THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY BRENNAN, BELFANTI, BEYER, CALTAGIRONE, CASORIO, COHEN, D. COSTA, FABRIZIO, GOODMAN, GRUCELA, HALUSKA, HARKINS, HENNESSEY, KORTZ, KOTIK, MAHONEY, MANDERINO, MANN, MILLARD, MURPHY, MURT, O'NEILL, PARKER, SANTONI, SIPTROTH, K. SMITH, SOLOBAY, THOMAS, WATERS, WHITE AND YOUNGBLOOD, FEBRUARY 9, 2010

REFERRED TO COMMITTEE ON CONSUMER AFFAIRS, FEBRUARY 9, 2010  

AN ACT

Amending Title 42 (Judiciary and Judicial Procedure) of the

Pennsylvania Consolidated Statutes, further providing for

definitions, for required disclosures in connection with

rental-purchase agreement, for prohibited provisions of

agreement, for lessee's right to acquire ownership, for

lessee's right to reinstate agreement after termination, for

rent reduction, for advertising and display of property and

for lessor's liability for noncompliance.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Sections 6902, 6903, 6904, 6905, 6906, 6907, 6908

and 6909 of Title 42 of the Pennsylvania Consolidated Statutes

are amended to read:

§ 6902.  Definitions.

The following words and phrases when used in this chapter

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Advertisement."  A written, visual or oral communication

made to a lessee or prospective lessee by means of personal

representation, newspaper, magazine, circular, billboard, direct

mailing, sign, radio, television, telephone or other means of

communication that aids, promotes or assists, directly or

indirectly, a rental-purchase agreement. The term does not

include price tags, window signs or other in-store merchandising

aids.

"Cash price."  The price at which the lessor would offer to

sell in the ordinary course of business the same or similar

property for cash on the day the lessee enters into a rental-

purchase agreement.

"Date of consummation."  The date on which a lessee becomes

contractually obligated under a rental-purchase agreement.

"Department."  The Department of State of the Commonwealth.

"Initial payment."  The amount to be paid before or at the

consummation of the agreement or at the delivery of the property

if the delivery occurs after consummation.

"Lessee."  A person who rents personal property pursuant to a

rental-purchase agreement.

"Lessor."  A person who, in the ordinary course of business,

regularly offers to rent or arranges for personal property to be

rented pursuant to a rental-purchase agreement. A lessor is a

creditor as defined in 37 Pa. Code § 303.2 (relating to

definitions) when owed or alleged to be owed a debt and is

subject to 37 Pa. Code Ch. 303 (relating to debt collection

trade practices).

"Payment schedule."  The amount and timing of the periodic

payments and the total number of all periodic payments that the

consumer will make if the consumer acquires ownership of the

property by making all periodic payments.

"Periodic payment."  The total payment a lessee will make for

a specific rental period after the initial payment, including

the rental payment, taxes, mandatory fees or charges and any

optional fees or charges agreed to by the lessee.

"Personal property."  Any property that is not real property

under the laws of the state where it is located when it is

offered or made available for a rental-purchase agreement.

"Reinstatement period."  The time when a lessee may either

pay delinquent rent or return the property and thereby retain

the right to have the rental-purchase agreement reinstated.

"Rental-purchase agreement."  An agreement for the use of

personal property by an individual primarily for personal,

family or household purposes for an initial period of four

months or less that is automatically renewable with each rental

payment after the initial period and that permits, but does not

require, the lessee to acquire ownership of the property. The

term shall not be construed to be, nor is it subject to laws

governing, any of the following:

(1)  A lease for agricultural, business or commercial

purposes.

(2)  A lease made to an organization.

(3)  A lease of money or intangible personal property.

(4)  A lease of a motor vehicle, motor home, mobile home

or manufactured housing.

(5)  A home solicitation sale under section 7 of the act

of December 17, 1968 (P.L.1224, No.387), known as the Unfair

Trade Practices and Consumer Protection Law.

(6)  A retail installment sale, retail installment

contract or retail installment account as defined in the act

of October 28, 1966 (1st Sp.Sess., P.L.55, No.7), known as

the Goods and Services Installment Sales Act.

(7)  A security interest as defined in 13 Pa.C.S. § 1201 

(relating to general definitions).

(8)  A lease made with government agencies or

instrumentalities.

(9)  A credit sale.

(10)  A consumer lease.

