LRBs0275/1
ARG:ahe/emw/wlj
2017 - 2018 LEGISLATURE
SENATE SUBSTITUTE AMENDMENT 2,
TO SENATE BILL 637
March 15, 2018 - Offered by
Committee on Agriculture, Small Business and
Tourism.
SB637-SSA2,1,3
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
This substitute amendment 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
Wisconsin Consumer Act (consumer act).
Under current law, a consumer credit transaction that is entered into for
personal, family, or household purposes is generally subject to the consumer act. The
consumer act grants consumers certain rights and remedies and contains notice and
disclosure requirements and prohibitions relating to consumer credit transactions,
including credit sales and consumer leases that have a term of more than four
months. 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 substitute amendment 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 of the type typically
used 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. For purposes of a rental-purchase
agreement, “rental property" does not include motor vehicles. 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, but does not include a person only in the business
of renting musical instruments used in schools.
Under the substitute amendment, every rental-purchase agreement must
contain certain provisions, including the following, to the extent applicable:
1. A description of the rental property.
2. The cash price of the rental property.
3. The total amount of the rental payments necessary to acquire ownership of
the property.
4. The difference between the amount described under item 3., above, and the
cash price of the rental property.
5. The total amount of the initial payment due when the rental-purchase
agreement is executed or the rental property is delivered.
6. The rental payment necessary to renew the rental-purchase agreement.
7. An itemized description of any other charges or fees the rental-purchase
company may charge upon the occurrence of a contingency specified in the
rental-purchase agreement, as well as certain other charges and fees.
8. A statement of, and information related to, the lessee's early-purchase
option.
9. A statement of the lessee's responsibility in the event of theft of or damage
to the rental property.
10. A statement that, with certain exceptions, the rental-purchase company
is required to service the rental property and maintain it in good working condition.
11. A statement that the lessee may terminate the rental-purchase agreement
at any time, without penalty, by surrendering the rental property in good repair.
12. An explanation of the lessee's right to reinstate the rental-purchase
agreement.
13. A statement that the lessee will not own the rental property until the lessee
exercises an early-purchase option or makes all payments necessary to acquire
ownership.
All required provisions of a rental-purchase agreement must be clearly and
conspicuously disclosed to the lessee in 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 substitute amendment also 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. The substitute amendment also includes certain disclosure
requirements for property subject to a rental-purchase agreement if the property is
not displayed or offered at a physical location that derives 50 percent or more of its
revenues from rental-purchase agreements.
The substitute amendment 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
permission to enter the lessee's residence or commit a breach of the peace in
repossessing the rental property; 3) a waiver of any defense or counterclaim or any
provision of the substitute amendment's requirements; 4) a provision requiring
rental payments totaling more than the total dollar amount of all rental payments
necessary to acquire ownership; and 5) a provision requiring the lessee to purchase
insurance from the rental-purchase company to insure the rental property. The
substitute amendment also prohibits a rental-purchase company from charging a
lessee a late fee and from charging a lessee an insufficient funds fee or credit card
charge-back fee greater than $15.
The substitute amendment allows a rental-purchase company and lessee to
contract for, and allows the rental-purchase company to charge a fee for, a liability
damage waiver, but the fee may not exceed 10 percent of the periodic rental payment.
The substitute amendment imposes various requirements with respect to such a
liability damage waiver and specifies that the waiver is not insurance.
Under the substitute amendment, 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 365 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,
the rental payment for the next term, and a reinstatement fee not to exceed $5 or $8,
depending on the circumstances. Upon reinstatement, the rental-purchase
company must provide the lessee with the same rental property or with substitute
property of comparable quality and condition.
Under the substitute amendment, 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.
The substitute amendment creates requirements for advertising
rental-purchase transactions. With certain exceptions, the substitute amendment
requires a rental-purchase company to display a card or tag on or next to any
rental-purchase property offered for rent, indicating whether the property is new or
used and indicating the cash price of the property, the amount and timing of the
rental payments, and the total number and total 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 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.
Under the substitute amendment, a rental-purchase company that violates
any of the provisions of the substitute amendment, or any applicable rule or order
of the Department of Financial Institutions, 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 three 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, a rental-purchase company is not liable for any violation if the
rental-purchase company notifies the consumer of its noncompliance and corrects
the noncompliance within 45 days. Third, 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.
Under the substitute amendment, within 30 days after commencing business
in this state, a rental-purchase company must file with DFI a notice that includes
each location where the rental-purchase company conducts rental-purchase
operations in this state. The rental-purchase company must thereafter annually file
with DFI a list of locations where the rental-purchase company conducts
rental-purchase operations in this state and must pay an annual fee based on the
number of locations but not to exceed a maximum of $2,500.
With some limitations, the substitute amendment allows DFI to promulgate
rules necessary to administer and enforce the requirements of the substitute
amendment. Although DFI may by rule develop a model rental-purchase
agreement, DFI may not require its use, although use of the form creates a conclusive
presumption of compliance with certain provisions of the substitute amendment.
