SENATE, No. 2062
STATE OF NEW JERSEY
INTRODUCED MAY 15, 1997
By Senators SCOTT and BRYANT
An Act concerning rental-purchase agreements and supplementing Title 17 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. This act shall be known and may be cited as the "New Jersey Rental-Purchase Consumer Protection Act."
2. As used in this act:
"Advertisement" means a commercial message in any medium that aids, promotes or assists, directly or indirectly, in the consummation of a rental-purchase agreement.
"Cash price" means the price at which the merchant would have sold the property to the consumer for cash on the date of the rental-purchase agreement. 1The "cash price" of the property shall be one of the following:
(1) the manufacturers' suggested or list price;
(2) two times (a) the documented acquisition cost from the manufacturer and (b) the actual cost of shipping, which cost shall not exceed 10% of the acquisition cost; or
(3) the published or advertised price of the same property selling in the same trade area.1
"Consumer" means a natural person who rents personal property under a rental-purchase agreement to be used primarily for personal, family or household purposes.
"Consummation" means the time a consumer becomes contractually obligated on a rental-purchase agreement.
"Early buy-out formula" means the cash price of the rented property less 50 percent of the rental payments made by the consumer.
"Rental-purchase agreement" means an agreement for the use of personal property by a consumer primarily for personal, family or household purposes, for an initial period of four months or less, that is automatically renewable with each payment after the initial period, but does not obligate or require the consumer to continue renting or using the property beyond the initial period, and that permits the renter to become the owner of the property.
"Merchant" means a person who regularly provides the use of property through rental-purchase agreements and to whom rental payments are initially payable on the face of the rental-purchase agreement.
1"Retail price" means the manufacturers' suggested retail price, or if there is no manufacturers' suggested retail price available for the property, "retail price" means a price based on the published or advertised prices of the same property selling on a non-discount basis in the same trade area which is established by regulation on a quarterly basis by the Division of Consumer Affairs in the Department of Law and Public Safety.1
3. a. A rental-purchase agreement that complies with the provisions of this act shall not be construed as, nor be governed by, the laws relating to:
(1) a retail installment contract as defined in subsection (b) of section 1 of P.L.1960, c.40 (C.17:16C-1);
(2) a retail charge account as defined in subsection (r) of section 1 of P.L.1960, c.40 (C.17:16C-1);
(3) a retail installment sale of goods or retail installment contract for the sale of goods pursuant to P.L.1968, c.223 (C.17:16C-61.1 et seq.); or
(4) a security interest as defined in subsection (37) of N.J.S.12A:1-201.
b. The provisions of this act shall not apply to:
(1) rental-purchase agreements primarily for business, commercial or agricultural purposes, or those made with governmental agencies, instrumentalities or organizations;
(2) a rental or lease of a safe deposit box;
(3) a rental or lease or bailment of personal property which is incidental to the lease of real property, and which provides that the consumer has no option to purchase the rented or leased property; or
(4) a rental or lease of an automobile.
4. a. A merchant shall disclose to a consumer the information required by section 5 of this act. In a transaction involving more than one merchant, only one merchant shall make the disclosures required by section 5 of this act, but all merchants involved in a rental-purchase agreement with a consumer shall be bound by those disclosures.
b. The disclosures shall be made at or before consummation of the rental-purchase agreement. Agreements shall be written in plain English, and in any other language used by a merchant in advertisements for rental-purchase agreements.
c. The disclosures shall be made clearly and conspicuously in writing and a copy of the rental-purchase agreement shall be provided to the consumer at the time the agreement is consummated. The disclosures required pursuant to section 5 of this act shall be made on the face of the contract above the line for the consumer's signature.
d. If a disclosure becomes inaccurate as the result of any act, occurrence or agreement by the consumer after delivery of the required disclosures, the resulting inaccuracy is not a violation of this act.
