Scope
The bill regulates the activities of a rental-purchase company, which is defined
in the bill as a person engaged in the business of entering into rental-purchase
agreements or acquiring or servicing rental-purchase agreements that are entered
into in this state. With certain exceptions, an agreement qualifies as a
rental-purchase agreement under the bill if, among other things, the rental property
is to be used primarily for personal, family, or household purposes; the rental
property is not a motor vehicle; the agreement has an initial term of four months or
less and is automatically renewable with each payment after the initial term; the
agreement does not require the lessee to renew the agreement beyond the initial
term; and the agreement permits, but does not require, the lessee to acquire
ownership of the rental property. Under the bill, a rental-purchase agreement is not
subject to any laws relating to a security interest under the Uniform Commercial
Code.
Administration
The bill requires a person that operates a rental-purchase company to obtain
a license and registration from the division of banking in the Department of
Financial Institutions (division), pay annual license and registration fees, and make
annual reports to the division. A license is not assignable and must be posted in a
conspicuous place at the location of the rental-purchase company. The bill permits
the division to examine the books and records of a rental-purchase company to
determine compliance with the bill's requirements. In addition, the bill specifically
authorizes the division to issue orders and conduct investigations and examinations.
The division may suspend or revoke a rental-purchase company's license if, among
other things, the rental-purchase company violates the bill's requirements, the
rental-purchase company fails to pay the license fee, or the division becomes aware
of a fact that would be grounds for refusing to grant the rental-purchase company
a license. Also, the bill prohibits a person granted a license from changing the place
of business of the rental-purchase company without the prior approval of the
division.
Rental-purchase agreements
The bill requires every rental-purchase agreement to contain certain
provisions, including the following, to the extent applicable:
1. A description of the rental property.
2. The price at which the rental-purchase company would sell the property, if
paid in full on the date on which the rental-purchase agreement is executed. The
bill refers to this price as the "cash price" of the rental property.
3. A statement indicating that the rental property may be available at a lower
cost from another retailer.
4. The total amount of the rental payments necessary to acquire ownership of
the property.
5. The difference between the amount described under item 4 and the cash price
of the rental property.
6. The amount of any payment due when the rental-purchase agreement is
executed or the rental property is delivered.
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. The total amount of all charges necessary to acquire ownership of the rental
property.
10. A summary of the lessee's early-purchase option.
11. A description of the lessee's responsibility in the event of theft of or damage
to the rental property.
12. 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.
13. A statement that the lessee may terminate the rental-purchase agreement
at any time, without penalty, by surrendering the rental property in good repair.
14. A description of the lessee's right to reinstate the rental-purchase
agreement.
15. 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 the inclusion of certain provisions in a rental-purchase
agreement. The prohibited provisions include the following: (1) a confession of
judgment; (2) a provision granting the rental-purchase company a security interest
in property other than the rental property; (3) 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; (4) a waiver of any defense
or counterclaim or any provision of the bill's requirements; (5) a provision requiring
rental payments totaling more than the total dollar amount of all rental payments
necessary to acquire ownership; (6) a provision requiring the lessee to purchase
insurance from the rental-purchase company to insure the rental property; and (7)
a provision requiring the lessee to pay attorney fees. Several of these prohibitions
are similar to prohibitions contained in the consumer act.
The bill imposes other requirements on rental-purchase agreements, including
the following: (1) the bill limits the cash price of the rental property to no more than
twice the amount paid by the rental-purchase company to the wholesaler or
manufacturer; (2) the bill limits total charges for rental services and all required fees
or charges, except for taxes, in a transaction to no more than the cash price of the
rental property; and (3) the bill regulates the amount and timing of late fees that may
be charged to a lessee.
Disclosures
All required provisions of a rental-purchase agreement must be clearly and
conspicuously disclosed to the lessee on the face of the rental-purchase agreement
in at least eight-point standard type, except for certain provisions that must be
disclosed in at least ten-point boldface type. 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 the lessee
designates 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 bill includes a
formula for determining the maximum that may be charged for early purchase. 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 and advertising
The bill provides that advertising for rental-purchase agreements is subject to
the consumer act's prohibitions and remedies regarding false, misleading, or
deceptive advertising. The bill also creates requirements for advertising
rental-purchase agreements. 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 bill also 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, the rental payment for the next term, 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 that a rental-purchase company must,
with certain exceptions, follow if a lessee defaults under a rental-purchase
agreement. The bill defines "default" as either (1) a breach of the rental-purchase
agreement that materially impairs the condition, value, or protection of the rental
property, or (2) 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 surrender voluntarily the applicable rental property. Before
filing 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. The notice must
specify, among other things, the actions required to cure the default. If the lessee
received a similar notice and cured the applicable default at least twice during the
year preceding the current default, the bill allows a rental-purchase company to file
an action without providing the written notice.
