Amendment ASA1-AB849

1999 - 2000 LEGISLATURE

ASSEMBLY SUBSTITUTE AMENDMENT 1, TO 1999 ASSEMBLY BILL 849

March 21, 2000 - Offered by Committee on Financial Institutions.

AB849-ASA1,1,5 An Act to amend chapter 218 (title), 220.02 (2) (b) and 220.02 (3); and to create subchapter XI of chapter 218 [precedes 218.61], 409.104 (12m) and 421.202 (7m) of the statutes; relating to: regulating rental-purchase companies, providing an exemption from emergency rule procedures, granting rule-making authority and providing a penalty.

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

AB849-ASA1, s. 1 Section 1. Chapter 218 (title) of the statutes is amended to read:

AB849-ASA1,1,12 CHAPTER 218 FINANCE COMPANIES, AUTO DEALERS, ADJUSTMENT COMPANIES and, collection agencies, rental-purchase companies and rent-to-own agreements

AB849-ASA1, s. 2 Section 2. Subchapter XI of chapter 218 [precedes 218.61] of the statutes is created to read:

AB849-ASA1,2,3 CHAPTER 218

AB849-ASA1,2,6 Subchapter XI Rental-purchase companies and Rent-to-own agreements

AB849-ASA1,2,10 218.61 Scope. (1) Inapplicability of other laws. A rent-to-own agreement under this subchapter 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-ASA1,2,11 (2) Exclusions. This subchapter does not apply to any of the following:

AB849-ASA1,2,13 (a) A lease or bailment of personal property that is incidental to the lease of real property.

AB849-ASA1,2,14 (b) A lease of a motor vehicle, as defined in s. 218.01 (1) (m).

AB849-ASA1,2,16 (c) A credit sale, as defined in 15 USC 1602 (g) and in the regulations promulgated under that section.

AB849-ASA1,2,18 218.612 Territorial application. For the purposes of this subchapter, a rent-to-own agreement is entered into in this state if any of the following applies:

AB849-ASA1,2,21 (1) A writing signed by a lessee and evidencing the obligation under the rent-to-own agreement or an offer of a lessee is received by a rental-purchase company in this state.

AB849-ASA1,2,24 (2) The rental-purchase company induces a lessee who is a resident of this state to enter into the rent-to-own agreement by face-to-face solicitation or by mail or telephone solicitation directed to the particular lessee in this state.

AB849-ASA1,3,4 218.614 Obligation of good faith. Every agreement or duty under this subchapter 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.

AB849-ASA1,3,5 218.616 Definitions. In this subchapter:

AB849-ASA1,3,7 (1) "Division" means the division of banking in the department of financial institutions.

AB849-ASA1,3,9 (2) "Lessee" means an individual who rents personal property under a rent-to-own agreement.

AB849-ASA1,3,11 (3) "Licensee" means a rental-purchase company holding a license issued by the division under this subchapter.

AB849-ASA1,3,13 (4) "Rental property" means personal property rented under a rent-to-own agreement.

AB849-ASA1,3,16 (5) "Rental-purchase company" means a person engaged in the business of entering into rent-to-own agreements in this state or acquiring or servicing rent-to-own agreements that are entered into in this state.

AB849-ASA1,3,19 (6) "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-ASA1,3,21 (a) The personal property that is rented under the agreement is to be used primarily for personal, family or household purposes.

AB849-ASA1,3,23 (b) The agreement has an initial term of 4 months or less and is automatically renewable with each payment after the initial term.

AB849-ASA1,3,25 (c) The agreement does not obligate or require the lessee to renew the agreement beyond the initial term.

AB849-ASA1,4,2 (d) The agreement permits, but does not obligate, the lessee to acquire ownership of the personal property.

AB849-ASA1,4,4 218.617 License required. No person may operate as a rental-purchase company without a valid license issued by the division under this subchapter.

AB849-ASA1,4,8 218.618 Application for license; fees; bond. (1) Application. (a) An application for a license under this subchapter shall be made to the division, in writing, in the form prescribed by the division. An application for a license under this subchapter shall include all of the following:

AB849-ASA1,4,9 1. If the applicant is an individual, the applicant's social security number.

AB849-ASA1,4,11 2. If the applicant is not an individual, the applicant's federal employer identification number.