DFI's rules may not establish requirements for rental-purchase agreements beyond
those established in the substitute amendment and may not include provisions that
are more restrictive than those in the substitute amendment.
Under the substitute amendment, rental-purchase agreements entered into by
rental-purchase companies that have provided notice to DFI are not subject to the
consumer act or to the security interest provisions of UCC Article 9.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SB637-SSA2,1
1Section 1
. 409.109 (4) (n) of the statutes is created to read:
SB637-SSA2,5,42
409.109
(4) (n) Rental-purchase agreements entered into by a rental-purchase
3company that has provided notice to the department of financial institutions under
4ch. 420.
SB637-SSA2,2
5Section 2
. Chapter 420 of the statutes is created to read:
SB637-SSA2,5,77
RENTAL-PURCHASE COMPANIES
SB637-SSA2,5,8
8420.01 Definitions. In this chapter:
SB637-SSA2,5,12
9(1) “Cash price" means the price at which a rental-purchase company would
10sell rental property to the lessee of the rental property if the lessee were to pay for
11the rental property in full on the date on which the rental-purchase agreement is
12executed.
SB637-SSA2,5,14
13(2) “Charge-back fee” means a charge or fee for a payment that is denied or
14dishonored by a credit card provider.
SB637-SSA2,5,15
15(3) “Department" means the department of financial institutions.
SB637-SSA2,5,18
16(4) “Displayed or offered primarily for rental-purchase,” with respect to rental
17property, means rental property displayed or offered at a physical location that
18derives 50 percent or more of its revenues from rental-purchase agreements.
SB637-SSA2,5,20
19(5) “Insufficient funds fee” means a charge or fee for the return of a check,
20electronic funds transfer, or other payment instrument that is denied or dishonored.
SB637-SSA2,6,2
1(6) “Rental property" means property rented under a rental-purchase
2agreement but does not include any motor vehicle, as defined in s. 340.01 (35).
SB637-SSA2,6,5
3(7) “Rental-purchase agreement" means an agreement between a
4rental-purchase company and a lessee for the use of rental property if all of the
5following apply:
SB637-SSA2,6,76
(a) The rental property is of the type typically used for personal, family, or
7household purposes.
SB637-SSA2,6,98
(b) The agreement has an initial term of 4 months or less and is renewable with
9each payment after the initial term.
SB637-SSA2,6,1110
(c) The agreement does not obligate or require the lessee to renew the
11agreement beyond the initial term.
SB637-SSA2,6,1312
(d) The agreement permits, but does not obligate, the lessee to acquire
13ownership of the rental property.
SB637-SSA2,6,18
14(8) “Rental-purchase company" means a person engaged in the business of
15entering into rental-purchase agreements in this state or acquiring rental-purchase
16agreements that are entered into in this state, but does not include a person only in
17the business of renting musical instruments that are intended to be used in whole
18or in part in an elementary school or high school.
SB637-SSA2,6,21
19420.02 General requirements of disclosure. (1) Form, location, size, and
20time of disclosure. The information that is required to be disclosed under s. 420.03
21shall satisfy all of the following:
SB637-SSA2,6,2222
(a) The information shall be clearly and conspicuously disclosed.
SB637-SSA2,6,2323
(b) The information shall be disclosed in writing.
SB637-SSA2,7,324
(c) Except as provided in par. (f), the information shall be disclosed in the
25rental-purchase agreement above the line for the lessee's signature. Multiple pages
1or backs of pages may be used as long as the final page of the rental-purchase
2agreement is signed by the lessee and other pages are signed or initialed by the
3lessee.
SB637-SSA2,7,54
(d) Except as provided in par. (f), the information shall be disclosed in not less
5than 8-point standard type.
SB637-SSA2,7,76
(e) The information shall be disclosed before the time that the lessee becomes
7legally obligated under the rental-purchase agreement.
SB637-SSA2,7,118
(f) The disclosures required by s. 420.03 (2), (3), (4), and (5) shall be printed in
9at least 10-point boldface type on the face of the rental-purchase agreement, and
10shall be grouped together in a box, in the form and order prescribed by the
11department.
SB637-SSA2,7,16
12(2) Accuracy of disclosure. The information required under s. 420.03 must
13be accurate as of the time that it is disclosed to the lessee. If any information
14subsequently becomes inaccurate as a result of any act, occurrence, or agreement by
15the lessee, the resulting inaccuracy is not a violation of any provision of this chapter
16relating to rental-purchase agreements.
SB637-SSA2,7,21
17(3) Copy of rental-purchase agreement. The rental-purchase company shall
18provide the lessee with a copy of the completed rental-purchase agreement signed
19by the lessee. If more than one lessee is legally obligated under the same
20rental-purchase agreement, delivery of a copy of the completed rental-purchase
21agreement to one of the lessees shall satisfy this subsection.