Collection practices
Under the bill, rental-purchase companies are subject to the same prohibitions
regarding collection practices that apply to other consumer transactions under the
consumer act. As a result, rental-purchase companies are prohibited from doing the
following in attempting to recover rental property or collect amounts owed under a
rental-purchase agreement:
1. Using or threatening to use force or violence.
2. Disclosing or threatening to disclose false information relating to the
creditworthiness of the lessee.
3. Harassing or threatening the lessee or a relative of the lessee.
4. Using obscene language in communicating with the lessee or a relative of the
lessee.
5. Using a communication that falsely simulates legal, judicial, or
governmental process.
6. Threatening 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.
7. Threatening criminal prosecution.
8. With certain exceptions, communicating with the lessee's employer.
9. Engaging in other specified conduct.
Unconscionable conduct
The bill requires the division to promulgate rules that prohibit conduct that the
division declares to be unconscionable regarding rental-purchase agreements. In
promulgating the rules, the division must consider factors under current law that the
division must consider for declaring conduct to be unconscionable in consumer credit
transactions. The bill also allows a court to void a provision of a rental-purchase
agreement that the court finds to be unconscionable. This authority is similar to a
court's authority under current law with respect to consumer credit transactions,
except that if a rental-purchase company complies with the bill's limits on cash
prices, a court may not find that the price of goods under a rental-purchase
agreement is unconscionable.
Penalties and remedies
A rental-purchase company that willfully and knowingly violates the bill's
requirements is subject to a fine of not more than $2,000, which is the penalty under
current law that applies to willful and knowing violations of the consumer act.
The bill also generally provides that a rental-purchase company that violates
the bill's requirements is liable to a lessee damaged as a result of the violation for the
amount of actual damages sustained as a result of the violation, including incidental
and consequential damages, as well as for the costs of the action and reasonable
attorney fees. In addition, the lessee is entitled to recover an amount equal to 25
percent of the total amount of payments necessary to acquire ownership under the
rental-purchase agreement. This additional recovery is subject to a $100 minimum
and a $1,000 maximum. However, if a rental-purchase company includes a
prohibited provision in a rental-purchase agreement, these remedies do not apply.
Instead, the rental-purchase company must surrender to the lessee the rental
property and any amounts paid under the rental-purchase agreement.
The bill also provides that class actions based on violations of the bill are, with
one exception, subject to the same requirements that apply to class actions for
violations of the consumer act under current law. The exception is that, for certain
willful and knowing violations of the bill's requirements, the total liability of a
rental-purchase company is subject to a limit of $500,000 (plus costs and attorney
fees), instead of the $100,000 limit (plus costs and attorneys fees) that applies under
current law.
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:
AB587, s. 1
1Section
1. Subchapter XI of chapter 218 [precedes 218.60] of the statutes is
2created to read:
AB587,7,55
rental-purchase companies
AB587,7,6
6218.60 Definitions. In this subchapter:
AB587,7,8
7(1) "Division" means the division of banking in the department of financial
8institutions.
AB587,7,9
9(2) "Rental-purchase agreement" has the meaning given in s. 421.301 (37u).
AB587,7,10
10(3) "Rental-purchase company" has the meaning given in s. 421.301 (37v).
AB587,7,12
11218.61 License required. No person may operate as a rental-purchase
12company without a valid license issued by the division under this subchapter.
AB587,7,17
13218.62 Application for license; fees; bond. (1) Application. (a) An
14application for a license under this subchapter shall be made to the division, in
15writing, in the form prescribed by the division. In addition to any other information
16that may be required by the division, an application for a license under this
17subchapter shall include all of the following:
AB587,7,1818
1. If the applicant is an individual, the applicant's social security number.
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12. If the applicant is not an individual, the applicant's federal employer
2identification number.
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(b) The division may not disclose any information received under par. (a) 1. or
42. to any person except as follows:
AB587,8,65
1. The division may disclose the information to the department of revenue for
6the sole purpose of requesting certifications under s. 73.0301.
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2. The division may disclose the information to the department of workforce
8development in accordance with a memorandum of understanding entered into
9under s. 49.857.