(11)  A transaction giving rise to a debt incurred in

connection with the business of lending money or a thing of

value.

§ 6903.  Required disclosures in connection with rental-purchase

agreement.

(a)  General rule.--A lessor shall disclose all of the

following in a clear and conspicuous manner segregated from

other information at the beginning of the agreement and shall be

identified in boldface, uppercase letters to any person who is a

signatory to a rental-purchase agreement under this chapter:

(1)  A brief description of the rented property

sufficient to identify it to the lessee and lessor and a

statement as to whether the property is new, used or

previously rented. If a rental is for multiple items of

property, a description of each item may be provided in a

separate statement incorporated by reference in the rental-

purchase agreement or primary disclosure statement.

(2)  The total amount of any initial payment, including

any advance payment, delivery charge or any trade-in

allowance, to be paid by the lessee at or before consummation

of the rental-purchase agreement.

(3)  The amount and timing of rental payments.

(4)  The amount of all other charges, individually

itemized, payable by the lessee to the lessor that are not

included in the rental payments.

(5)  The party who is liable for loss, theft, damage in

excess of normal wear and tear or destruction of the rented

property.

(6)  The right of the lessee to reinstate under section

6906 (relating to lessee's right to reinstate agreement after

termination) and the amount of or method of determining the

amount of the delinquency charges, reinstatement fee or

delivery charge for reinstatement.

(7)  The party responsible for maintaining or servicing

the rental property and a brief description of the

responsibility.

(8)  The conditions upon which the lessee or lessor may

terminate the rental agreement prior to the expiration of the

rental term.

(9)  The total of all initial payments, all rental

payments and all other charges necessary to acquire ownership

of the rented property.

(10)  That the lessee has the option to, but is not

required to, purchase the rented property at any time and at

what price or by what formula or method the purchase price

will be determined.

(11)  The cash price of the personal property that is the

subject of the rental-purchase agreement. If the agreement

involves the rental of two or more items as a set, a

statement of the aggregate cash price of all items shall

satisfy this requirement.

(12)  The cost of lease services, which is the difference

between the total of payments disclosed under paragraph (9)

and the cash price of the property disclosed under paragraph

(11).

(13)  That if any part of a manufacturer's warranty

exists on the leased property when a lessee acquires

ownership of the property, the warranty will be transferred

to the lessee if permitted by the terms of the warranty.

(14)  That the lessee is not required to purchase

insurance or liability damage waiver for the property that is

the subject of the rental agreement from the lessor or from

any vendor owned or controlled by the lessor.

(15)  The date of the consummation of the rental-purchase

transaction and the identities of the lessee and lessor.

(16)  A statement of the consumer's right to terminate

the agreement without paying any fee or charge not previously

due under the agreement by voluntarily surrendering or

returning the property in good repair upon expiration of the

lease.

(17)  That upon request of the lessee, a lessor shall

provide a statement of the lessee's account. The merchant may

charge a reasonable fee when there have been more than four

requests within a 12-month period.

(18)  Statements that indicate the following:

(i)  The terms under which the lessee shall acquire

ownership of the property either by payment of the total

cost to acquire ownership or by exercise of an early

purchase option.

(ii)  The transfer or nontransfer of any

manufacturer's express warranty that covers the property

at the time of the transfer of ownership to the lessee.

(iii)  A description of, if applicable, a grace

period for making any period payment, the amount of any

security deposit and the terms for refunds of the

security deposit upon return, surrender or purchase by

the lessee.

(b)  Notice required.--Every primary disclosure statement

shall include a notice in a prominent place in at least ten-

point type in substantially the following form:

NOTICE

You are renting this property. You will not own it until

you make all of the regularly scheduled payments or you

use the early purchase option. You do not have the right

to keep the property if you do not make required payments

or do not use the early purchase option. Subject to your

grace periods and reinstatement rights, the lessor may

repossess the property if you fail to make rental

payments as scheduled. Your rights and responsibilities

are fully explained in this rental-purchase agreement.

(c)  Time of disclosure.--Every rental-purchase agreement

shall be in writing. The information required by this section

shall be disclosed by the lessor prior to the signing of the

rental-purchase agreement by the lessee and shall be disclosed

either in the rental-purchase agreement or on a dated, separate

piece of paper that identifies the rental-purchase agreement and

the parties to it.

