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2011 - 2012 LEGISLATURE
February 17, 2012 - Introduced by Representatives Petryk, Bernier, Litjens,
Stone
and Suder, cosponsored by Senator Moulton. Referred to Committee
on Financial Institutions.
AB582,1,3 1An Act to create 409.109 (4) (n), chapter 420 and 421.202 (11) of the statutes;
2relating to: regulation of rental-purchase agreements and granting
3rule-making authority.
Analysis by the Legislative Reference Bureau
Under current law, a consumer credit transaction that is entered into for
personal, family, or household purposes is generally subject to the Wisconsin
Consumer Act (consumer act). The consumer act grants consumers certain rights
and remedies and contains notice and disclosure requirements and prohibitions
relating to consumer credit transactions. Currently, a consumer lease that has a
term of more than four months is among the consumer credit transactions that are
subject to the consumer act. In addition, the consumer act applies to any other
consumer lease, if the lessee pays or agrees to pay at least an amount that is
substantially equal to the value of the leased property and if the lessee will become,
or for not more than a nominal additional payment has the option to become, the
owner of the leased property.
This bill creates requirements that specifically apply to rental-purchase
agreements, imposes requirements on rental-purchase companies, and exempts
rental-purchase companies and rental-purchase agreements from the scope of the
consumer act and from provisions of the Uniform Commercial Code relating to
security interests. The bill defines a "rental-purchase agreement" as an agreement
between a rental-purchase company and a lessee for the use of rental property if all
of the following apply: 1) the rental property is to be used primarily for personal,

family, or household purposes; 2) the agreement has an initial term of four months
or less and is renewable with each payment after the initial term; 3) the agreement
does not obligate or require the lessee to renew the agreement beyond the initial
term; and 4) the agreement permits, but does not obligate, the lessee to acquire
ownership of the rental property. A "rental-purchase company" is defined as a
person engaged in the business of entering into rental-purchase agreements in this
state or acquiring rental-purchase agreements that are entered into in this state.
The bill requires a rental-purchase company to file notice with the Department
of Financial Institutions (DFI) within 30 days after commencing business in this
state. A separate notice is required for each place of business maintained by the
rental-purchase company. In addition, the rental-purchase company must pay to
DFI an annual fee of $1,000 for each location for which a notice is filed.
Under the bill, the total amount charged by a rental-purchase company for all
required charges or fees, excluding applicable taxes and any late fees or
reinstatement fees, in a rental-purchase transaction may not exceed twice the
maximum cash price of the rental property. The maximum cash price of rental
property may not exceed the greater of the following: 1) an amount equal to twice
the actual purchase price of the rental property, including any applicable freight
charges, paid by the rental-purchase company; or 2) the price at which property of
like type and quality is offered, in the ordinary course of business, for sale for cash
in the market area of the rental-purchase store where the property is offered for
rental purchase. The bill also limits the maximum amount that a lessee must pay
to acquire ownership of the property if the lessee elects an early-purchase option
after the initial rental period. This maximum amount to acquire ownership under
an early-purchase option is the greater of the following: 1) an amount not to exceed
55 percent of the difference between the total of rental payments necessary to acquire
ownership of the rental property and the total amount of rental payments paid for
use of the rental property at that time, plus applicable taxes; or 2) the amount of one
rental payment. Before a lessee acquires ownership of the rental property under an
early-purchase option, the rental-purchase company may require the lessee to pay
any accrued unpaid rental payments and fees.
The bill specifies that a rental-purchase company must not disclose, in a
rental-purchase agreement or otherwise, any percentage rate calculation, including
an annual percentage rate.
