AB849: Bill Text

(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.

AB849,12,20 (b) The information shall be disclosed in writing.

AB849,12,22 (c) The information shall be disclosed on the face of the rent-to-own agreement above the line for the lessee's signature.

AB849,12,23 (d) The information shall be disclosed in not less than 8-point standard type.

AB849,12,25 (e) The information shall be disclosed at or before the time that the lessee becomes legally obligated under the rent-to-own agreement.

AB849,13,4 (2) Accuracy of disclosure. The information required under s. 435.402 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 chapter.

AB849,13,9 (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.

AB849,13,12 435.402 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:

AB849,13,17 (1) Description. A brief description of the rental property, sufficient to identify the rental property to the lessee and the rental-purchase company, including an 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 chapter.

AB849,13,23 (2) Cash price. The price at which the rental-purchase company would sell the rental property to the lessee if the lessee were to pay for the rental property in full on the date on which the rent-to-own agreement is executed, along with a statement that, if the lessee intends to acquire ownership of the rental property and is able to pay for the property in full or is able to obtain credit to finance the purchase, the lessee may be able to purchase similar property from a retailer at a lower cost.

AB849,13,24 (3) Rental payment. The periodic rental payment for the rental property.

AB849,14,5 (4) Up-front payment. Any payment required of the lessee at the time that the agreement is executed or at the time that the rental property is delivered, including the initial rental payment, any application or processing charge, any delivery fee, any charge for a liability damage waiver or for other optional services agreed to by the lessee, and the applicable tax.

AB849,14,8 (5) Payment to acquire ownership. The total number, total dollar amount and timing of all periodic rental payments necessary to acquire ownership of the rental property.

AB849,14,14 (6) Other charges and fees. A statement that the total dollar amount of all periodic rental payments necessary to acquire ownership of the rental property does not include other charges or fees that a lessee may incur, such as application, processing or delivery charges, or late payment, reinstatement, default or pickup fees. These charges and fees shall be separately identified in the rental-purchase agreement, and the amount of each charge and fee shall be disclosed.

AB849,14,19 (7) Summary of early-purchase option. A statement summarizing the terms of the lessee's option to acquire ownership of the rental property, including a statement indicating that the lessee has the right to exercise an early purchase option and indicating the price, or the formula or method for determining the price, at which the rental property may be purchased under the early-purchase option.

AB849,15,2 (8) Responsibility for theft or damage. A statement that, unless otherwise agreed, the lessee is responsible for the fair market value of the rental property, determined according to the early-purchase option formula or method, if the rental property is stolen, damaged or destroyed while in the possession of or subject to the control of the lessee. The statement shall indicate that the fair market value will be determined as of the date on which the rental property is stolen, damaged or destroyed.

AB849,15,9 (9) Service and warranty. A statement identifying the party responsible for maintaining or servicing the rental property during the term of the rent-to-own agreement, together with a description of that responsibility, and a statement that if any part of a manufacturer's express warranty covers the rental property when the lessee acquires ownership of the rental property the manufacturer's express warranty will be transferred to the lessee, if the transfer is allowed by the terms of the manufacturer's express warranty.

AB849,15,12 (10) Termination at option of lessee. A statement that the lessee may terminate the agreement at any time without penalty by voluntarily surrendering or returning the rental property in good repair.

AB849,15,14 (11) Right to reinstate. A brief explanation of the lessee's right to reinstate a rent-to-own agreement under s. 435.602.

AB849,15,23 (12) Rental, not purchase. A statement that the lessee will not own the rental property until the lessee has made all of the periodic rental payments necessary to acquire ownership or has exercised the lessee's early-purchase option. The rental-purchase company shall also include a notice reading substantially as follows: "You are renting this property. You will not own the property until you make all of the periodic rental payments necessary to acquire ownership or until you exercise your early-purchase option. If you do not make your periodic rental payments as scheduled or exercise your early-purchase option, the lessor may repossess the property."

AB849,16,2 (13) Information about rental-purchase company and lessee. The names of the rental-purchase company and the lessee, the rental-purchase company's business address and telephone number, the lessee's address and the date on which the rent-to-own agreement is executed.

AB849,16,5 435.403 Prohibited provisions of rent-to-own agreement. A rental-purchase company may not include any of the following provisions in a rent-to-own agreement:

AB849,16,6 (1) Confession. A confession of judgment.

AB849,16,9 (2) Security. A provision granting the rental-purchase company a security interest in any property except the rental property delivered by the rental-purchase company under the rent-to-own agreement.

AB849,16,13 (3) Repossession. A provision authorizing a rental-purchase company or an agent of the rental-purchase company to enter the lessee's premises or to commit a breach of the peace in the repossession of rental property delivered by the rental-purchase company under the rent-to-own agreement.

AB849,16,16 (4) Waiver. A waiver of a defense or counterclaim, or a waiver of any right to assert any claim that the lessee may have against the rental-purchase company or an agent of the rental-purchase company or a waiver of any provision of this chapter.

AB849,16,19 (5) Overpayment. A provision requiring periodic rental payments totaling more than the total dollar amount of all periodic rental payments necessary to acquire ownership, as disclosed in the rental-purchase agreement.

AB849,16,21 (6) Insurance. A provision requiring the purchase of insurance from the rental-purchase company to insure the rental property.