(d)  Manner of disclosure.--The disclosures required by

subsection (a)(2), (3), (9), (11) and (12) shall be printed or

typed in at least ten-point boldface type and grouped together.

All other disclosures required by this section shall be printed

or typed in at least eight-point type. All numerical amounts and

percentages shall be stated in figures. All information required

by this section shall be written, organized and designed so that

it is easy to read and understand. The information shall be

appropriately divided and captioned by its sections.

(e)  Disclosure of additional information.--A lessor may

disclose information that is not required by this section if the

additional information is not stated, used or placed in a manner

that will contradict, obscure or distract attention from the

required information.

(f)  Compliance with Federal law.--With respect to matters

specifically governed by the Consumer Credit Protection Act

(Public Law 90-321, 15 U.S.C. § 1601 et seq.), compliance with

that act satisfies the requirements of this section.

(g)  Accuracy of information.--The disclosures made under

this act shall be accurate as of the date the disclosure is made

based on the information available at the time. If the

information is subsequently rendered inaccurate as the result of

any agreement between the lessor and lessee, the resulting

inaccuracy shall not constitute a violation of this act.

§ 6904.  Prohibited provisions of agreement.

A rental-purchase agreement or any document that the lessor

requests the lessee to sign shall not contain any provision by

which:

(1)  A power of attorney is given to confess judgment in

this Commonwealth or to appoint the lessor, its agents or its

successors in interest as the lessee's agent in the

collection of payments or the repossession of the rental

property.

(2)  The lessee authorizes the lessor or its agent to

commit any breach of the peace in repossessing the rental

property or to enter the lessee's dwelling or other premises

without obtaining the lessee's consent at the time of entry.

(3)  The lessor mandates that the lessee purchase

insurance or liability waiver against loss or damage to the

rental property from the lessor. This paragraph shall not,

however, be construed to prohibit a lessor from offering

insurance or a liability waiver to a lessee provided it is

clearly disclosed that acceptance of the offer of insurance

or a liability waiver is optional. A merchant may provide

coverage only if the merchant clearly and conspicuously

discloses to the consumer the cost of each component of

coverage before the consummation of the rental-purchase

agreement and the consumer signs an affirmative written

request for coverage after the required disclosures under

this paragraph.

(4)  The lessee waives or agrees to waive any defense,

counterclaim or right the lessee may have against the lessor,

its agent or its successor in interest.

(5)  The lessee is required to pay a late fee unless the

rental payment is five days or more late under a rental-

purchase agreement with payments made monthly or two days or

more late under a rental-purchase agreement with payments

made more frequently than monthly. There may only be one late

fee or charge for an unpaid or delinquent periodic payment

regardless of the period in which the payment remains unpaid

or delinquent or a late fee or charge for any periodic

payment because a previously assessed late fee has not been

paid in full.

(6)  A lessee is required to pay a late fee exceeding the

greater of $5 or 10% of the amount of the past due payment,

regardless of how long the payment remains unpaid.

(7)  The lessee is required to pay a fee in connection

with retrieval of the property or the termination or

rescission of the rental-purchase agreement.

(8)  The lessee is charged a fee for in-home collection

of a rental payment unless the amount of the fee is disclosed

and the lessee expressly has agreed to pay the fee.

(9)  A negotiable instrument is created.

(10)  A claim or security interest is created in any

goods other than those goods provided in the rental-purchase

agreement.

(11)  A wage assignment is created.

(12)  A provision requiring the waiver of a legal claim

or remedy created by Federal or State law.

(13)  A provision requiring the lessee to pay greater

than the fair market value, the actual cost of repair or the

early purchase option amount provided in the rental-purchase

agreement, in the event the item is lost, damaged, destroyed

or stolen.

§ 6905.  Lessee's right to acquire ownership.

(a)  Limitation on cost of lease services.--The total amount

charged by the lessor for the cost of lease services in a

rental-purchase transaction shall not exceed the cash price of

the property.

(b)  Acquisition of ownership.--[At any time after tendering

an initial rental payment, a lessee may acquire ownership of the

property that is the subject of the rental-purchase agreement by

tendering an amount equal at a maximum to the amount by which

the cash price of the leased property exceeds 50% of all rental

payments made by the lessee.] The consumer shall acquire

ownership of the rental property upon payment of the total cost

of the rental purchase agreement, as disclosed in the rental-

purchase agreement. A lessor shall not require the consumer to

pay, as a condition for acquiring ownership of the property, a

fee or charge in addition to or in excess of the regular

periodic payments or early purchase option amount provided in

the agreement. Unpaid late charges or fees for which the lessor

has previously billed the lessee for shall not constitute an

additional fee or charge for purposes of this subsection.

