that the amount of each rental payment may be adjusted accordingly as the lessee's monthly income increases. A rental-purchase company may reasonably require continuing evidence of reduced monthly income. In order to compensate for the reduced amount of the rental payments, a rental-purchase company may increase the total number of rental payments necessary to acquire ownership of the rental property. A rental-purchase company may not, however, increase the total dollar amount of rental payments necessary to acquire ownership, or the amount of any single rental payment, to greater than the amount initially disclosed in the rent-to-own agreement. The consumer act does not contain any similar provisions.

The bill also grants a lessee the right to reinstate a terminated rent-to-own agreement, as long as the lessee returned the rental property within five days after termination and not more than 21 days have passed since the return date or, if the lessee paid at least two-thirds of the total number of rental payments necessary to acquire ownership, not more than 45 days have passed since the return date. A rental-purchase company may require the payment of a $5 reinstatement fee, all past-due rental charges and any applicable late fees as a condition of reinstatement. Upon reinstatement, a rental-purchase company must provide a lessee with the same rental property, if available and in the same condition as when it was returned, or with comparable quality rental property.

Default and right to cure

The bill establishes a notice procedure similar to that contained in the consumer act that a rental-purchase company may follow if a lessee defaults under a rent-to-own agreement. The bill defines "default" as a material breach of the rent-to-own agreement or a failure to return rental property within seven days after the expiration of the term for which the last payment was made. Before giving a lessee a notice of default, a rental-purchase company may first request the lessee to voluntarily surrender the applicable rental property. Under the bill, as under the consumer act, with certain exceptions, in order to file an action against a lessee arising out of the lessee's default, a rental-purchase company must give to the lessee a written notice of the default and of the lessee's right, within 15 days after receiving the notice, to cure the default. Under the bill, the notice must specify, among other things, the actions required to cure the default, although, unlike the consumer act, the bill does not indicate what actions are required or permitted. As in the consumer act, if the lessee received a similar notice and cured the applicable default at least twice during the year preceding the current default, the bill permits a rental-purchase company to file an action without providing the written notice of default and right to cure as a condition of filing an action.

Collections practices

Under the bill, a rental-purchase company may not do any of the following in attempting to recover rental property or collect amounts owed under a rent-to-own agreement:

(1) Use or threaten to use force or violence.

(2) Disclose or threaten to disclose false information relating to the creditworthiness of the lessee.

(3) Disclose or threaten to disclose a debt that is disputed by the lessee without disclosing the fact that the debt is disputed.

(4) Harass or threaten the lessee or a relative of the lessee.

(5) Use obscene language in communicating with the lessee or a relative of the lessee.

(6) Threaten to enforce a right with knowledge that the right does not exist.

(7) Use a communication that falsely simulates legal, judicial or governmental process.

(8) Threaten to file an action against the lessee, unless the action is of a type that the rental-purchase company files in the regular course of business or unless the rental-purchase company intends to file the action.

In addition, a rental-purchase company may not threaten criminal prosecution, unless the rental-purchase company reasonably believes, in good faith, that the lessee has committed a crime and the rental-purchase company intends to seek the filing of criminal charges against the lessee. A rental-purchase company also may not communicate with a lessee's employer, except to verify employment status or earnings, to determine whether the employer has established a debt counseling procedure or to give effect to an assignment of earnings. Similar provisions regarding debt collection are also contained in the consumer act, except that, with certain exceptions, the consumer act also prohibits a creditor from disclosing to another person information affecting a customer's reputation, if the creditor knows or has reason to know that the person has no legitimate business need for the information.

Remedies, defenses and statute of limitations

With certain exceptions, a rental-purchase company that violates the new chapter is liable to a lessee damaged as a result of the violation for the greater of $100; the amount of actual damages sustained as a result of the violation, including incidental and consequential damages; or an amount equal to 25% of the total amount of payments due in one month under the lessee's rent-to-own agreement, up to $1,000. A rental-purchase company is also liable for the costs of the action and reasonable attorney fees. If, however, a rental-purchase company includes a prohibited provision in a rent-to-own agreement, these remedies do not apply. In this case, the rental-purchase company must surrender to the lessee the rental property and any amounts paid under the rent-to-own agreement. With certain limited exceptions, multiple violations in connection with the same rent-to-own agreement only entitle the lessee to a single recovery. The bill also caps the total liability of a rental-purchase company under a class action at $100,000 plus costs and reasonable attorney fees.

