AB898: Bill Text

(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.

AB898,11,15 (2) "Division" means the division of banking in the department of financial institutions.

AB898,11,16 (3) "General order" means an order of the administrator of the division.

AB898,11,18 (4) "Lessee" means an individual who rents personal property under a rental-purchase agreement.

AB898,11,20 (5) "Licensee" means a rental-purchase company holding a license issued by the division under this chapter.

AB898,11,22 (6) "Rental property" means personal property rented under a rental-purchase agreement.

AB898,11,25 (7) "Rental-purchase company" means a person engaged in the business of entering into rental-purchase agreements in this state or acquiring or servicing rental-purchase agreements that are entered into in this state.

AB898,12,3 (8) "Rental-purchase agreement" means an agreement between a rental-purchase company and a lessee for the use of personal property if all of the following apply:

AB898,12,5 (a) The personal property is to be used primarily for personal, family, or household purposes.

AB898,12,7 (b) The agreement has an initial term of 4 months or less and is automatically renewable with each payment after the initial term.

AB898,12,9 (c) The agreement does not obligate or require the lessee to renew the agreement beyond the initial term.

AB898,12,11 (d) The agreement permits, but does not obligate, the lessee to acquire ownership of the personal property.

AB898,12,12 (9) "Special order" means an order of the division to or affecting a person.

AB898,12,13 Subchapter IV

AB898,12,14 Administration

AB898,12,16 430.401 License required. No person may operate as a rental-purchase company without a valid license issued by the division under this chapter.

AB898,12,21 430.402 Application for license; fees; bond. (1) Application. (a) An application for a license under this chapter shall be made to the division, in writing, in the form prescribed by the division. In addition to any other information that may be required by the division, an application for a license under this chapter shall include all of the following:

AB898,12,22 1. If the applicant is an individual, the applicant's social security number.

AB898,12,24 2. If the applicant is not an individual, the applicant's federal employer identification number.

AB898,13,2 (b) The division may not disclose any information received under par. (a) 1. or 2. to any person except as follows:

AB898,13,4 1. The division may disclose the information to the department of revenue for the sole purpose of requesting certifications under s. 73.0301.

AB898,13,7 2. The division may disclose the information to the department of workforce development in accordance with a memorandum of understanding entered into under s. 49.857.

AB898,13,10 (2) Application fees. At the time of applying to the division for a license under this chapter, the applicant shall pay any applicable fee specified by the administrator by rule.

AB898,13,13 (3) Bond. The division may require an 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.

AB898,13,21 430.403 Issuance or denial of license. (1) Investigation. Upon the filing of an application under s. 430.402 (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 chapter, the division shall issue a license to the applicant.

AB898,14,2 (2) Denial; notice; hearing. Except as provided in sub. (3), the division may deny an application made under s. 430.402 (1) by providing written notice to the applicant stating the grounds for the denial. Except as provided in sub. (3), a person whose application is 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.

AB898,14,4 (3) Denial; child or family support or tax delinquency. The division may not issue a license under this chapter if any of the following applies: