LRB-5166/1
TNF&KSH:kmg:jlb
1995 - 1996 LEGISLATURE
February 26, 1996 - Introduced by Representatives Freese, Green, Gunderson,
Kaufert, F. Lasee, Meyer, Travis, Vrakas, Albers, Ainsworth, Foti, Gard,
Hutchison, Jensen, Kreibich, Kreuser, Ladwig, Lehman, Nass, Olsen, Otte

and Seratti, cosponsored by Senators Rude, Shibilski, Darling, Grobschmidt,
Huelsman, Petak, C. Potter, Welch, Wineke, Breske, Clausing, Cowles,
Drzewiecki, Farrow, George, Risser, Schultz
and Zien. Referred to
Committee on Financial Institutions.
AB954,2,3 1An Act to repeal 218.01 (6) (b) 1. to 8., 218.01 (6) (bm) and (bn), 218.01 (6) (j) and
2422.201 (4); to renumber 218.01 (2) (bb); to renumber and amend 218.01 (6)
3(b) (intro.) and 422.201 (12m); to amend 218.01 (1) (n) 1. and 2., 218.01 (1) (p),
4218.01 (1) (v), 218.01 (1a), 218.01 (2) (b), 218.01 (2) (d) 8. b., 218.01 (2) (dr),
5218.01 (2) (h) 2., 218.01 (2) (k) 3., 218.01 (2) (k) 5., 218.01 (3) (a) 5., 218.01 (3)
6(a) 6., 218.01 (3) (a) 8., 218.01 (3) (a) 9., 218.01 (3) (a) 10., 218.01 (3) (a) 13.,
7218.01 (3) (a) 14., 218.01 (3) (a) 18., 218.01 (3) (a) 19., 218.01 (3) (a) 20., 218.01
8(3) (a) 21., 218.01 (3) (a) 25., 218.01 (3) (a) 29., 218.01 (3) (bf) 1., 218.01 (5) (a),
9218.01 (6) (bp), 218.01 (6) (d), 218.01 (7b), 218.01 (9) (b), 344.51 (title), 344.51
10(1), 344.51 (2), 421.103 (2), 421.201 (5), 421.202 (6), 421.202 (7), 421.202 (8),
11421.301 (20) (intro.), 421.301 (35), 422.201 (7) (intro.) and (a), 422.201 (8), (9)
12and (12), 422.207 (1), 422.207 (3), 422.208, 422.303 (3) (intro.), 422.413 (1),
13422.417 (2), 424.201 (1) and (2), 425.106 (1) (intro.) and 425.107 (4); and to
14create
218.01 (1) (ar), 218.01 (1) (ct), 218.01 (1) (ji), 218.01 (1) (jj), 218.01 (1) (jk),
15218.01 (1) (o) 5., 218.01 (1) (pw), 218.01 (1) (qm), 218.01 (2) (bb) 2., 218.01 (6x),
16421.103 (5), 421.202 (9), 421.301 (25m), 421.301 (43m), 422.201 (12m) (a),
17422.202 (1) (e), 422.303 (3m), 424.201 (3) and chapter 429 of the statutes;

1relating to: the leasing of motor vehicles, motor vehicle consumer leases,
2prelease agreements, financial responsibility for domestic rented or leased
3vehicles and providing a penalty.
Analysis by the Legislative Reference Bureau
This bill makes a number of changes to state law relating to the leasing of motor
vehicles by consumers.
Motor vehicle consumer leases
The bill defines a motor vehicle consumer lease as a lease with a total lease
obligation not exceeding $25,000 for the right of possession and use of a motor vehicle
for a period of more than 4 months by a consumer primarily for personal, family,
household or agricultural purposes. The consumer lease may permit, but does not
require, the consumer to become the owner of the motor vehicle at the end of the lease
period.