(c)  Transfer.--Upon payment of all fees, charges and amounts

due under the rental-purchase agreement, the lessor shall

deliver or mail to the last known address of the lessee

documents and instruments that are necessary to acknowledge

ownership in the property acquired under the rental-purchase

agreement. All warranties shall transfer from the manufacturer,

distributor or seller to the lessee except when transfer is

prohibited by the terms of the warranty.

§ 6906.  Lessee's right to reinstate agreement after

termination.

(a)  General rule.--A lessee who fails to make a timely

rental payment may reinstate the agreement without losing any

rights or options which exist under the agreement by the payment

of all of the following within seven days of the renewal date if

the lessee paid on a monthly basis or three days if the lessee

paid more frequently than monthly:

(1)  All past due rental charges.

(2)  The reasonable costs of retrieval and redelivery, if

the property has been retrieved.

(3)  Any applicable late fee.

(b)  Extended reinstatement after return of property.--

(1)  In the case of a lessee who has paid less than [two-

thirds] one-half of the total payments necessary to acquire

ownership and where the lessee has returned or voluntarily

surrendered the property, other than through judicial

process, during the applicable reinstatement period set forth

in subsection (a), the lessee may reinstate the agreement

during a period of not less than [90] 60 days after the date

of the return of the property.

(2)  In the case of a lessee who has paid [two-thirds]

one-half or more of the total of payments necessary to

acquire ownership and where the lessee has returned or

voluntarily surrendered the property, other than through

judicial process, during the applicable period set forth in

subsection (a), the lessee may reinstate the agreement during

a period of not less than 120 days after the date of the

return of the property.

(3)  The lessee has the right to receive the same

property returned. If the property is not available, the

lessor shall substitute an item of comparable quality and

condition, except that the department may, by regulation or

order, exempt an independent small business, as defined by

the department by regulation, from the requirement of

providing the same or comparable item during the

reinstatement period. If the department determines, taking

into account standards as the department determines, that the

reinstatement right would provide an excessive hardship for

the independent small business.

(c)  Right to reinstate following repossession.--Nothing in

this section shall prevent a lessor from attempting to repossess

property during the reinstatement period, but a repossession

during the reinstatement period shall not affect the lessee's

right to reinstate. Upon reinstatement, the lessor shall provide

the lessee with the same property or substitute property of

comparable quality and condition.

(d)  Repossession.--A lessor shall have the right to

repossess property during the reinstatement period, however,

repossession shall not affect the lessee's right to

reinstatement.

§ 6907.  Rent reduction.

(a)  General rule.--If any lessee who has signed a rental-

purchase agreement experiences an interruption or reduction of

25% or more of income due to involuntary job loss, involuntary

reduced employment, illness, pregnancy or disability after two-

thirds or more of the total amount of the rental payments

necessary to acquire ownership under the agreement has been

paid, the lessor shall reduce the amount of each rental payment

by:

(1)  the percentage of the reduction in the lessee's

income; or

(2)  fifty percent, whichever is less, for the period

during which the lessee's income is interrupted or reduced.

(b)  Number of payments.--If payments are reduced, the total

dollar amount of payments necessary to acquire ownership shall

not be increased, but the number of payments necessary to

acquire ownership shall be increased accordingly and the rights

and duties of the lessor and the lessee shall not otherwise be

affected.

(c)  Income restored.--When the lessee's income is restored,

the lessor may increase the amount of rental payments, but in no

event shall rental payments exceed the originally disclosed

amount of rental payments.

(d)  Voluntary renegotiations and extensions.--New

disclosures shall be required with all renegotiations and

extensions except in the following situations:

(1)  A reduction in payments.

(2)  A deferment of one or more payments.

(3)  The extension of a rental-purchase agreement.

(4)  The substitution of property that has a

substantially equivalent or greater economic value as long as

the rental-purchase cost does not increase.

(5)  The deletion of property in a multiple-item

agreement.

(6)  A change in the rental period as long as the rental-

purchase cost does not increase.

(7)  An agreement resulting from a court proceeding.