The bill establishes two defenses to a rental-purchase company's liability. First, a rental-purchase company is not liable for any violation resulting from an error of the rental-purchase company if, within 60 days after discovering the error, the rental-purchase company notifies the lessee of the error and makes necessary adjustments to correct the error. Second, a rental-purchase company is not liable for any violation that the rental-purchase company shows, by a preponderance of the evidence, was unintentional and resulted from a bona fide error that the rental-purchase company has acted to correct and that took place notwithstanding the maintenance of procedures reasonably adopted to avoid the error. The bill specifies that a bona fide error includes a clerical error, an error in making calculations and an error due to computer malfunction or computer programming or a printing error. The consumer act does not contain similar defenses.

An action brought by a lessee for a violation of the new chapter must be commenced within one year after the date of the violation, two years after the date on which the rent-to-own agreement was entered into or one year after the date of the last payment, whichever is later. This statute of limitations is generally the same as the statute of limitations under the consumer act.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB849, s. 1 Section 1. 409.104 (12m) of the statutes is created to read:

AB849,7,3 409.104 (12m) To a transfer of an interest under a rent-to-own agreement under ch. 435; or

AB849, s. 2 Section 2. 421.202 (7m) of the statutes is created to read:

AB849,7,5 421.202 (7m) A rent-to-own agreement under ch. 435;

AB849, s. 3 Section 3. Chapter 435 of the statutes is created to read:

AB849,7,8 CHAPTER 435 RENT-TO-OWN AGREEMENTS

AB849,7,10 Subchapter I scope

AB849,7,14 435.102 Scope. (1) Inapplicability of other laws. A rent-to-own agreement under this chapter is not governed by the laws relating to a security interest, as defined in s. 401.201 (37), or a lease, as defined in s. 411.103 (1) (j), and is not governed by chs. 421 to 427 and 429.

AB849,7,15 (2) Exclusions. This chapter does not apply to any of the following:

AB849,7,17 (a) A lease or bailment of personal property that is incidental to the lease of real property.

AB849,7,18 (b) A lease of a motor vehicle, as defined in s. 218.01 (1) (m).

AB849,7,20 (c) A credit sale, as defined in 15 USC 1602 (g) and in the regulations promulgated under that section.

AB849,8,2 subchapter ii definitions

AB849,8,3 435.201 Definitions. In this chapter:

AB849,8,4 (1) "Department" means the department of financial institutions.

AB849,8,6 (2) "Lessee" means an individual who rents personal property under a rent-to-own agreement.

AB849,8,8 (3) "Rental property" means personal property rented under a rent-to-own agreement.

AB849,8,11 (4) "Rental-purchase company" means a person who regularly provides the use of personal property through rent-to-own agreements and to whom rental payments are initially payable under the terms of a particular rent-to-own agreement.

AB849,8,14 (5) "Rent-to-own agreement" means an agreement between a rental-purchase company and a lessee for the use of personal property if all of the following conditions are met:

AB849,8,16 (a) The personal property is to be used primarily for personal, family or household purposes.

AB849,8,18 (b) The agreement has an initial term of 4 months or less and is automatically renewable with each payment after the initial term.

AB849,8,20 (c) The agreement does not obligate or require the lessee to renew the agreement beyond the initial term.

AB849,8,22 (d) The agreement permits, but does not obligate, the lessee to acquire ownership of the personal property.

AB849,8,24 subchapter iii administration

AB849,9,9 435.301 Registration. (1) Requirement; application. Every person engaging in business as a rental-purchase company in this state shall file a registration statement with the department within 30 days after the date on which the person commences business in this state and no later than February 28 of each year thereafter. Except during the first 30 days after the date on which the person commences business in this state, no person may engage in business as a rental-purchase company in this state without a valid unsuspended or unrevoked registration filed under this subsection. A registration statement under this section shall include all of the following information:

AB849,9,10 (a) The name of the rental-purchase company.

AB849,9,11 (b) The name under which the rental-purchase company transacts business.

AB849,9,12 (c) The address of the rental-purchase company's principal office.

AB849,9,14 (d) The addresses of all locations in this state at which the rental-purchase company offers rent-to-own agreements to potential lessees.

