AB898: Bill Text

(5) The amount of any payment due when the rental-purchase 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) The total dollar amount and an itemization of all taxes, liability damage waiver fees, fees for optional services, processing and application fees, and delivery charges that the lessee would incur if the lessee were to rent the property until the lessee acquires ownership.

(8) An itemization and description of any other charges or fees the rental-purchase company may charge the lessee.

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

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

(11) A statement indicating that, with certain exceptions, the rental-purchase company is required to service the rental property to maintain it in good working condition.

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

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

(14) 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 rental-purchase agreement. For example, under the bill, a rental-purchase 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, a provision requiring the lessee to purchase insurance from the rental-purchase company to insure the rental property, or a provision requiring the lessee to pay attorney fees. Several of these prohibitions are similar to prohibitions contained in the consumer act.

Disclosure

All required provisions of a rental-purchase agreement must be clearly and conspicuously disclosed to the lessee in at least eight-point standard type on the face of the rental-purchase agreement. The lessee's payment obligations must be evidenced by a single, dated instrument that includes the signatures of the rental-purchase company and lessee. 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 rental-purchase agreement. In addition, a rental-purchase company must provide the lessee with a receipt for any payment made by the lessee in cash, or upon request, for any other type 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. The rental-purchase company may charge a fee if a lessee or designated person requests more than one copy in any 12-month period.

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 percent of the rental payment due under the rental-purchase agreement. The bill permits a lessee to cancel a liability waiver at the end of any rental term.

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 rental-purchase agreement that refers to the amount of a payment for a specific item of property also states that the advertisement is for a rental-purchase 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 bill also prohibits a rental-purchase company from inducing an individual to enter into a rental-purchase 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 rental-purchase 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, a lessee has the right to reinstate a terminated rental-purchase agreement, as long as the lessee returned the rental property within seven days after termination and not more than 60 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 120 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 rental-purchase agreement. The bill defines "default" as a material breach of the rental-purchase 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, 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 rental-purchase 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.

(9) With certain exceptions, disclose or threaten to disclose to a person other than the lessee or the lessee's spouse information affecting the lessee's reputation, with knowledge or reason to know that the person to whom the disclosure is made does not have a legitimate business need for the information.

In addition, a rental-purchase company may not threaten criminal prosecution. 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.

Unconscionable conduct

The bill requires the administrator of the division to promulgate rules declaring specific conduct in rental-purchase agreements and the collection of accounts and property arising therefrom to be unconscionable and prohibiting the use thereof. In promulgating the rules, the administrator must consider that the practice unfairly takes advantage of the lack of knowledge, ability, experience, or capacity of the lessees; that those engaging in the practice know of the inability of lessees to receive benefits properly anticipated from the goods or services involved; the fact that the practice may enable rental-purchase companies to take advantage of the inability of lessees reasonably to protect their interests by reason of physical or mental infirmities, illiteracy, or inability to understand the language of the agreement, ignorance or lack of education, or similar factors; that the terms of the transaction require lessees to waive legal rights; that the terms of the transaction require lessees to unreasonably jeopardize money or property beyond the money or property immediately at issue in the transaction; that the natural effect of the practice is to cause or aid in causing lessees to misunderstand the true nature of the transaction or their rights and duties thereunder; that the writing purporting to evidence the obligation of the lessees in the transaction contains terms or provisions or authorizes practices prohibited by law; and definitions of unconscionability in statutes, rules, rulings, and decisions of legislative, administrative, or judicial bodies.

Obligation of good faith

Every agreement and duty regulated or established under the bill must be executed or performed in good faith, consistent with reasonable standards of fair dealing.

Penalties, remedies, defenses, and statute of limitations

Depending upon the violation, a rental-purchase company that violates the new chapter may be required to forfeit up to $100 per violation or may be subjected to a $2,000 fine and imprisonment for up to six months. In addition, 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 percent of the total amount of payments necessary to acquire ownership under the lessee's rental-purchase 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 rental-purchase 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 rental-purchase agreement. With certain limited exceptions, multiple violations in connection with the same rental-purchase 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 $500,000 plus costs and reasonable attorney fees.

The bill provides that 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 rental-purchase agreement was entered into, or one year after the date of the last payment, whichever is later.

For further information see the state and local 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:

AB898, s. 1 Section 1. 220.02 (2) (b) of the statutes is amended to read:

AB898,7,5 220.02 (2) (b) The lending of money under s. 138.09 or those relating to finance companies, motor vehicle dealers, adjustment service companies, community currency exchanges, rental-purchase companies licensed under ch. 430, and collection agencies under ch. 218.

AB898, s. 2 Section 2. 220.02 (3) of the statutes, as affected by 2003 Wisconsin Act 33, is amended to read:

AB898,8,2 220.02 (3) It is the intent of sub. (2) to give the division jurisdiction to enforce and carry out all laws relating to banks or banking in this state, including those relating to state banks, savings banks, savings and loan associations, and trust company banks, and also all laws relating to small loan companies or other loan companies or agencies, finance companies, motor vehicle dealers, adjustment service companies, community currency exchanges, rental-purchase companies licensed under ch. 430, and collection agencies and those relating to sellers of checks under ch. 217, whether doing business as corporations, individuals, or otherwise, but to exclude laws relating to credit unions.