The changes to state law relating to motor vehicle consumer leases may be cited
as the Wisconsin motor vehicle consumer lease act and include all of the following:
1. The bill requires all motor vehicle consumer leases to be in writing and
signed by the lessee (consumer) and the lessor (the person leasing the motor vehicle
to the consumer). The bill requires that a lessor make certain disclosures to a
consumer before entering into the motor vehicle consumer lease. The disclosures
must include all of the following information: a) that the consumer has no ownership
rights in the vehicle unless the lease permits the consumer to purchase the vehicle
upon lease termination and the consumer exercises this option and purchases the
vehicle; b) all fees and charges applicable to the lease, including that there may be
a charge for early termination of the lease; c) if the lease does not provide any liability
insurance for bodily injury or property damage with respect to the leased vehicle,
notice that no such liability insurance is included in the lease; d) the "capitalized
cost" under the lease and an explanation of the term (basically, the price of the vehicle
used for calculating the periodic lease payments); e) any "capitalized cost reduction"
under the lease (basically, any trade-in allowance plus any downpayment); f) "the
adjusted capitalized cost" under the lease and an explanation of the term (capitalized
cost minus the capitalized cost reduction); g) the "residual value" of the vehicle
(basically, the estimated fair market value at lease expiration); h) the standards to
be used in determining the excess wear and damage to the leased vehicle for which
the consumer may be held liable; i) if applicable, that the lease contains a separate
charge for waiver of any or all of the "gap amount" and that, in lieu of this charge,
the consumer may purchase insurance insuring the consumer for any or all of the gap
amount; and j) any other disclosure required by the federal consumer leasing act.
The bill defines "gap amount" to mean the difference between the amount in the lease
to be paid by the consumer to the lessor in the event of total loss or destruction of the
vehicle and any moneys received by the lessor with respect to the vehicle from
insurance proceeds or any other person.

If the consumer lease is renegotiated or extended for more than 6 months, these
disclosures must be made at the time of the renegotiation or extension.
2. A motor vehicle consumer lease may not contain a penalty, for nonacceptance
of the vehicle by the consumer, that is greater than 5% of the capitalized cost of the
vehicle.
3. The bill permits a consumer to purchase a liability insurance policy for bodily
injury and property damage with respect to operation of the leased vehicle from an
insurer acceptable to the lessor. In lieu of such purchase, the motor vehicle consumer
lease may include a charge payable to the lessor by the consumer for an insurance
premium in connection with an applicable liability insurance policy.
4. The bill permits the consumer to terminate the motor vehicle consumer lease
at any time. The bill establishes requirements that govern the calculation of the
consumer's obligations to the lessor upon early termination of the lease. A lessor,
upon request of a consumer, is required to prepare and give to the consumer a written
statement of the projected early termination obligations of the consumer. No charge
may be imposed or collected for the first statement in any 12-month period, but a
reasonable charge, not exceeding $20 per statement, may be imposed and collected
for each subsequent statement in a 12-month period.
5. The motor vehicle consumer lease may provide that the consumer is
responsible for the gap amount and a consumer may, but is not required to, obtain
gap protection from the lessor. "Gap protection" is defined to mean a charge under
the consumer lease whereby the lessor agrees to waive the gap amount or have a
person other than the consumer be liable for the gap amount. A lessor's waiver of
holding the consumer liable for the gap amount may be conditioned upon receipt of
applicable insurance proceeds or of other payments from the consumer.
6. The bill establishes a mechanism for the assessment of excess wear and
damage to the leased vehicle for which a consumer may be obligated to pay an excess
wear and damage charge. No such charge may be imposed or collected if the
consumer exercises an option to purchase the vehicle upon lease termination.
The bill specifies the conditions and disclosures required for an inspection of the
leased vehicle for excess wear and damage. In lieu of an inspection after termination
of the lease, the motor vehicle consumer lease may require a pretermination
inspection, which shall be conducted not earlier than 15 days before the termination
date set forth in the lease.