AB849,9,16 (e) The address of the rental-purchase company's designated agent upon whom service of process may be made in this state.

AB849,9,18 (2) Rules. The department shall promulgate rules and prescribe forms for the efficient administration of this section.

AB849,9,22 435.302 Registration fees. (1) When due. A rental-purchase company required to register under s. 435.301 shall pay a registration fee to the department when the rental-purchase company files the registration statement required under s. 435.301.

AB849,9,24 (2) Amount. The amount of the annual registration fee is $50, plus $25 for each location in this state, in excess of 2, at which the rental-purchase company offers rent-to-own agreements to potential lessees, subject to a maximum fee of $750 per year.

AB849,10,5 435.303 Examination of books and records. (1) Purpose of examination. The department may examine the books and records of a rental-purchase company for the purpose of determining compliance with this chapter.

AB849,10,12 (2) Availability of books and records. A rental-purchase company shall make its books and records reasonably available for inspection by the department. If the rental-purchase company's books and records are located outside of this state, the rental-purchase company shall, at the rental-purchase company's option, either make the books and records available to the department at a convenient location in this state or pay the reasonable and necessary expenses for the department to examine the books and records at the location where they are maintained.

AB849,10,16 (3) Method of bookkeeping. A rental-purchase company shall use generally accepted accounting principles and practices in keeping its books and records so that the department may determine if the rental-purchase company is in compliance with this chapter.

AB849,10,21 (4) Destruction of records; when authorized. A rental-purchase company shall keep records relating to each rent-to-own agreement entered into by the rental-purchase company and the payments made under each rent-to-own agreement for at least 2 years after the date on which the rent-to-own agreement is terminated.

AB849,10,24 435.304 Suspension or revocation of registration. (1) Grounds. The department may issue an order suspending or revoking a rental-purchase company's registration if any of the following conditions is met:

AB849,11,3 (a) The rental-purchase company has violated any provision of this chapter, the violation is not isolated or inadvertent and the department determines that the violation justifies the suspension or revocation of the registration.

AB849,11,7 (b) The department becomes aware that any fact or condition exists which, if it had existed at the time that the rental-purchase company first filed its registration statement, would have warranted the department's refusal to approve the registration.

AB849,11,9 (c) The rental-purchase company has failed to pay the registration fee under s. 435.302.

AB849,11,11 (2) Procedure. The following procedure applies to every order of the department that suspends or revokes a rental-purchase company's registration:

AB849,11,15 (a) The department shall provide a written notice to the rental-purchase company of the department's intent to issue an order suspending or revoking the rental-purchase company's registration. The notice shall specify the grounds for and the effective date of the proposed order.

AB849,11,21 (b) The rental-purchase company may file with the department a written response to the allegations contained in the notice within 20 days after receiving the notice. The rental-purchase company's written response may contain a request for a contested case hearing under s. 227.42. If the written response does not contain a request for a contested case hearing under s. 227.42, the right to a contested case hearing is waived.

AB849,12,2 (c) If a written response containing a request for a contested case hearing under s. 227.42 is received by the department within the time provided under par. (b) and if, in the opinion of the department, the matter satisfies all of the conditions under s. 227.42 (1) (a) to (d), the matter shall be scheduled for a contested case hearing to commence within 60 days after the date on which the department receives the written response.

AB849,12,12 (d) If the rental-purchase company fails to file a written response within the time provided under par. (b), files a timely written response but fails to request a contested case hearing under s. 227.42 or files a timely written response requesting a contested case hearing but, in the opinion of the department, the matter fails to satisfy all of the conditions under s. 227.42 (1) (a) to (d), the department may issue an order suspending or revoking the rental-purchase company's registration under sub. (1). If the rental-purchase company files a timely written response containing a proper request for a contested case hearing under s. 227.42, any order of the department suspending or revoking the rental-purchase company's registration shall be stayed pending completion of proceedings under ch. 227.

AB849,12,15 subchapter iv rent-to-own agreements and disclosure requirements

AB849,12,18 435.401 General requirements of disclosure. (1) Form, location, size and time of disclosure. The information required under s. 435.402 shall satisfy all of the following requirements:

AB849,12,19 (a) The information shall be clearly and conspicuously disclosed.