AB898, s. 3 Section 3. 409.109 (4) (n) of the statutes is created to read:

AB898,8,5 409.109 (4) (n) The transfer of an interest under a rental-purchase agreement under ch. 430.

AB898, s. 4 Section 4. 421.202 (11) of the statutes is created to read:

AB898,8,7 421.202 (11) A rental-purchase agreement under ch. 430.

AB898, s. 5 Section 5. 421.301 (9) of the statutes is amended to read:

AB898,8,18 421.301 (9) "Consumer credit sale" means a sale of goods, services or an interest in land to a customer on credit where the debt is payable in installments or a finance charge is imposed and includes any agreement in the form of a bailment of goods or lease of goods or real property if the bailee or lessee pays or agrees to pay as compensation for use a sum substantially equivalent to or in excess of the aggregate value of the goods or real property involved and it is agreed that the bailee or lessee will become, or for no other or a nominal consideration has the option to become, the owner of the goods or real property upon full compliance with the terms of the agreement. "Consumer credit sale" does not include a rental-purchase agreement under ch. 430.

AB898, s. 6 Section 6. 421.301 (11) of the statutes is amended to read:

AB898,8,22 421.301 (11) "Consumer lease" means a lease of goods which a merchant makes to a customer for a term exceeding 4 months. "Consumer lease" does not include a rental-purchase agreement under ch. 430.

AB898, s. 7 Section 7. 423.201 (2) of the statutes is renumbered 423.201 (2) (intro.) and amended to read:

AB898,9,2 423.201 (2) (intro.) "Consumer approval transaction" does not include a any of the following:

AB898,9,4 (a) A catalog sale that is not accompanied by any other solicitation or a consumer loan conducted and consummated entirely by mail.

AB898, s. 8 Section 8. 423.201 (2) (b) of the statutes is created to read:

AB898,9,6 423.201 (2) (b) A rental-purchase agreement under ch. 430.

AB898, s. 9 Section 9. Chapter 430 of the statutes is created to read:

AB898,9,8 CHAPTER 430

AB898,9,9 RENTal-purchase AGREEMENTS

AB898,9,10 Subchapter I

AB898,9,11 Short title; General provisions

AB898,9,13 430.101 Short title. Chapter 430 shall be known and may be cited as the Wisconsin Rental-Purchase Agreements Act.

AB898,9,17 430.102 Applicable law. (1) Unless superseded by ch. 430, the principles of law and equity, including the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause supplement ch. 430.

AB898,9,21 430.103 Obligation of good faith. Every agreement or duty under this chapter imposes an obligation of good faith in its performance or enforcement. In this section, "good faith" means honesty in fact in the conduct or transaction concerned and the observance of reasonable commercial standards of fair dealing.

AB898,9,22 Subchapter II

AB898,9,23 Scope and jurisdiction

AB898,9,25 430.201 Scope. (1) Inapplicability of other laws. A rental-purchase 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.

AB898,10,3 (2) Exclusions. This chapter does not apply to any of the following:

AB898,10,5 (a) A lease or bailment of personal property that is incidental to the lease of real property.

AB898,10,6 (b) A lease of a motor vehicle, as defined in s. 218.0101 (22).

AB898,10,8 (c) A credit sale, as defined in 15 USC 1602 (g) and in any federal regulations promulgated under that section.

AB898,10,11 430.202 Territorial application. (1) For the purposes of this chapter, a rental-purchase agreement is entered into in this state if any of the following applies:

AB898,10,14 (a) A writing signed by a lessee and evidencing the obligation under the rental- purchase agreement or an offer of a lessee is received by a rental-purchase company in this state.

AB898,10,17 (b) The rental-purchase company induces a lessee who is a resident of this state to enter into the rental-purchase agreement by face-to-face solicitation or by mail or telephone solicitation directed to the particular lessee in this state.

AB898,10,21 (2) If a rental-purchase agreement is made or modified in another state with a lessee who is a resident of this state at the time that the agreement or modification is made, the following apply as though the agreement or modification occurred in this state:

AB898,10,23 (a) A rental-purchase company, or an assignee of its rights, may collect through actions or other proceedings charges only to the extent permitted under this chapter.

AB898,10,25 (b) A rental-purchase company may not enforce any right against a lessee if the enforcement of that right would violate s. 430.503.

AB898,11,4 (3) Except as provided in subs. (1) and (2), a rental-purchase agreement made or modified in another state with an individual who was not a resident of this state at the time that the agreement or modification was made, is valid and enforceable under the laws of the state applicable to the transaction.

AB898,11,9 (4) For purposes of this chapter, the residence of a lessee is the address given by the lessee as his or her residence in any writing signed by the lessee in connection with a rental-purchase agreement. The given address is presumed to be unchanged until the rental-purchase company knows or has reason to know of a new or different address.

AB898,11,10 Subchapter III

AB898,11,11 Definitions

AB898,11,12 430.301 Definitions. In this chapter:

AB898,11,13 (1) "Administrator" means the administrator of the division.