5. a. For each rental-purchase agreement, the merchant shall disclose in the agreement the following items, as applicable:
(1) the total number, total dollar amount and timing of all payments necessary to acquire ownership of the property;
(2) a statement that the consumer will not own the property until the consumer has made the total dollar amount of payments necessary to acquire ownership;
(3) a statement that the consumer is responsible for the fair market value of the property, according to the early buy-out formula, if, and as of the time, it is stolen, damaged or destroyed;
(4) a brief description of the rented property, sufficient to identify the property to the consumer and the merchant, including an identification number, if applicable, and a statement indicating whether the property is new or used, but a statement that indicates new property is used is not a violation of this act;
(5) the cash price of the property 1,including the information that the cash price is one of the following: (a) the manufacturers' suggested or list price; (b) two times (i) the actual cost of acquisition from the manufacturer and (ii) the actual cost of shipping, which cost shall not exceed 10% of the acquisition cost; or (c) the published or advertised price of the same merchandise selling in the same trade area1 ;
(6) 1the retail price of the property;
(7)1 the total of initial payments paid or required at or before consummation of the rental-purchase agreement or delivery of the property, whichever is later;
1[(7)] (8)1 a statement that the total dollar amount of payments does not include other charges that a consumer may incur, such as late payment, default, pickup and reinstatement fees, which charges shall be separately and individually disclosed by dollar amount in the rental-purchase agreement;
1[(8)] (9)1 a statement clearly summarizing the terms of the consumer's option to purchase, including a statement that the consumer has the right to exercise an early purchase option and the price, formula or method for determining the price at which the property may be so purchased;
1[(9)] (10)1 a statement identifying the party responsible for maintaining or servicing the property while it is being rented, together with a description of that responsibility, and a statement that if any part of a manufacturer's express warranty covers the rental property at the time the consumer acquires ownership of the property, it shall be transferred to the consumer, if allowed by the terms of the warranty;
1[(10)] (11)1 the date of the consummation of the agreement and the identities of the merchant and the consumer;
1[(11)] (12)1 a statement that the consumer may terminate the agreement without penalty by voluntarily surrendering or returning the property in good repair upon expiration of any rental term along with any past due rental payments; and
1[(12)] (13)1 notice of the right to reinstate a rental-purchase agreement pursuant to section 1 91 of this act, which notice shall include the provisions of section 1 91 of this act1;
(14) in 10-point bold type on a separate page to be signed by the consumer separately from the rental-purchase agreement, a copy of which is to be given to the consumer and a copy of which is to be kept by the merchant, the following:
(a) the difference between what the consumer would pay if the consumer purchased the property for the retail price and the amount the consumer would pay to own the property by making all the rental payments necessary under the rental purchase agreement, expressed as a dollar amount; and
(b) a statement that if the intention of the consumer is to own the property which is the subject of the rental-purchase agreement and the consumer can obtain conventional financing for that purchase, purchasing the property from a retailer would be a less expensive option;
(15) a statement indicating that the following grace periods apply with respect to a payment period, setting forth when a payment will be considered late:
(a) for a weekly payment period, no late fee shall be assessed for a payment that is made within two calendar days after the date the scheduled payment is due; and
(b) for any payment period, longer than one week, no late fee shall be assessed for a payment that is made within five calendar days after the date the scheduled payment is due;
(16) (a) a statement indicating that a late fee shall not exceed $5 per late payment:
(b) that a late fee may be collected only once on each minimum payment due however long it remains in default;
(c) that payments received shall be applied first to the payment of the amount due and then to late fees and any other charges; and
(d) that the late fee may be collected at the time it accrues or any time later;
(17) a statement that the merchant is responsible for delivering and picking up any goods that are too large to be transported by the consumer1.
b. With respect to matters specifically governed by the federal Consumer Credit Protection Act (15 U.S.C. §1601 et seq.), compliance with that act shall be deemed to satisfy the disclosure requirements of this section.
6. A rental-purchase agreement may not contain a provision:
a. Requiring a confession of judgment;
b. Requiring a garnishment of wages;
c. Permitting the merchant a security interest in or other claim to a property interest in any property except property delivered by the merchant pursuant to the rental-purchase agreement;
d. Authorizing a merchant or an agent of the merchant to commit a breach of the peace during repossession of the property;
e. Waiving a defense, counterclaim, or right the renter may have against the merchant or an agent of the merchant;
f. Requiring a balloon payment in addition to regular rental payments in order to acquire ownership of the property, or requiring rental payments totaling more than the cost to acquire ownership, as disclosed in the rental-purchase agreement; or
g. Requiring purchase of insurance from the merchant to cover the property.
17. a. The following grace periods shall apply to payments made with respect to a rental-purchase agreement:
(1) for a weekly payment period, no late fee shall be assessed for a payment that is made within two calendar days after the date the scheduled payment is due; and
(2) for any payment period longer than one week, no late fee shall be assessed for a payment that is made within five calendar days after the date the scheduled payment is due.
b. (1) A late fee shall not exceed $5 per late payment;
(2) A late fee may be collected only once on each minimum payment due however long it remains in default;
(3) Payments received shall be applied first to the payment of the amount due and then to late fees and any other charges: and
(4) A late fee may be collected at the time it accrues or at any time afterward.
c. (1) Subject to paragraph (2) of this subsection c., if any consumer who has signed the rental-purchase agreement experiences an interruption or reduction of 25 percent or more of income due to involuntary job loss, involuntary reduced employment, illness, pregnancy, or disability after one-half of the total amount of periodic payments necessary to acquire ownership under the agreement has been paid, the merchant shall reduce the amount of each periodic payment by (a) the same percent the consumer's income has been reduced or (b) 50 percent, whichever is less, for the period during which the consumer's income is interrupted or reduced. If payment amounts are reduced, the total dollar amount of payments necessary to acquire ownership shall not be increased, and the rights and duties of the merchant and the consumer shall not be otherwise affected. If the consumer's income is restored, the merchant may increase the amount of the periodic payments, but in no event shall the amount of the periodic payments exceed the originally scheduled amount of periodic payments, nor shall the total dollar amount of payments necessary to acquire ownership exceed the total amount of the original rental-purchase agreement.