AB849-ASA1,4,13 (b) The division may not disclose any information received under par. (a) 1. or 2. to any person except as follows:

AB849-ASA1,4,16 1. The division may disclose information received under par. (a) 1. or 2. to the department of revenue for the sole purpose of requesting certifications under s. 73.0301.

AB849-ASA1,4,19 2. The division may disclose information received under par. (a) 1. to the department of workforce development in accordance with a memorandum of understanding entered into under s. 49.857.

AB849-ASA1,4,22 (2) Application fees. At the time of applying to the division for a license under this subchapter, the applicant shall pay any applicable fee specified in the rules promulgated under s. 218.63 (3).

AB849-ASA1,4,25 (3) Bond. The division may require any applicant or licensee to file with the division and maintain in force a bond, in a form prescribed by and acceptable to the division, and in an amount determined by the division.

AB849-ASA1,5,8 218.62 Issuance or denial of license. (1) Investigation. Upon the filing of an application under s. 218.618 (1) and the payment of any applicable fee, the division shall perform an investigation. Except as provided in sub. (3), if the division finds that the character, general fitness and financial responsibility of the applicant; the members of the applicant, if the applicant is a partnership, limited liability company or association; and the officers and directors of the applicant, if the applicant is a corporation; warrant the belief that the business will be operated in compliance with this subchapter, the division shall issue a license to the applicant.

AB849-ASA1,5,14 (2) Denial; notice; hearing. Except as provided in sub. (3), the division may deny an application under s. 218.618 (1) by providing written notice to the applicant stating the grounds for the denial. Except as provided in sub. (3), a person whose application has been denied may request a hearing under s. 227.44 within 30 days after the date of denial. The division may appoint a hearing examiner under s. 227.46 to conduct the hearing.

AB849-ASA1,5,16 (3) Denial; child or family support or tax delinquency. The division may not issue a license under this subchapter if any of the following applies:

AB849-ASA1,5,18 (a) The applicant fails to provide the information required under s. 218.618 (1) (a).

AB849-ASA1,5,23 (b) The department of revenue certifies under s. 73.0301 that the applicant is liable for delinquent taxes. An applicant for whom a license is not issued under this paragraph for delinquent taxes is entitled to a notice under s. 73.0301 (2) (b) 1. b. and a hearing under s. 73.0301 (5) (a) but is not entitled to any other notice or hearing under this section.

AB849-ASA1,6,8 (c) The applicant fails to comply, after appropriate notice, with a subpoena or warrant issued by the department of workforce development or a county child support agency under s. 59.53 (5) and related to paternity or child support proceedings or is delinquent in making court-ordered payments of child or family support, maintenance, birth expenses, medical expenses or other expenses related to the support of a child or former spouse, as provided in a memorandum of understanding entered into under s. 49.857. An applicant whose application is denied under this paragraph for delinquent payments is entitled to a notice and hearing under s. 49.857 but is not entitled to any other notice or hearing under this section.

AB849-ASA1,6,12 218.622 License; other business. (1) Licensed locations. A license issued under this subchapter shall specify the location at which the licensee is permitted to conduct business. A separate license shall be required for each place of business maintained by the licensee.

AB849-ASA1,6,13 (2) Assignment. A license issued under this subchapter is not assignable.

AB849-ASA1,6,15 (3) Posting. A licensee shall post its license in a conspicuous place at the location specified in the license.

AB849-ASA1,6,21 (4) Term of license; fee. Every license shall remain in force until suspended or revoked in accordance with this subchapter or surrendered by the licensee. Every licensee shall, on or before June 1 of each year, pay to the division the annual license fee specified in rules promulgated under s. 218.63 (3) and, if required by the division, provide a rider or endorsement to increase the amount of any bond required under s. 218.618 (3).

AB849-ASA1,6,25 (5) Other business prohibited. No licensee may conduct business as a rental-purchase company within any office, room or place of business in which any other business is solicited or engaged in, unless the licensee is authorized to do so, in writing, by the division.

AB849-ASA1,7,4 218.624 Revocation, suspension and restriction of license. (1) Discretionary suspension or revocation. The division may issue an order suspending or revoking any license issued under this subchapter if the division finds that any of the following applies:

AB849-ASA1,7,7 (a) The licensee has violated any of the provisions of this subchapter, any rules promulgated under s. 218.63 (3) or any lawful order of the division under s. 218.63 (1).