(8)  Any other event described in regulations by the

department.

§ 6908.  Advertising and display of property.

(a)  Advertisements.--

(1)  An advertisement for a rental-purchase agreement

shall not state that a rental of any specific property is

available at a specific amount or on specific terms unless

the lessor will rent the property at the amount or on the

terms specified.

(2)  An advertisement shall not state that a payment or a

rental payment is due upon origination of a rental without

disclosing all of the following:

(i)  The payment due upon origination of the rental.

(ii)  The rental payment.

(iii)  The total number of rental payments necessary

to obtain ownership of the property that is the subject

of the rental-purchase agreement.

(iv)  That the item is offered under a rental-

purchase agreement and the amount, timing and taxes the

lessee must pay.

(v)  Whether the item is new or used.

(b)  Information on displays or offers.--All property

displayed or offered under a rental-purchase agreement shall

have stamped on or affixed to the property and clearly and

conspicuously indicated in Arabic numerals that are readable and

understandable by visual inspection all of the following:

(1)  The amount and timing of the rental payment.

(2)  The cash price of the property.

(3)  The total number and amount of rental payments

necessary to acquire ownership of the property that is the

subject of the rental-purchase agreement.

(4)  The cost of lease services.

(5)  That the transaction advertised is a rental-purchase

agreement.

(6)  Whether the property is new or used.

(c)  Compliance with Federal law.--With respect to matters

specifically governed by the Consumer Credit Protection Act

(Public Law 90-321, 15 U.S.C. § 1601 et seq.), compliance with

that act satisfies the requirements of this section.

§ 6909.  Lessor's liability for noncompliance.

(a)  Violation of other law.--

(1)  A violation of this chapter shall constitute a

violation of the act of December 17, 1968 (P.L.1224, No.387),

known as the Unfair Trade Practices and Consumer Protection

Law, and shall be subject to the enforcement provisions and

private rights of action contained in that act, except as

limited in this section.

(2)  A lessor who knowingly fails to provide information

that the lessor is required to disclose to a lessee or to the

department under this chapter commits a class C misdemeanor.

(b)  Recovery in class action limited.--Notwithstanding any

other provision of this section or the Unfair Trade Practices

and Consumer Protection Law, in any class action brought for

violation of this chapter, the total recovery arising out of the

same failure to comply shall not be more than the lesser of

$500,000 or an amount equal to 1% of the net worth of the

lessor.

(c)  Recovery of damages.--If a particular rental-purchase

agreement has more than one lessee, only one recovery of damages

is allowed for a violation of this chapter. Multiple violations

in connection with a single rental-purchase agreement entitle

the lessee or multiple lessees to only one recovery under this

chapter.

(d)  Commencement of class action.--A class action alleging a

violation of this chapter may not be brought more than two years

after the occurrence of the violation that is the subject of the

suit or more than two years after the lessee made the last

rental payment, whichever is later. This subsection does not bar

a lessee from asserting a violation of this chapter as a matter

of defense by recoupment or setoff in an action brought by a

lessor more than two years after the date of the occurrence of

the violation on an obligation arising from the rental-purchase

agreement.

(e)  Counteraction or defense.--A lessee may not take any

action to offset any amount for which a lessor is potentially

liable under the Unfair Trade Practices and Consumer Protection

Law against any amount owed by the lessee unless the amount of

the liability of the lessor has been determined by a judgment of

a court of competent jurisdiction in an action in which the

lessor was a party. This subsection does not bar a lessee in

default on an obligation arising from the rental-purchase

agreement from asserting a violation of this chapter in an

original action or as a defense or counterclaim to an action

brought by the lessor to collect amounts owed by the lessee

under the rental-purchase agreement.

(f)  Liability of assignees.--An action for a violation of

this chapter may only be brought against an assignee if the

violation is apparent of the face of the rental-purchase

agreement to which it relates. An assignee shall have no

liability if the assignment is involuntary. Nothing in this

section shall limit or alter the liability of a lessor assigning

a rental-purchase agreement.

(g)  Usury limits.--The legal rate of interest is 6% for

loans worth less than $50,000, except for loans with liens on

nonresidential real estate, loans to corporations and loans that

have no collateral and are above $35,000. It is criminal usury

to charge more than 25%.

Section 2.  This act shall apply to all transactions entered

into six months after the effective date of this act.

Section 3.  This act shall take effect in 60 days.