PRINTER'S NO. 2203
No. 1848 Session of 1991
INTRODUCED BY F. TAYLOR, NOYE, LINTON, COY, CAPPABIANCA,
KRUSZEWSKI, STABACK, BELARDI, TRELLO, OLASZ, ALLEN, LUCYK,
STUBAN, KREBS, ROBINSON, PETRONE, JAROLIN, McCALL, B. SMITH,
CLARK, NICKOL, VANCE, TULLI, VROON, NAILOR, FARGO, MERRY,
BROWN, KING, JADLOWIEC, MARSICO AND PRESTON, JUNE 29, 1991
REFERRED TO COMMITTEE ON BUSINESS AND COMMERCE, JUNE 29, 1991
AN ACT
1 Amending the act of October 28, 1966 (1st Sp.Sess., P.L.55,
2 No.7), entitled "An act defining, regulating and relating to
3 retail installment contracts for all goods and services
4 except certain motor vehicles and home improvements;
5 prescribing the requirements of such contracts and
6 limitations on the enforcement thereof; and providing
7 remedies and penalties," providing for certain lease-purchase
8 agreements; providing for penalties; and making a repeal.
9 The General Assembly of the Commonwealth of Pennsylvania
10 hereby enacts as follows:
11 Section 1. Section 201(5) and (6) of the act of October 28,
12 1966 (1st Sp.Sess., P.L.55, No.7), known as the Goods and
13 Services Installment Sales Act, reenacted July 11, 1989
14 (P.L.573, No.57) and amended February 26, 1988 (P.L.78, No.15),
15 are amended to read:
16 Section 201. Unless the context or subject matter otherwise
17 requires, the definitions given in this article govern the
18 construction of this act.
19 * * *
1 (5) "Retail installment sale" or "sale" means the sale of
2 goods or the furnishing of services by a retail seller to a
3 retail buyer for a time sale price payable in installments. The
4 term does not include a lease-purchase agreement as defined in
5 section 1201-A.
6 (6) "Retail installment contract" or "contract" means any
7 contract for a retail installment sale between a buyer and a
8 seller which provides for repayment in installments, whether or
9 not such contract contains a title retention provision, and in
10 which a time price differential is computed upon and added to
11 the unpaid balance at the time of sale or where no time price
12 differential is added but the goods or services are available at
13 a lesser price if paid by cash or where the buyer, if he had
14 paid cash, would have received any additional goods or services
15 or any higher quality goods or services at no added cost over
16 the total amount he pays in installments. When taken or given in
17 connection with a retail installment sale, the term includes but
18 is not limited to a security agreement and a contract for the
19 bailment or leasing of goods by which the bailee or lessee
20 contracts to pay as compensation for their use a sum
21 substantially equivalent to or in excess of their value and by
22 which it is agreed that the bailee or lessee is bound to become,
23 or has the option of becoming, the owner of the goods upon full
24 compliance with the terms of the contract. [The term also
25 includes any contract, obligation or agreement in the form of
26 bailment or lease if the bailee or lessee has the option to
27 renew the contract by making the payments specified in the
28 contract, the contract obligates the bailor or lessor to
29 transfer ownership of the property to the bailee or lessee upon
30 full compliance by the bailee or lessee with his obligations
19910H1848B2203 - 2 -
1 under the contract, including any obligation incurred with
2 respect to the exercise of an option by the bailee or lessee to
3 renew the contract, and the payments contracted for by bailee or
4 lessee, including those payments pursuant to the exercise of an
5 option by the bailee or lessee to renew the contract, are
6 substantially equivalent to or in excess of the aggregate value
7 of the property and services involved. With respect to a sale
8 described in the previous sentence, the disclosures required
9 under this title shall be calculated on the assumption that the
10 bailee or lessee will exercise all of his options to renew the
11 contract, make all payments specified in the contract, and
12 become the owner of the property involved.] The term does not
13 include a lease-purchase agreement as defined in section 1201-A.
14 * * *
15 Section 2. The act is amended by adding an article to read:
16 ARTICLE XII-A
17 LEASE PURCHASE AGREEMENTS
18 Section 1201-A. Unless the context or subject matter
19 otherwise requires, the definitions given in this article govern
20 the construction of this article.
21 (1) "Cash price" means the cash price stated in a lease-
22 purchase agreement for which the lessor would offer to sell or
23 furnish to the lessee, and the lessee would buy or obtain from
24 the lessor, the goods which are the subject matter of the lease-
25 purchase agreement if the lease were a sale for cash.