After a pretermination inspection or inspection after termination of the lease,
the consumer may, under specified conditions and at his or her own expense, obtain
a counter-inspection for excess wear and damage by a mutually agreed upon
inspector. With limited exceptions, the counter-inspection is conclusive as to the
consumer's excess wear and damage obligations under the lease, except for any
excess wear and damage that occurred after the counter-inspection or for excess
wear and damage that was obscured or concealed. A consumer does not default on
a motor vehicle consumer lease for failing to obtain a pretermination inspection or
counter-inspection.
7. No motor vehicle consumer lease creates a security interest in any real or
personal property of the consumer, except for any security deposit, advance lease

payment or other prepayment; any right of setoff; or in any security interest in the
leased vehicle or in any proceeds, refunds for cancellation or any other rights of the
consumer with respect to the consumer lease.
8. The bill contains provisions governing the refund of an advance payment or
the return of a trade-in vehicle if the consumer lease application is not approved.
9. The bill provides that any person who violates any provision of the Wisconsin
motor vehicle consumer lease act is liable to the consumer. The amount of the
liability is $100 and actual damages sustained by the consumer as a result of the
violation, including any incidental and consequential damages.
This liability provision does not apply to failure of a lessor to substantially
comply with the provisions of the act relating to excess wear and damage, in which
case the exclusive remedy is a waiver of the lessor's right to collect all contested
excess wear and damage charges from the consumer.
Prelease agreement
The bill governs prelease agreements. A "prelease agreement" is defined to
mean an agreement to enter into a motor vehicle consumer lease. The agreement
must be in writing and signed by both parties.
A prospective lessor must make certain disclosures to the prospective consumer
before entering into a prelease agreement. These disclosures must include most of
the disclosures pertaining to a motor vehicle consumer lease and a statement that
includes a notice that the prelease agreement is binding and obligates the consumer
to enter into a motor vehicle consumer lease with the prospective lessor when the
vehicle to be leased is available and ready for delivery.
The bill permits a prospective lessor to cancel the prelease agreement within
10 business days of entering into the agreement if the prospective consumer is unable
to obtain credit approval of an applicable sales finance company, and the prelease
agreement contains notice to the prospective consumer of this cancellation right.
A prelease agreement may not contain a penalty, for nonacceptance of the
vehicle by the prospective consumer, that is greater than 5% of the capitalized cost
of the vehicle.
Other provisions
Other provisions of the bill make changes to state law relating to the leasing of
motor vehicles. These changes include all of the following:
1. Under current law, a person may not rent or lease a motor vehicle unless a
bond or liability insurance policy is filed with the department of transportation
(DOT). The bill provides that the bondsman or liability insurer (and not the renter
or lessor of the vehicle) is liable for damages caused by the negligent operation of the
leased vehicle. If no liability policy is filed with DOT, the renter or lessor may be held
personally liable for damages, but only in an amount up to the limits that apply
whenever proof of financial responsibility is required. These limits are $25,000 for
injury or death to one person in any one accident, $50,000 for injury or death to 2 or
more persons and $10,000 for damage to property. The bill does not affect the right
or ability to recover damages from the person whose negligent operation of the rented
or leased vehicle caused the injury or damage.

2. The bill extends the definitions of "motor vehicle dealer", "motor vehicle
salesperson" and "sales finance company" to cover motor vehicle consumer leases
and the leasing of motor vehicles. In addition, various provisions relating to the
denial, suspension or revocation of a license of a motor vehicle dealer, motor vehicle
salesperson or sales finance company extend to prelease agreements and the leasing
of motor vehicles.
3. The bill requires a sales finance company to provide and maintain in force
a bond or irrevocable letter of credit of not less than $25,000. The bond or credit must
be executed in the name of the state for the benefit of the state and any person who
sustains a loss because of an act of the sales finance company that would constitute
grounds for the suspension or revocation of the sales finance company's license.
