SB 737

This bill creates a new regulatory framework for lease-purchase agreements for personal property.

Under current law, a consumer credit transaction that is entered into for personal, family, or household purposes is generally subject to the Wisconsin Consumer Act (consumer act). The consumer act grants consumers certain rights and remedies and contains notice and disclosure requirements and prohibitions relating to consumer credit transactions, 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.

The bill defines a “lease-purchase agreement” as an agreement for the use of personal property (goods) by an individual (consumer) if 1) the goods are to be used for personal, family, or household purposes; 2) the agreement is for an initial period of four months or less and is automatically renewable with each payment after the initial period, but does not obligate the consumer to continue renting the goods beyond the initial period; and 3) the agreement permits the consumer to become the owner of the goods. A “lessor” is a person who regularly provides the use of goods under lease-purchase agreements and to whom periodic payments are initially payable under the lease-purchase agreement.

Under the bill, a lease-purchase agreement must be in writing, designated “lease-purchase agreement,” dated, signed by the consumer and lessor, and completed as to all essential provisions. The lessor must provide the consumer with a copy of the agreement. The agreement must include the disclosures described below, above the line for the consumer's signature, and these disclosures must be made on or before the date the consumer enters into the agreement. The agreement must be available to a consumer in any language in which the lessor advertises.

The bill requires a lessor to disclose in each lease-purchase agreement all of the following to the extent applicable:

1. The period for periodic payments (for example, weekly or monthly), the dollar amount of each payment, and the total number and total dollar amount of all periodic payments necessary to acquire ownership of the goods.

2. A statement that the consumer will not own the goods until the consumer has paid the total amount necessary to acquire ownership.

3. A statement advising the consumer whether the consumer is liable for loss or damage to the goods and, if so, a statement as to the limit of this liability (as discussed below).

4. A brief description of the goods, including whether the goods are new or used.

5. A statement of the cash-sale price of the goods. The “cash-sale price” is defined as the price stated in the lease-purchase agreement for which the lessor would have sold and the consumer would have bought the goods if the transaction had been a sale for cash.

6. The total amount of initial payments paid or required on or before the date the consumer enters into the lease-purchase agreement.

7. A statement that the total amount of payments necessary to acquire ownership of the goods does not include other charges or fees and a statement of all other charges or fees.

8. A statement clearly summarizing the terms of the consumer's early purchase option.

9. A statement describing responsibility for maintaining or servicing the goods.

10. A statement that the consumer may terminate the lease-purchase agreement without penalty by voluntarily surrendering or returning the goods in good repair, reasonable wear and tear excepted, along with any past-due periodic payments, upon expiration of any lease period.

11. Notice of the right to reinstate the lease-purchase agreement (as discussed below).

12. A notice stating the following: “Do not sign this agreement before you read it or if it contains blank spaces. You are entitled to a copy of the agreement you sign.”

The bill also prohibits certain provisions in a lease-purchase agreement, including a confession of judgment; a security interest in the consumer’s property; a wage assignment; the consumer’s waiver of claims or defenses; authorization to enter the consumer's premises unlawfully or to commit a breach of the peace in repossessing the goods; requiring the consumer to purchase insurance or a liability damage waiver from the lessor; requiring the consumer to make a balloon payment or additional payments to acquire ownership of the goods; and requiring the consumer to pay multiple reinstatement fees on a periodic payment or a late charge in addition to a reinstatement fee.

The bill requires a lessor, upon request by the consumer, to provide the consumer with a written receipt for each payment made. The bill also requires a lessor to include in a lease-purchase agreement an early purchase option, the terms of which are governed by the agreement. Under the bill, if a consumer is liable for loss or damage to goods, the consumer’s liability may not exceed the fair market value of the goods as of the time they are lost or damaged. The bill also requires the lessor, if the consumer acquires ownership of goods covered by an express warranty, to transfer the warranty to the consumer if allowed by the terms of the warranty.

Under the bill, a consumer who fails to make a timely payment may reinstate the lease-purchase agreement without losing any rights or options under the agreement by paying, within five days after the end of the payment period (renewal date) if periodic payments are monthly or within two days if periodic payments are more frequent, all of the following: 1) all past-due lease charges; 2) if the goods were picked up by the lessor, the reasonable costs of pickup and redelivery of the goods to the consumer; and 3) any applicable reinstatement fee. However, if the consumer returned the goods to the lessor within seven days of the renewal date, the consumer has at least 21 days from the date the goods were returned to reinstate the lease­purchase agreement, except that the consumer has at least 30 days if the consumer has paid at least two-thirds of the total of payments necessary to acquire ownership of the goods. Upon reinstatement, if the consumer no longer has possession of the goods, the lessor must provide the consumer with the same goods, if available, or with substitute goods of comparable quality and condition. A lessor’s repossession of goods (if authorized under other law) during the reinstatement period does not affect the consumer’s right to reinstate.

Under the bill, if the lessor and consumer renegotiate any term of the lease-purchase agreement that is a required disclosure identified in items 1 to 12 above, the change requires a new lease-purchase agreement that includes all the disclosures identified in items 1 to 12 above. However, this does not include certain changes, such as a change to the date of the periodic payment, deferral or waiver of a periodic payment, or reinstatement of a lease-purchase agreement.

The bill also governs advertisements that solicit consumers to enter into lease-purchase agreements. If the advertisement refers to the dollar amount of a periodic payment and the right to acquire ownership of specific goods, the advertisement must also state 1) that the transaction advertised is a lease-purchase agreement; 2) the total number and total amount of periodic payments necessary to acquire ownership of the goods; and 3) that the consumer acquires no ownership rights in the goods unless the total amount necessary to acquire ownership is paid. If goods are displayed or offered under a lease-purchase agreement, the goods must bear a tag or card that indicates the cash price, the amount of the periodic payment, and the total number and total amount of periodic payments necessary to acquire ownership. If goods are displayed or offered online for an online transaction, a lessor may satisfy these requirements by electronic disclosure. An advertisement in a language other than English must contain disclosures in the same language as the advertisement.

Subject to the exceptions discussed below, a lessor that fails to comply with the requirements described above is liable to a consumer damaged by the violation in an amount equal to the greater of 1) the consumer’s actual damages resulting from the violation or 2) 25 percent of the total of payments necessary to acquire ownership of the goods but not less than $100 nor more than $1,000. With any monetary award to a consumer, the court must also award to the consumer the costs of the action and reasonable attorney fees. To obtain an award, a consumer must bring an action no later than one year after the date of the consumer’s last periodic payment or the date the violation occurred, whichever is later. A lessor is also not liable to a consumer for damages if the lessor establishes that the lessor’s violation was unintentional or the result of a bona fide error and the lessor maintained reasonable procedures to avoid such errors. A lessor is also not liable to a consumer for damages if, within 60 days after discovering the violation and before the consumer files suit or notifies the lessor of the violation, the lessor notifies the consumer of the violation and corrects the lessor’s noncompliance for the consumer. In addition, a lessor is not liable to a consumer with respect to any action or omission of the lessor made in a good faith effort to comply with the provisions of the bill.

Under the bill, lease-purchase agreements that comply with the bill’s requirements are not subject to the consumer act. The bill also does not apply to the lease of motor vehicles or mobile homes.