26 (2) "Consummation" means the time a lessee becomes
27 contractually obligated on a consumer lease-purchase agreement.
28 (3) "Lease-purchase agreement" means an agreement for the
29 use of personal property by an individual primarily for
30 personal, family or household purposes, for an initial period of
19910H1848B2203 - 3 -
1 four (4) months or less, whether or not there is any obligation
2 beyond the initial period, that is automatically renewable with
3 each payment and that permits the consumer to become the owner
4 of the property. The term shall not be construed to be a "retail
5 installment sale" as defined in clause (5) of section 201; a
6 "revolving loan account" as defined in section 2 of the act of
7 April 8, 1937 (P.L.262, No.66), known as the "Consumer Discount
8 Company Act"; or a "security interest" as defined in 13 Pa.C.S.
9 § 1201 (relating to general definitions).
10 (4) "Lessee" means a natural person who rents personal
11 property under a consumer lease-purchase agreement.
12 (5) "Lessor" means a person who regularly provides the use
13 of property through consumer lease-purchase agreements and to
14 whom the obligation is initially payable on its face.
15 (6) "Personal property" means any property that is not real
16 property under the laws of the state where it is located when it
17 is made available for a consumer lease-purchase agreement.
18 Section 1202-A. (a) A lease-purchase agreement shall be in
19 the form of a written statement which shall include all of the
20 following:
21 (1) A brief description of the leased property, sufficient
22 to identify the property to the lessee and lessor, including
23 whether the property is new or used. If a lease is for multiple
24 items, a description of each item may be provided in a separate
25 statement which is incorporated by reference in the primary
26 disclosure statement.
27 (2) The total amount of any initial payment, including any
28 advance payment, any delivery charge or any trade-in allowance,
29 to be paid by the lessee at or before consummation of the lease-
30 purchase agreement.
19910H1848B2203 - 4 -
1 (3) The amount and timing of payments.
2 (4) The amount of all other charges, individually itemized,
3 payable by the lessee to the lessor, which are not included in
4 the renewal payments.
5 (5) A statement of the party liable for loss, damage in
6 excess of normal wear and tear, or destruction of the leased
7 property.
8 (6) The lessee's right to reinstate and the amount, or
9 method of determining the amount, of any penalties or other
10 charges for reinstatement as established in section 1207-A.
11 (7) A statement that the lessor is responsible for
12 maintaining or servicing the leased property, together with a
13 brief description of this responsibility.
14 (8) A statement of the conditions under which the lessee or
15 lessor may terminate the lease.
16 (9) A statement of the product of the number of renewal
17 payments necessary to acquire ownership of the leased property
18 times the amount of each renewal payment, to be specifically and
19 clearly denominated "total cost of lease."
20 (10) A statement that the lessee has the option to purchase
21 the leased property during the term of the lease-purchase
22 agreement by the formula for early purchase set forth in section
23 1210-A.
24 (11) A statement that, if any part of a manufacturer's
25 warranty continues to cover the leased property at the time the
26 lessee assumes ownership of the property, it will be passed on
27 to the lessee if allowed by the terms of the warranty.
28 (12) The cash price of the leased property at the time of
29 consummation.
30 (13) The difference between the amount disclosed under
19910H1848B2203 - 5 -
1 clause (9) and the amount disclosed under clause (12), which
2 difference shall be specifically and clearly denominated "cost
3 of lease services."
4 (14) A statement that the lease-purchase agreement may be
5 canceled by the lessee without penalty at any time prior to the
6 delivery of the leased property.
7 (15) A notice in a prominent place in type not smaller than
8 the size of twelve-point type, or in legible print with letters
9 not smaller than one-eighth (1/8) inch, in substantially the
10 following form:
11 "Notice: This agreement is regulated by State law and may be
12 enforced by the Attorney General, or by you by private legal
13 action."
14 (b) All information required by this section shall be stated
15 in a clear and coherent manner, using words and phrases of
16 common meaning. A lease-purchase agreement shall be dated and
17 shall be in writing. The printed portion of the agreement shall
18 be in at least eight-point type, except as otherwise provided in
19 this article. The information shall be appropriately divided and
20 captioned by its sections. All numerical amounts and percentages
21 shall be stated in figures. The information shall be disclosed
22 by the lessor prior to the signing of the lease by the lessee.