4. Under current law, a minor must have the advance consent of a custodial
parent of the minor or, if neither parent has custody, the person having custody of the
minor, before the minor may purchase a motor vehicle. A statement signed by the
parent or other custodian of the minor must be submitted to the seller of the motor
vehicle. Any person who sells a motor vehicle to a minor with knowledge of this fact
without obtaining the statement may be fined not more than $200 or imprisoned for
not more than 6 months or both.
The bill extends this requirement and penalty for a violation to motor vehicle
consumer leases.
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:
AB954, s. 1 1Section 1. 218.01 (1) (ar) of the statutes is created to read:
AB954,5,22 218.01 (1) (ar) "Capitalized cost" has the meaning given in s. 429.104 (5).
AB954, s. 2 3Section 2. 218.01 (1) (ct) of the statutes is created to read:
AB954,5,44 218.01 (1) (ct) "Consumer lease" has the meaning given in s. 429.104 (9).
AB954, s. 3 5Section 3. 218.01 (1) (ji) of the statutes is created to read:
AB954,5,76 218.01 (1) (ji) "Lease" or "leasing" means, with respect to a lessor, to enter into
7or offer to enter into a consumer lease with a lessee.
AB954, s. 4 8Section 4. 218.01 (1) (jj) of the statutes is created to read:
AB954,5,99 218.01 (1) (jj) "Lessee" has the meaning given in s. 429.104 (17).
AB954, s. 5 10Section 5. 218.01 (1) (jk) of the statutes is created to read:
AB954,6,2
1218.01 (1) (jk) "Lessor" means a person who leases a motor vehicle to a lessee
2under a consumer lease, but does not include an assignee of a consumer lease.
AB954, s. 6 3Section 6. 218.01 (1) (n) 1. and 2. of the statutes are amended to read:
AB954,6,64 218.01 (1) (n) 1. For commission, money or other thing of value, sells, leases,
5exchanges, buys, rents with the option of purchase, offers or attempts to negotiate
6a sale, consumer lease or exchange of an interest in motor vehicles; or,
AB954,6,97 2. Is engaged wholly or in part in the business of selling or leasing motor
8vehicles, including motorcycles, whether or not such motor vehicles are owned by
9such person, firm or corporation.
AB954, s. 7 10Section 7. 218.01 (1) (o) 5. of the statutes is created to read:
AB954,6,1211 218.01 (1) (o) 5. Sales finance companies who purchase or otherwise acquire
12consumer leases from a motor vehicle dealer.
AB954, s. 8 13Section 8. 218.01 (1) (p) of the statutes is amended to read:
AB954,6,1814 218.01 (1) (p) "Motor vehicle salesperson" means sales representative, sales
15manager, general manager or other person who is employed by a motor vehicle dealer
16for the purpose of selling or approving retail sales, or leasing or approving consumer
17leases,
of motor vehicles. Any motor vehicle salesperson licensed hereunder shall be
18licensed to sell or lease only for one dealer at a time.
AB954, s. 9 19Section 9. 218.01 (1) (pw) of the statutes is created to read:
AB954,6,2020 218.01 (1) (pw) "Periodic" has the meaning given in s. 429.104 (20).
AB954, s. 10 21Section 10. 218.01 (1) (qm) of the statutes is created to read:
AB954,6,2422 218.01 (1) (qm) "Prelease agreement" means an agreement to enter into a
23consumer lease whereby the motor vehicle will be available and ready to be delivered
24to the prospective lessee at a later time.
AB954, s. 11 25Section 11. 218.01 (1) (v) of the statutes is amended to read:
AB954,7,7
1218.01 (1) (v) "Sales finance company" means and includes any person, firm or
2corporation engaging in the business, in whole or in part, of acquiring by purchase
3or by loan on the security thereof, or otherwise, retail instalment contracts or
4consumer leases
from retail sellers or lessors in this state, including any motor
5vehicle dealer who sells or leases any motor vehicle on an instalment contract or
6consumer lease
or acquires any retail instalment contracts in the dealer's retail sales
7or leases of motor vehicles.