AB849-ASA1,7,10 (b) A fact or condition exists that, if it had existed at the time of the original application for the license, would have warranted the division in refusing to issue the license.

AB849-ASA1,7,12 (c) The licensee has made a material misstatement in an application for a license or in information furnished to the division.

AB849-ASA1,7,14 (d) The licensee has failed to pay the annual license fee required under s. 218.622 (4) or has failed to maintain in effect any bond required under s. 218.618 (3).

AB849-ASA1,7,17 (e) The licensee has failed to provide any additional information, data and records required by the division, within the time period prescribed under s. 218.626 (2).

AB849-ASA1,7,19 (f) The licensee has failed to pay any penalties due under s. 218.682 (1) or (2) within 30 days after receiving notice, by certified mail, that the penalties are due.

AB849-ASA1,8,6 (2) Mandatory restriction or suspension; child or family support. The division shall restrict or suspend a license issued under this subchapter if the division finds that the licensee is an individual who fails to comply, after appropriate notice, with a subpoena or warrant issued by the department of workforce development or a county child support agency under s. 59.53 (5) and related to paternity or child support proceedings or who is delinquent in making court-ordered payments of child or family support, maintenance, birth expenses, medical expenses or other expenses related to the support of a child or former spouse, as provided in a memorandum of understanding entered into under s. 49.857. A licensee whose license is restricted or suspended under this subsection is entitled to a notice and hearing only as provided in a memorandum of understanding entered into under s. 49.857 and is not entitled to any other notice or hearing under this section.

AB849-ASA1,8,12 (3) Mandatory revocation; delinquent taxes. The division shall revoke a license issued under this subchapter if the department of revenue certifies under s. 73.0301 that the licensee is liable for delinquent taxes. A licensee whose license is revoked under this subsection for delinquent taxes is entitled to a notice under s. 73.0301 (2) (b) 1. b. and a hearing under s. 73.0301 (5) (a) but is not entitled to any other notice or hearing under this section.

AB849-ASA1,8,15 (4) Revocation and suspension procedure. Except as provided in subs. (2) and (3), the following procedure applies to every order of the division that suspends or revokes a license issued under this subchapter:

AB849-ASA1,8,18 (a) The division shall provide a written notice to the licensee of the division's intent to issue an order suspending or revoking the licensee's license. The notice shall specify the grounds for and the effective date of the proposed order.

AB849-ASA1,8,23 (b) The licensee may file with the division a written response to the allegations contained in the notice within 20 days after receiving the notice. The licensee'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-ASA1,9,4 (c) If a written response containing a request for a contested case hearing under s. 227.42 is received by the division within the time provided under par. (b) and if, in the opinion of the division, the matter satisfies all of the conditions specified in s. 227.42 (l) (a) to (d), the matter shall be scheduled for a contested case hearing to commence within 60 days after the date on which the division receives the written response.

AB849-ASA1,9,13 (d) If the licensee 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 division, the matter fails to satisfy all of the conditions specified in s. 227.42 (l) (a) to (d), the division may issue an order suspending or revoking the license. If the licensee files a timely written response containing a proper request for a contested case hearing under s. 227.42, any order of the division suspending or revoking the licensee's license shall be stayed pending completion of proceedings under ch. 227.

AB849-ASA1,9,20 218.626 Modification of license. (1) Change in place of business. No licensee may change its place of business to another location without the prior approval of the division. A licensee shall provide the division with at least 15 days' prior written notice of a proposed change under this subsection and shall pay any applicable fees specified in the rules promulgated under s. 218.63 (3). Upon approval by the division of the new location, the division shall issue an amended license, specifying the date on which the amended license is issued and the new location.

AB849-ASA1,9,25 (2) Other changes. Except as provided in sub. (1), a licensee shall notify the division of any material change to the information provided in the licensee's original application for a license under this subchapter or provided in a previous notice of change filed by the licensee with the division under this subsection. A licensee shall provide the notice required under this subsection within 10 days after the change. The licensee shall provide any additional information, data and records about the change to the division within 20 days after the division requests the information, data or records. The division shall determine the cost of investigating and processing the change. The licensee shall pay the division's cost within 30 days after the division demands payment.

AB849-ASA1,10,9 (3) Division approval of other changes. Any change that is subject to the notice requirement under sub. (2) is subject to the approval of the division. In reviewing the change, the division shall apply the same criteria as the criteria for approval of an original license application.