23 All the information required by this section shall be provided
24 directly on the lease contract or instrument or on a separate
25 form. The disclosures described in clauses (1), (2), (3), (4),
26 (9), (12) and (13) of subsection (a) shall be made clearly,
27 conspicuously and together in sequence, and shall be prominently
28 located on the same page of the contract or other instrument
29 evidencing the lease, and shall be in at least ten-point type.
30 (c) In a consumer lease-purchase agreement, the lessor shall
19910H1848B2203 - 6 -
1 make the disclosures required by this section in the manner
2 required by subsection (b) before consummation of the lease-
3 purchase agreement.
4 (d) At the lessor's option, information in addition to that
5 required by this section may be disclosed if the additional
6 information is not stated, utilized or placed in a manner which
7 will contradict, obscure or distract attention from the required
8 information.
9 Section 1203-A. A lease-purchase agreement shall not contain
10 a provision requiring any of the following:
11 (a) A garnishment of wages, a power of attorney to confess a
12 judgment or an assignment of wages.
13 (b) Authorization to the lessor or a person acting on the
14 lessor's behalf to unlawfully enter upon the lessee's premises
15 or to commit any breach of the peace in the repossession of
16 goods.
17 (c) The lessee to waive any defense, counterclaim or right
18 of action against the lessor or a person acting on the lessor's
19 behalf as the lessee's agent.
20 (d) The lessee to agree not to assert against a lessor or
21 against an assignee of the lessor a claim or defense arising out
22 of the lease.
23 Section 1204-A. A lessor shall not require any of the
24 following from a lessee:
25 (a) The purchase of insurance from the lessor for property
26 that is the subject of a lease-purchase agreement.
27 (b) A fee for in-home collection of a payment unless the
28 lessee has expressly agreed to the fee and the amount of the fee
29 is disclosed.
30 (c) A penalty for early termination of a lease-purchase
19910H1848B2203 - 7 -
1 agreement or for the return of an item at any point.
2 (d) The payment of a late charge or reinstatement fee unless
3 a renewal payment is delinquent for more than three (3) days.
4 The charge or fee shall not exceed the greater of ten percent
5 (10%) of the delinquent amount or two dollars ($2) for
6 agreements that are renewed weekly, and shall not exceed the
7 greater of ten percent (10%) of the delinquent amount or five
8 dollars ($5) for agreements that are renewed monthly. In the
9 event that multiple items are leased to a lessee pursuant to
10 more than one lease-purchase agreement, any late fee imposed
11 pursuant to this clause shall not exceed ten percent (10%) of
12 the total of the renewal payments that are delinquent.
13 (e) A penalty other than those charges allowed under clause
14 (d) for a delinquency. A lessee defaults when he fails to make a
15 renewal payment and fails to return the rented property or make
16 arrangements for its return as provided by the agreement.
17 (f) A fee for picking up rental property if the lessee
18 chooses to terminate the lease.
19 Section 1205-A. Any provision in a lease-purchase agreement
20 which is prohibited by this article shall be void but shall not
21 otherwise affect the validity of the lease-purchase agreement.
22 Section 1206-A. The seller or holder of a lease-purchase
23 agreement must give the buyer a written receipt for any payment
24 made in cash. Upon the buyer's written request, the holder of a
25 lease-purchase agreement shall give or forward to the buyer a
26 written statement of the amount of payments and the total amount
27 unpaid under the contract covering transactions during a period
28 not to exceed eighteen (18) months from the date of the buyer's
29 written request. A buyer is entitled to such a statement once
30 every six (6) months without charge. The holder may require
19910H1848B2203 - 8 -
1 payment of a charge not exceeding five dollars ($5) for each
2 additional statement furnished during every six (6) month
3 period.
4 Section 1207-A. (a) A lease-purchase agreement must provide
5 the following:
6 (1) A lessee who fails to make a timely renewal payment may
7 reinstate an agreement without losing rights or options
8 previously acquired and without incurring any charges, other
9 than rental charges for the time the lessee possessed the leased
10 property, and except for those charges provided for in clause
11 (e) of section 1204-A, by making the required payment before
12 seven (7) days after the due date of the renewal payment.