AB954, s. 12 8Section 12. 218.01 (1a) of the statutes, as affected by 1995 Wisconsin Act 27,
9is amended to read:
AB954,7,2410 218.01 (1a) Authority of licensors. The department of transportation shall
11issue the licenses provided for in sub. (2) (d) 1. to 6. and have supervision over the
12licensees thereunder in respect to all the provisions of this section, except only as to
13such matters as relate to the sale of motor vehicles on retail instalment contracts and
14the financing and servicing of such contracts and as to such matters as relate to
15consumer leases
, over which matter the division of banking shall have jurisdiction
16and control, and the division of banking shall issue the licenses to sales finance
17companies. Either licensor hereunder shall, upon request, furnish the other licensor
18with any information it may have in respect to any licensee or applicant for license
19or any transaction in which such licensee or applicant may be a party or be
20interested. No license shall be issued under sub. (2) (d) 1. and 8. until both licensors
21have approved the application. The suspension or revocation of either of such
22licenses shall automatically likewise suspend or revoke the other license; and such
23suspension or revocation shall be certified by the licensor ordering it to the other
24licensor.
AB954, s. 13
1Section 13. 218.01 (2) (b) of the statutes, as affected by 1995 Wisconsin Act 27,
2section 5843, is amended to read:
AB954,8,173 218.01 (2) (b) Application for license shall be made to the licensor, at such time,
4in such form and with such information as the licensor shall require and shall be
5accompanied by the required fees. An applicant for a sales finance company license,
6other than a motor vehicle dealer, shall pay to the division of banking a
7nonrefundable $300 investigation fee in addition to the license fee under par. (dr).
8If the cost of an investigation exceeds $300, the applicant shall, upon demand of the
9division of banking, pay the amount by which the cost of the investigation exceeds
10the nonrefundable fee. A licensee is not required to pay an investigation fee for the
11renewal of a license. The licensor may require the applicant to provide information
12relating to any pertinent matter that is commensurate with the safeguarding of the
13public interest in the locality in which the applicant proposes to engage in business,
14except that information relating to the applicant's solvency and financial standing
15may not be required for motor vehicle dealers except as provided in par. (h) 1. The
16information provided may be considered by the licensor in determining the fitness
17of the applicant to engage in business as set forth in this section.
AB954, s. 14 18Section 14. 218.01 (2) (bb) of the statutes, as affected by 1995 Wisconsin Act
1927
, is renumbered 218.01 (2) (bb) 1.
AB954, s. 15 20Section 15. 218.01 (2) (bb) 2. of the statutes is created to read:
AB954,9,321 218.01 (2) (bb) 2. A sales finance company or an applicant for a sales finance
22company license shall provide and maintain in force a bond or irrevocable letter of
23credit of not less than $25,000 issued by a surety company licensed to do business in
24this state or a federally insured financial institution, as defined in s. 705.01 (3). The
25bond or letter of credit shall be payable to the state of Wisconsin for the use of the

1state and of any person who sustains a loss because of an act of a sales finance
2company that constitutes grounds for the suspension or revocation of a license under
3this section.
AB954, s. 16 4Section 16. 218.01 (2) (d) 8. b. of the statutes, as affected by 1995 Wisconsin
5Act 27
, is amended to read:
AB954,9,96 218.01 (2) (d) 8. b. For motor vehicle dealers that operate as a sales finance
7company or that carry or retain time sales retail instalment contracts or consumer
8leases
for more than 30 days, to the division of banking, the same as for sales finance
9companies under par. (dr), except for gross volume of $100,000 or less, $50.
AB954, s. 17 10Section 17. 218.01 (2) (dr) of the statutes, as affected by 1995 Wisconsin Act
1127
, is amended to read:
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