Under the bill, a lessee may reinstate a rental-purchase agreement that has
ended without losing any rights or options previously acquired if all of the following
apply: 1) the lessee voluntarily returned or surrendered the rental property within
seven days after the expiration of the rental-purchase agreement; and 2) not more
than 120 days have passed after the date on which the rental-purchase agreement
ended. As a condition of reinstatement, the rental-purchase company may require
the payment of all past-due rental charges, any applicable late fees, a reinstatement
fee not to exceed $5, and the rental payment for the next term. Upon reinstatement,
the rental-purchase company must provide the lessee with the same rental property
or with substitute property of comparable quality and condition. A rental-purchase
company must provide written notice to a lessee of the lessee's rights and obligations

relating to reinstatement of the rental-purchase agreement within 15 days of
repossession or voluntary return or surrender of the rental property, if the lessee is
entitled to reinstatement.
Under the bill, a rental-purchase company that violates any of these
provisions, or any applicable rule or order of DFI, pertaining to a lessee is liable to
the lessee in an amount equal to the greater of the following: 1) the actual damages
sustained by the lessee as a result of the violation; 2) if the action is not brought as
a class action, 25 percent of the total payments necessary for the lessee to acquire
ownership of the rental property, but not less than $100 nor more than $1,000; or 3)
if the action is brought as a class action, the amount the court determines to be
appropriate. However, there are two limitations on such an award of damages. First,
a rental-purchase company is not liable for any violation if the rental-purchase
company shows by a preponderance of the evidence that the violation was not
intentional and resulted from a bona fide error, and the rental-purchase company
maintained procedures reasonably adapted to avoid such an error. Second, in a class
action or series of class actions, the total recovery by all lessees arising out of the
same violation may not be more than the lesser of $500,000 or 1 percent of the net
worth of the rental-purchase company. If a court awards any monetary amount of
damages to a lessee, the rental-purchase company is also liable to the lessee for the
costs of the action and reasonable attorney fees.
The bill allows DFI to promulgate rules relating to rental-purchase company
disclosure requirements and requirements for rental-purchase companies to
maintain records and make reports to DFI. The bill also requires DFI to administer
and enforce the provisions of the bill.
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:
AB582, s. 1 1Section 1. 409.109 (4) (n) of the statutes is created to read:
AB582,3,42 409.109 (4) (n) Any rental-purchase company that has filed notice as provided
3under s. 420.02 (1) and any rental-purchase agreement entered into by such a
4rental-purchase company.
AB582, s. 2 5Section 2. Chapter 420 of the statutes is created to read:
AB582,3,66 CHAPTER 420
AB582,3,77 RENTAL-PURCHASE COMPANIES
AB582,3,8 8420.01Definitions. In this chapter:
AB582,4,4
1(1) "Cash price" means the price at which a rental-purchase company would
2sell rental property to the lessee of the rental property if the lessee were to pay for
3the rental property in full on the date on which the rental-purchase agreement is
4executed.
AB582,4,5 5(2) "Department" means the department of financial institutions.
AB582,4,7 6(3) "Rental property" means property rented under a rental-purchase
7agreement but does not include any motor vehicle, as defined in s. 340.01 (35).
AB582,4,10 8(4) "Rental-purchase agreement" means an agreement between a
9rental-purchase company and a lessee for the use of rental property if all of the
10following apply:
AB582,4,1211 (a) The rental property is to be used primarily for personal, family, or household
12purposes.
AB582,4,1413 (b) The agreement has an initial term of 4 months or less and is renewable with
14each payment after the initial term.
AB582,4,1615 (c) The agreement does not obligate or require the lessee to renew the
16agreement beyond the initial term.
AB582,4,1817 (d) The agreement permits, but does not obligate, the lessee to acquire
18ownership of the rental property.
AB582,4,21 19(5) "Rental-purchase company" means a person engaged in the business of
20entering into rental-purchase agreements in this state or acquiring rental-purchase
21agreements that are entered into in this state.
AB582,5,2 22420.02 Notice to the department. (1) Notice required. A rental-purchase
23company shall file notice with the department, in the form and manner prescribed
24by the department, within 30 days after commencing business in this state. A

1separate notice is required for each place of business maintained by the
2rental-purchase company.
AB582,5,6 3(2) Fee. For each location for which a notice is filed under sub. (1), the
4rental-purchase company shall pay to the department an annual fee of $1,000. If a
5rental-purchase company fails to timely pay the annual fee, the department shall
6order the rental-purchase company to cease operating until the annual fee is paid.