AB587,8,12
10(2) Application fees. At the time of applying to the division for a license under
11this subchapter, the applicant shall pay any applicable fee specified by the division
12by rule.
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13(3) Bond. The division may require an applicant or licensee to file with the
14division and maintain in force a bond, in a form prescribed by and acceptable to the
15division, and in an amount determined by the division.
AB587,8,24
16218.63 Issuance or denial of license.
(1) Investigation. Upon the filing of
17an application under s. 218.62 (1) and the payment of any applicable fee, the division
18shall perform an investigation. Except as provided in sub. (3), if the division finds
19that the character, general fitness, and financial responsibility of the applicant; the
20members of the applicant, if the applicant is a partnership, limited liability company,
21or association; and the officers and directors of the applicant, if the applicant is a
22corporation warrant the belief that the business will be operated in compliance with
23any provision of chs. 421 to 427 relating to rental-purchase agreements, the division
24shall issue a license to the applicant.
AB587,9,6
1(2) Denial; notice; hearing. Except as provided in sub. (3), the division may
2deny an application made under s. 218.62 (1) by providing written notice to the
3applicant stating the grounds for the denial. Except as provided in sub. (3), a person
4whose application is denied may request a hearing under s. 227.44 within 30 days
5after the date of denial. The division may appoint a hearing examiner under s. 227.46
6to conduct the hearing.
AB587,9,8
7(3) Denial; child or family support or tax delinquency. The division may not
8issue a license under this chapter if any of the following applies:
AB587,9,109
(a) The applicant fails to provide the information required under s. 218.62 (1)
10(a).
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(b) The department of revenue certifies under s. 73.0301 that the applicant is
12liable for delinquent taxes. An applicant for whom a license is not issued under this
13paragraph for delinquent taxes is entitled to a notice under s. 73.0301 (2) (b) 1. b. and
14a hearing under s. 73.0301 (5) (a) but is not entitled to any other notice or hearing
15under this section.
AB587,9,2516
(c) The applicant fails to comply, after appropriate notice, with a subpoena or
17warrant issued by the department of workforce development or a county child
18support agency under s. 59.53 (5) and related to paternity or child support
19proceedings or is delinquent in making court-ordered payments of child or family
20support, maintenance, birth expenses, medical expenses, or other expenses related
21to the support of a child or former spouse, as provided in a memorandum of
22understanding entered into under s. 49.857. An applicant whose application is
23denied under this paragraph for delinquent payments is entitled to a notice and
24hearing under s. 49.857, but is not entitled to any other notice or hearing under this
25section.
AB587,10,4
1218.64 Licenses; other business. (1) Licensed locations. A license issued
2under this subchapter shall specify the location at which the licensee is permitted
3to conduct business. A separate license shall be required for each place of business
4maintained by the licensee.
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5(2) Assignment. A license issued under this subchapter is not assignable.
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6(3) Posting. A licensee shall post its license in a conspicuous place at the
7location specified in the license.
AB587,10,12
8(4) Term of license; fee. Every license shall remain in force until suspended
9or revoked in accordance with this subchapter or surrendered by the licensee. Every
10licensee shall, on or before June 1 of each year, pay to the division an annual license
11fee specified by the division by rule and, if required by the division, provide a rider
12or endorsement to increase the amount of any bond required under s. 218.62 (3).
AB587,10,17
13(5) Other business prohibited. No licensee may conduct business as a
14rental-purchase company within any office, room, or place of business in which any
15other business is solicited or engaged in, unless the licensee is authorized to do so,
16in writing, by the division. For the purpose of this subsection, the division may not
17unreasonably withhold any such authorization.
AB587,10,21
18218.65 Revocation, suspension, and restriction of license. (1) 19Discretionary suspension or revocation. The division may issue an order
20suspending or revoking a license issued under this subchapter if the division finds
21that any of the following applies:
AB587,10,2422
(a) The licensee has violated any provision of chs. 421 to 427 relating to
23rental-purchase agreements, any rules promulgated under any such provision, or
24any lawful order of the division under s. 218.68 (1).
AB587,11,3
1(b) A fact or condition exists that, if it had existed at the time of the original
2application for the license, would have warranted the division's refusing to issue the
3license.
AB587,11,54
(c) The licensee has made a material misstatement in an application for a
5license or in any information furnished to the division.
AB587,11,76
(d) The licensee has failed to pay the annual license fee required under s. 218.64
7(4) or has failed to maintain in effect any bond required under s. 218.62 (3).