(2) The periodic payment shall be reduced pursuant to paragraph (1) of this subsection c. only if the consumer provides the merchant with evidence of the amount and cause of the interruption or reduction of income.1
18. A merchant shall be responsible for delivery and pick-up of any goods that are too large to be transported by the consumer.1
1[7.] 9.1 a. A consumer who fails to make a timely rental payment may reinstate a rental-purchase agreement without losing any rights or options which exist under the agreement, if the following apply:
(1) subsequent to having failed to make a timely rental payment, the consumer promptly returns or surrenders the property upon the merchant's request; and
(2) not more than 60 days have passed since the property was returned to the merchant; except that if the consumer has paid 1 501 percent or more of the total of payments necessary to acquire ownership of the property, then the reinstatement period shall be extended to 180 days.
b. As a condition of reinstatement under this section, the merchant may require the payment of all past due rental charges, any applicable late fee, plus a reinstatement fee not to exceed $5.
c. Nothing in this section shall prevent a merchant from attempting to repossess property during the reinstatement period, but that repossession shall not affect the consumer's rights to reinstate. Upon reinstatement, the merchant shall provide the consumer with the same property or substitute property of comparable quality and condition.
1[8.] 10.1 a. No merchant shall offer a rental-purchase agreement in which 50 percent of all rental payments necessary to acquire ownership of the rented property exceeds the posted cash price of the rented property. When 50 percent of all rental payments made by a consumer equals the posted cash price of the property disclosed to the consumer pursuant to paragraph (5) of subsection a. of section 5 of this act, the consumer shall acquire ownership of the rented property and the rental-purchase agreement shall terminate.
b. At any time after tendering an initial rental payment, a consumer may acquire ownership of the property that is the subject of the rental-purchase agreement by tendering the amount by which the posted cash price of the rented property exceeds 50 percent of all rental payments previously made by the consumer.
1[9.] 11.1 A merchant shall provide the consumer a written receipt for each payment made by cash or money order, upon request by the consumer.
1[10.] 12.1 a. A renegotiation shall occur when an existing rental-purchase agreement is satisfied and replaced by a new agreement undertaken by the same merchant and consumer. A renegotiation shall be considered a new agreement requiring new disclosures pursuant to this act. However, events such as the following shall not be treated as renegotiation:
(1) the addition or return of property in a multiple-item agreement or the substitution of the rental property, if in either case the average payment allocable to a payment period is not changed by more than 25 percent;
(2) a deferral or extension of one or more periodic payments, or portions of a periodic payment;
(3) a reduction in charges in the agreement; and
(4) an agreement involved in a court proceeding.
b. No new disclosures are required for any extension of a rental-purchase agreement.
1[11.] 13.1 a. If an advertisement for a rental-purchase agreement refers to or states the dollar amount of any payment and right to acquire ownership for any one specific item, the advertisement shall also clearly and conspicuously state the following items, as applicable:
(1) that the transaction advertised is a rental-purchase agreement;
(2) the total number and total dollar amount of payments necessary to acquire ownership; and
(3) that the consumer does not acquire ownership rights if the total dollar amount of payments necessary to acquire ownership is not paid.
b. Any personal property displayed or offered under a rental-purchase agreement shall bear a tag which clearly and conspicuously states:
(1) the cash price of the property;
(2) the dollar amount of the periodic payment 1and the payment period1 ;
(3) the total dollar amount that must be paid in order to acquire ownership of the property under a rental-purchase agreement; 1[and]1
(4) 1the retail price;
(5) the difference between the amount of the retail price and the total amount that must be paid in order to acquire ownership of the property under a rental-purchase agreement expressed as a dollar amount; and
(6)1 that the property is new or used.
c. An owner or agent of the medium in which an advertisement for a rental-purchase agreement appears or through which it is disseminated shall not be liable pursuant to this section.
d. The provisions of subsection a. of this section shall not apply to an advertisement which does not refer to or state the amount of any payment, or which is published in the yellow pages of a telephone directory or in any similar directory of business.
1[12.] 14.1 a. Notwithstanding any provision of subsection b. of this section to the contrary, a merchant who fails to comply with the requirements of this act shall be liable to the consumer in an amount equal to the greater of:
(1) the actual damages sustained by the consumer as a result of the merchant's failure to comply with this act; or
(2) twenty-five percent of the total of payments necessary to acquire ownership, but not less than $100 nor more than $1,000.
That merchant shall also be liable to the consumer for the costs of the action and reasonable attorneys' fees, as determined by the court.
b. No consumer shall offset any amount for which a merchant is potentially liable under subsection a. of this section against any amount owed by the consumer, unless the amount of the merchant's liability has been determined by judgment of a court of competent jurisdiction in an action in which the merchant was a party. This subsection b. does not bar a consumer then in default on an obligation from asserting a violation of this act as an original action, or as a defense or counterclaim to an action brought by a merchant against the consumer.
c. No action under this section shall be brought in any court of competent jurisdiction more than two years after the date the consumer made his last rental payment, or more than two years after the date of the occurrence of a violation that is the subject of the suit, whichever is later.
1[13.] 15.1 This act shall take effect on the 180th day after enactment.
Provides for regulation of certain rental-purchase agreements.