AB582,5,9 7420.03 Price and cost limitations. (1) Limits on cash prices. The cash price
8for rental property offered by a rental-purchase company may not exceed the greater
9of the following:
AB582,5,1110 (a) An amount equal to twice the actual purchase price of the rental property,
11including any applicable freight charges, paid by the rental-purchase company.
AB582,5,1412 (b) The price at which property of like type and quality is offered, in the
13ordinary course of business, for sale for cash in the market area of the
14rental-purchase store where the property is offered for rental purchase.
AB582,5,19 15(2) Limits on cost of rental services and other charges. The total amount
16charged by the rental-purchase company for all required charges or fees, excluding
17applicable taxes and any late fees or reinstatement fees, in a rental-purchase
18transaction shall not exceed twice the maximum cash price of the property as
19determined under sub. (1).
AB582,6,4 20(3) Acquisition of ownership. At any time after the initial rental period under
21a rental-purchase agreement, if a lessee affirmatively elects an early-purchase
22option, the lessee may acquire ownership of the rental property by tendering an
23amount not to exceed 55 percent of the difference between the total of rental
24payments necessary to acquire ownership of the rental property and the total
25amount of rental payments paid for use of the rental property at that time, plus

1applicable taxes, except that the lessee's early-purchase option amount may not be
2less than the amount of one rental payment. Before a lessee acquires ownership of
3the rental property as provided under this subsection, a rental-purchase company
4may first require the lessee to pay any accrued unpaid rental payments and fees.
AB582,6,8 5(4) Annual percentage rate disclosure not required. A rental-purchase
6company shall not disclose, in a rental-purchase agreement or otherwise, any
7percentage rate calculation, including a time-price differential, an annual
8percentage rate, or an effective annual percentage rate.
AB582,6,12 9420.04 Reinstatement of a rental-purchase agreement. (1)
10Reinstatement generally. Subject to sub. (2), a lessee may reinstate a
11rental-purchase agreement that has ended without losing any rights or options
12previously acquired if all of the following apply:
AB582,6,1413 (a) The lessee voluntarily returned or surrendered the rental property within
147 days after the expiration of the rental-purchase agreement.
AB582,6,1615 (b) Not more than 120 days have passed after the date on which the
16rental-purchase agreement ended.
AB582,6,20 17(2) Authorized conditions on reinstatement. As a condition of reinstatement
18under sub. (1), the rental-purchase company may require the payment of all
19past-due rental charges, any applicable late fees, a reinstatement fee not to exceed
20$5, and the rental payment for the next term.
AB582,6,25 21(3) Effect of repossession on reinstatement. Nothing in this section prohibits
22a rental-purchase company from repossessing or attempting to repossess rental
23property when a rental-purchase agreement ends, but such efforts do not affect the
24lessee's right to reinstate as long as the rental property is voluntarily returned or
25surrendered within 7 days after the rental-purchase agreement ends.
AB582,7,5
1(4) Property available upon reinstatement. Upon reinstatement, the
2rental-purchase company shall provide the lessee with the same rental property, if
3the property is available and is in the same condition as when it was returned to the
4rental-purchase company, or with substitute property of comparable quality and
5condition.
AB582,7,9 6(5) Notice of reinstatement rights. If the lessee is entitled to reinstatement
7under subs. (1) and (2), within 15 days of repossession or voluntary return or
8surrender of the rental property, the rental-purchase company shall provide written
9notice to the lessee of the lessee's rights and obligations under this section.
AB582,7,14 10420.05 Rule making; enforcement. (1) Rule making. The department may
11promulgate rules relating to rental-purchase company disclosure requirements in
12connection with rental-purchase agreements as well as rules relating to any
13requirement by the department for rental-purchase companies to maintain records
14and make reports to the department.
AB582,7,16 15(2) Enforcement. The department shall administer and enforce this chapter,
16and any rule promulgated under, or order issued under, this chapter.
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