SB637-SSA2,7,24
22420.03 Required provisions of rental-purchase agreement. A
23rental-purchase company shall include all of the following information, to the extent
24applicable, in every rental-purchase agreement:
SB637-SSA2,8,5
1(1) Description. A brief description of the rental property, sufficient to identify
2the rental property to the lessee and the rental-purchase company, including any
3identification number, and a statement indicating whether the rental property is
4new or used. A statement that new rental property is used shall not be a violation
5of this chapter.
SB637-SSA2,8,6
6(2) Cash price. The cash price of the rental property.
SB637-SSA2,8,10
7(3) Rental payments to acquire ownership. The total number, total dollar
8amount, and timing of all rental payments necessary to acquire ownership of the
9rental property, excluding any applicable taxes, application or processing charge,
10delivery fee, liability damage waiver fee, and fees for optional services.
SB637-SSA2,8,17
11(4) Cost of rental services. The difference between the total dollar amount
12of payments necessary to acquire ownership of the rental property disclosed under
13sub. (3) and the cash price of the property disclosed under sub. (2). The
14rental-purchase company shall also include a statement substantially similar to the
15following: “The cost of rental services is the amount you will pay in addition to the
16cash price if you acquire ownership of the rented goods by making all payments
17necessary to acquire ownership."
SB637-SSA2,8,20
18(5) Periodic renewal payment. The rental payment necessary to renew the
19rental-purchase agreement, not including any applicable taxes and fees for optional
20services to which the lessee agrees.
SB637-SSA2,8,25
21(6) Initial payment. The total amount of the initial payment to be made by the
22lessee at the time that the rental-purchase agreement is executed or the rental
23property is delivered, including the initial rental payment, any application or
24processing charge, any delivery fee, and fees for other optional services to which the
25lessee agrees.
SB637-SSA2,9,6
1(7) Other charges. An itemized description of any other charges or fees that
2the rental-purchase company may charge upon the occurrence of a contingency
3specified in the rental-purchase agreement, such as a reinstatement fee or, subject
4to s. 420.07, a charge-back fee or insufficient funds fee, as well as any applicable
5taxes, fees for optional services, application or processing charges, and delivery fees
6that are not included in the initial payment under sub. (6).
SB637-SSA2,9,11
7(8) Summary of early-purchase option. A statement that the lessee has an
8early purchase option to purchase the property at any time during the period that
9the rental-purchase agreement is in effect. The statement must specify the price or
10the formula or other method for determining the price at which the property may be
11purchased.
SB637-SSA2,9,17
12(9) Responsibility for theft or damage. A statement that, unless otherwise
13agreed, in the event the rental property is stolen, damaged, or destroyed while in the
14possession of, or subject to the control of, the lessee, the lessee is responsible for an
15amount equal to the lesser of the amount required to exercise the early-purchase
16option as provided in sub. (8) or 55 percent of the scheduled remaining periodic
17payments, but in no event in an amount greater than the cash price.
SB637-SSA2,9,24
18(10) Service and warranty. A statement that, during the term of the rental-
19purchase agreement, the rental-purchase company is required to service the rental
20property and maintain it in good working condition, as long as no other person has
21serviced the rental property. In lieu of servicing the rental property, the
22rental-purchase company may, at its option, replace the rental property with
23substitute property of comparable quality and condition. The rental-purchase
24company's obligation to provide service is limited to defects in the property not
1caused by improper use or neglect by the lessee or harmful conditions outside the
2control of the rental-purchase company or manufacturer.
SB637-SSA2,10,5
3(11) Termination at option of lessee. A statement that the lessee may
4terminate the agreement at any time without penalty by voluntarily surrendering
5or returning the rental property in good repair.
SB637-SSA2,10,7
6(12) Right to reinstate. A brief explanation of the lessee's right to reinstate
7a rental-purchase agreement under s. 420.06.
SB637-SSA2,10,12
8(13) Rental, not purchase. A statement reading substantially as follows: “You
9are renting this property. You will not own the property until you make all payments
10necessary to acquire ownership or until you exercise your early-purchase option. If
11you do not make your payments as scheduled or exercise your early-purchase option,
12the rental-purchase company is entitled to immediate possession of the property."
SB637-SSA2,10,16
13(14) Information about rental-purchase company and lessee. The names of
14the rental-purchase company and the lessee, the rental-purchase company's
15business address and telephone number, the lessee's address, and the date on which
16the rental-purchase agreement is executed.
SB637-SSA2,10,23
17(15) Optional services. Space for a specific, separately signed or initialed,
18affirmative, written indication of the lessee's desire for any optional service for which
19a charge is assessed. The lessee's request must be obtained after a written disclosure
20of the cost of the optional service is made, and the disclosure of the cost and purpose
21of such service must be listed at or near the affirmation space. This requirement is
22satisfied by a separate written agreement for an optional service that meets the
23requirements of this subsection.