13 (2) If the leased property is returned or voluntarily
14 surrendered by the lessee, other than through judicial process,
15 during the applicable reinstatement period set forth in
16 subsection (a)(1), the lessee's right to reinstate the agreement
17 as set forth in subsection (a)(1) shall be extended for a period
18 of not less than sixty (60) days after the date of the return of
19 the leased property. If the lessee has paid one-half (1/2) of
20 the total of payments necessary to acquire ownership, the right
21 to reinstate the lease-purchase agreement shall be extended for
22 a period of not less than one hundred twenty (120) days after
23 the date of the return of the leased property. If the lessee has
24 paid three-fourths (3/4) of the total of payments necessary to
25 acquire ownership, the lessee's right to reinstate the lease-
26 purchase agreement shall be extended for a period of not less
27 than one hundred eighty (180) days after the return of the
28 property.
29 (b) This section does not prevent a lessor from attempting
30 to repossess property during the reinstatement period provided
19910H1848B2203 - 9 -
1 in subsection (a)(1). The lessee's right to reinstate an
2 agreement does not expire because of such a repossession. On
3 reinstatement, the lessor shall provide the lessee with the same
4 property or substitute property of substantially comparable
5 quality and condition, as determined by the lessor. If
6 substitute property is provided, the lessor shall provide the
7 disclosures required in subsection (a) of section 1202-A.
8 (c) Only one late charge or reinstatement fee may be
9 assessed for a delinquent renewal payment, regardless of the
10 period during which it remains in default. No lessor shall
11 assess a late charge for a renewal payment made in full on its
12 due date or within three (3) days when the only delinquency is
13 attributable to late fees assessed on earlier renewal payments.
14 With respect to renewal payments accepted by mail or by store
15 deposit box, no lessor shall assess a late fee for payments
16 which are postmarked or received before the expiration of the
17 applicable delinquency period.
18 (d) Notice of the lessee's right to reinstate shall be
19 provided upon consummation of the lease-purchase agreement, in a
20 document separate from the lease-purchase agreement, and no less
21 than once in each twelve (12) month period thereafter during
22 which the lessee is renting property under a lease-purchase
23 agreement. Notice of the lessee's right to reinstate shall also
24 be disclosed in the lease-purchase agreement.
25 (e) A lessor may not require a lessee to authorize the
26 lessor or a person acting on the lessor's behalf to unlawfully
27 enter upon the lessee's premises or to commit any breach of the
28 peace in the repossession of the property.
29 Section 1208-A. The lessee is authorized to pay the original
30 lessor until the lessee receives written notification of
19910H1848B2203 - 10 -
1 assignment of the rights to payment pursuant to a lease-purchase
2 agreement and that the payment is to be made to the assignee. A
3 notification which does not reasonably identify the rights
4 assigned is ineffective. If requested by the lessee, the
5 assignee must furnish reasonable proof that the assignment has
6 been made and, unless he does so, the lessee may pay the lessor.
7 Section 1209-A. (a) No lessor shall offer a lease-purchase
8 agreement in which fifty percent (50%) of all lease payments
9 necessary to acquire ownership exceed the cash price of the
10 leased property.
11 (b) When fifty percent (50%) of all lease payments made by a
12 lessee equals the cash price of the property disclosed to the
13 lessee in the lease-purchase agreement, the lessee shall acquire
14 ownership of the leased property and the lease-purchase
15 agreement shall terminate.
16 Section 1210-A. At any time after the initial payment, the
17 lessee may acquire ownership of the property by tendering an
18 amount equal to the cash price of the property minus fifty
19 percent (50%) of all previous renewal payments made.
20 Section 1211-A. (a) An advertisement for a lease-purchase
21 agreement that refers to or states the amount of a payment or
22 the right to acquire ownership of any one particular item under
23 the agreement shall clearly and conspicuously state:
24 (1) That the transaction advertised is a lease-purchase
25 agreement.
26 (2) The total number of payments and the total amount to be
27 paid to acquire ownership, which amount shall be explicitly
28 labeled "total cost of lease."
29 (3) The difference between the total cost of lease and the
30 cash price of the property under a lease-purchase agreement,
19910H1848B2203 - 11 -
1 which amount shall be explicitly labeled "cost of lease
2 services."
3 (4) The circumstances under which the consumer can acquire
4 ownership rights in the property.
5 (b) An advertisement for personal property available through
6 lease-purchase agreements that refers to more than one appliance
7 or particular item and includes information on periodic payment
8 amounts shall include a representative item available at that
9 amount and shall clearly and conspicuously state:
10 (1) That the merchandise offered may be new or used.