AB849-ASA1,10,14 218.628 Annual report; records. (1) Annual report. On or before March 31 of each year, a licensee shall file a report with the division giving such reasonable and relevant information as the division may require concerning the business and operations conducted by the licensee. The licensee shall make the report in the form prescribed by the division.

AB849-ASA1,10,19 (2) Books and records. A licensee shall keep such books and records in the licensed location as, in the opinion of the division, will enable the division to determine whether the provisions of this subchapter are being observed. Every licensee shall preserve its records of a rent-to-own agreement for at least 3 years after making the final entry with respect to the rent-to-own agreement.

AB849-ASA1,10,24 218.63 Powers and duties of division; administration. (1) Orders. The division may issue any general order, as defined in s. 217.02 (3), or special order, as defined in s. 217.02 (10), in execution of or supplementary to this subchapter, except that the division may not issue a general order or special order that conflicts with this subchapter.

AB849-ASA1,11,14 (2) Investigations and examinations. For the purpose of discovering violations of this subchapter, the division may cause an investigation or examination to be made of the business of a licensee transacted under this subchapter. The place of business, books of accounts, papers, records, safes and vaults of the licensee shall be open to the division for the purpose of an investigation or examination, and the division has authority to examine under oath all persons whose testimony is required for an investigation or examination. The division shall determine the cost of an investigation or examination. The licensee shall pay the cost of an investigation or examination. The licensee shall pay the cost of any hearing held for the purpose of this subsection, including witness fees, unless the division or a court finds that the licensee has not violated any provision of this subchapter. The licensee shall pay all costs owing under this subsection within 30 days after the division demands payment. The state may maintain an action for the recovery of any costs owing under this subsection.

AB849-ASA1,11,16 (3) Rules. The division may promulgate rules for the administration of this subchapter.

AB849-ASA1,11,19 (4) Testimonial powers and powers to secure evidence. The division has the same power to conduct hearings, take testimony and secure evidence as is provided in ss. 217.17 and 217.18.

AB849-ASA1,11,24 (5) Enforcement. The division has the duty, power, jurisdiction and authority to investigate, ascertain and determine whether this subchapter or any lawful orders issued under sub. (1) are being violated. The division may report violations of this subchapter to the attorney general or the district attorney of the proper county for prosecution.

AB849-ASA1,12,3 218.632 General requirements of disclosure. (1) Form, location, size and time of disclosure. The information required under s. 218.634 to be included in a rent-to-own agreement shall satisfy all of the following requirements:

AB849-ASA1,12,4 (a) The information shall be clearly and conspicuously disclosed.

AB849-ASA1,12,5 (b) The information shall be disclosed in writing.

AB849-ASA1,12,7 (c) The information shall be disclosed on the face of the rent-to-own agreement above the line for the lessee's signature.

AB849-ASA1,12,8 (d) The information shall be disclosed in not less than 8-point standard type.

AB849-ASA1,12,10 (e) The information shall be disclosed before the time that the lessee becomes legally obligated under the rent-to-own agreement.

AB849-ASA1,12,14 (2) Accuracy of disclosure. The information required under s. 218.634 must be accurate as of the time that it is disclosed to the lessee. If any information subsequently becomes inaccurate as a result of any act, occurrence or agreement by the lessee, the resulting inaccuracy is not a violation of this subchapter.

AB849-ASA1,12,19 (3) Copy of rent-to-own agreement. The rental-purchase company shall provide the lessee with a copy of the completed rent-to-own agreement signed by the lessee. If more than one lessee is legally obligated under the same rent-to-own agreement, delivery of a copy of the completed rent-to-own agreement to one of the lessees shall satisfy this subsection.

AB849-ASA1,12,23 (4) Single instrument. In a rent-to-own agreement, the lessee's payment obligations shall be evidenced by a single instrument, which shall include the signature of the rental-purchase company, the signature of the lessee and the date on which the instrument is signed.

AB849-ASA1,13,3 218.634 Required provisions of rent-to-own agreement. A rental-purchase company shall include all of the following information, to the extent applicable, in every rent-to-own agreement:

AB849-ASA1,13,8 (1) Description. A brief description of the rental property, sufficient to identify the rental property to the lessee and the rental-purchase company, including any identification number, and a statement indicating whether the rental property is new or used. A statement that incorrectly indicates that new rental property is used is not a violation of this subchapter.