11 (2) That the transaction advertised is a lease-purchase
12 agreement.
13 (3) That the consumer does not acquire ownership rights
14 unless the consumer complies with the ownership terms of the
15 agreement.
16 (c) Every item displayed or offered under a lease-purchase
17 agreement shall have clearly and conspicuously indicated in
18 Arabic numerals, so as to be readable and understandable by
19 visual inspection, each of the following affixed to the item:
20 (1) The cash price of the merchandise.
21 (2) The amount of the periodic payment and the total number
22 of periodic payments required for ownership.
23 (3) The total amount that must be paid to acquire ownership
24 of merchandise, which amount shall be explicitly labeled "total
25 cost of lease."
26 (4) The difference between the total cost of lease and the
27 cash price of the property under a lease-purchase agreement,
28 which amount shall be explicitly labeled "cost of lease
29 services."
30 Section 1212-A. (a) Any person who wilfully and
19910H1848B2203 - 12 -
1 intentionally violates, or who directly or knowingly consents to
2 the violation of, any provision of this article shall be guilty
3 of a misdemeanor of the third degree and upon conviction shall
4 be punished by a fine of not more than one thousand dollars
5 ($1,000) or by imprisonment for not more than one year, or both.
6 (b) Notwithstanding the provisions of this section, any
7 failure to comply with any provisions of this article may be
8 corrected by the lessor or its assignees in accordance with the
9 provisions of this section: Provided, That a wilful violation
10 may not be corrected; and a correction which will increase the
11 amount owed by the lessee or the amount of any payment shall not
12 be effective unless the lessee concurs in writing with the
13 correction. If a violation is corrected by the lessor or
14 assignee in accordance with the provisions of this section,
15 neither the lessor nor the assignee shall be subject to any
16 penalty under this section. The correction shall be made by
17 delivery to the lessee of a corrected copy of the contract
18 within thirty (30) days of the execution of the original
19 agreement by the lessee. Any amount improperly charged by the
20 lessor or its assignee shall be credited against any further
21 payments made by the lessee under the lease-purchase agreement.
22 (c) In case of a violation of any provision of this article,
23 with respect to any lease-purchase agreement, the lessee in such
24 agreement may, except in the case of a class action, recover
25 from the person committing the violation, or may set off or
26 counterclaim in any action by such person, actual damages with a
27 minimum recovery of one hundred dollars ($100), attorney's fees
28 and court costs.
29 Section 1213-A. (a) Whenever there shall be violation of
30 this article, an application may be made by the Attorney General
19910H1848B2203 - 13 -
1 in the name of the people of the Commonwealth of Pennsylvania to
2 a court or justice having jurisdiction to issue an injunction
3 and, upon notice to the defendant of not less than five (5)
4 days, to enjoin and restrain the continuance of such violations;
5 and, if it shall appear to the satisfaction of the court of
6 justice that the defendant has, in fact, violated this section,
7 an injunction may be issued by such court of justice enjoining
8 and restraining any further violation without requiring proof
9 that any person has, in fact, been injured or damaged thereby.
10 Whenever a court shall determine that a violation of this
11 article has occurred, the court may impose a civil penalty of
12 not more than five hundred dollars ($500) for each violation and
13 may require the defendant to pay the costs of the Attorney
14 General's investigation. In connection with any such proposed
15 application, the Attorney General is authorized to take proof
16 and make determination of the relevant facts and issue subpoenas
17 in accordance with the Pennsylvania Rules of Civil Procedure.
18 (b) Nothing in this article shall be construed so as to
19 nullify or impair any right or rights which a lessee may have
20 against a lessor at common law, by statute, or otherwise.
21 (c) The Attorney General shall have the authority to
22 promulgate regulations concerning the enforcement of this
23 article.
24 Section 1214-A. No action shall be brought under this
25 article more than four (4) years after the person bringing the
26 action knew or should have known of the occurrence of the
27 alleged violation.
28 Section 4. The definition of "security interest" in 13
29 Pa.C.S. § 1201 (relating to general definitions) is repealed
30 insofar as it is inconsistent with the provisions of Article
19910H1848B2203 - 14 -
1 XII-A of the act.
2 Section 5. This act shall take effect in 60 days.
F17L12PJP/19910H1848B2203 - 15 -