SB0054 97TH GENERAL ASSEMBLY

LRB097 02857 AEK 42879 b

97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
SB0054

Introduced 1/27/2011, by Sen. Ira I. Silverstein

SYNOPSIS AS INTRODUCED:

See Index

Amends the Rental-Purchase Agreement Act. Requires additional disclosures in a rental-purchase (aka rent to own) agreement clarifying the specific terms of the agreement including cost terms, minimum obligation period, and a notice putting the nature of the agreement in layman's terms. Provides that the rental-purchase agreement must provide that if the merchandise is returned to the merchant during the restatement period, the later of one week or half the number of days in a regular payment period, the consumer shall have the right to reinstate the agreement for a period of not less than one year. Creates an early purchase option where the consumer has the right to acquire ownership of the merchandise at any time during the agreement by paying the merchant a price determined by a multiplier. Provides that the merchant shall reduce the amount of each rental payment when the consumer experiences an interruption or reduction in income of more than 25% due to involuntary job loss/reduction, illness, pregnancy, or disability after at least 1/2 of the amount of the rental payments have been made. Provides that the merchant shall maintain the merchandise in good working order or replace or repair the merchandise without any fee to the consumer. Provides that a consumer has the ability to review a rental-purchase agreement for 48 hours prior to signing and that the consumer has the right to cancel the agreement without penalty before taking possession of the merchandise. Provides that a rental-purchase agreement shall not contain a mandatory arbitration clause. Establishes maximum cash prices for categories of merchandise and mandates the use of a terming matrix to establish a maximum cash price for merchandise on its second or subsequent rental. Provides that an advertisement must state whether its terms are for new or used merchandise. Provides that a merchant may not be held liable for an unintentional action that resulted from a bona fide or clerical error. Provides that an action shall not be brought after the later of 4 years after the occurrence of the act or one year after the last payment. Provides for enforcement by the Attorney General. Amends the Consumer Fraud and Deceptive Practices Act to make a violation of the Rental-Purchase Agreement Act a violation of that Act.

A BILL FOR

AN ACT concerning business.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Rental-Purchase Agreement Act is amended by changing Sections 1, 2, 3, 4 and 5 and by adding Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6 and 4.1 as follows:

(815 ILCS 655/1) (from Ch. 121 1/2, par. 1801)

Sec. 1. Definitions. In this Act:

(1) "Advertisement" means a commercial message in any medium that directly or indirectly promotes or assists a rental-purchase agreement.

(2) "Cash price" means the price for which the merchant would have sold the merchandise to the consumer for cash on the date of the rental-purchase agreement.

(3) "Consumer" means an individual who leases personal property under a rental-purchase agreement.

(4) "Merchandise" means the personal property that is the subject of a rental-purchase agreement.

(5) "Merchant" means a person who, in the ordinary course of business, regularly leases, offers to lease or arranges for the leasing of merchandise under a rental-purchase agreement, and includes a person who is assigned an interest in a rental-purchase agreement.

(6) "Rental-purchase agreement" means an agreement for the use of merchandise by a consumer for primarily personal, family or household purposes for an initial period of 4 months or less that is automatically renewable with each payment after the initial period and that permits the consumer to become the owner of the merchandise.

(7) "Cost of rental" means the difference between the total of payments necessary to acquire ownership under the rental-purchase agreement and the cash price of the rental merchandise that is subject to the rental-purchase agreement.

(8) "Fee" means any payment, charge, fee, cost, or expense, however denominated, other than a rental payment.

(9) "Appliance" means and includes any refrigerator, freezer, range including any cook top or oven, microwave oven, washer, dryer, dishwasher, room air conditioner, air purifier, or other machine for routine household tasks.

(10) "Electronic set" means and includes any television, radio, camera, video game system, or computer system, or any type of device for the recording, storage, copying, printing, transmission, display, or playback of any sound or image.

(11) "Merchant's cost" means the documented actual cost, including actual freight charges, of the rental merchandise to the merchant from a wholesaler, distributor, supplier, or manufacturer and net of any discounts, rebates, and incentives that are vested and calculable as to a specific item of merchandise at the time the merchant accepts delivery of the merchandise.

(12) "Total of payments" means the total amount of periodic payments necessary to acquire ownership of the merchandise if the consumer makes all regularly scheduled payments.

(13) "Periodic payment" means a payment to be made by a consumer for the right of the possession and use of merchandise for a specific rental period, but does not include taxes imposed on such payment.

(14) "Mandatory arbitration clause" means a term or provision contained in a rental-purchase agreement which requires the consumer to submit any controversy thereafter arising under the agreement to arbitration prior to the commencement of any legal action to enforce the provisions of the agreement and which also provides language to the effect that the decision of the arbitrator or panel of arbitrators in its application to the consumer shall be final and not subject to court review.

(Source: P.A. 85-957.)

(815 ILCS 655/2) (from Ch. 121 1/2, par. 1802)

Sec. 2. Form.

(a) A rental-purchase agreement must be written in plain English and clearly and simply in any other language used by the merchant in any oral or written advertisement related to the rental-purchase agreement. Numerical amounts must be stated in figures.

(b) Disclosures required by this Act must be printed or typed in each rental-purchase agreement in a size equal to at least 10 point bold-faced type in a color or shade that clearly contrasts with the background.

(c) A rental-purchase agreement may not contain a provision:

(1) requiring a confession of judgment;

(2) authorizing a merchant or an agent of the merchant to commit a breach of the peace in the repossession of merchandise;

(3) waiving a defense, counterclaim or right the consumer may have against the merchant or an agent of the merchant;

(4) requiring the purchase of insurance from the merchant to cover the merchandise;

(5) requiring the payment of a late charge or reinstatement fee unless a periodic payment is delinquent for 3 days and the charge or fee is in an amount not more than $5; or

(6) requiring a payment at the end of the scheduled rental-purchase term in excess of or in addition to a regular periodic payment in order to acquire ownership of the merchandise. In no event shall the consumer be required to pay a sum greater than the total amount to be paid to acquire ownership, as disclosed in item (3) of subsection (g) of this Section.

(d) Only one late charge or reinstatement fee may be collected on a payment regardless of the period during which it remains in default.

(e) A rental-purchase agreement must provide that:

(1) a charge in addition to periodic payments, if any, must be reasonably related to the service performed; and

(2) a consumer who fails to make a timely payment may reinstate an agreement, without losing rights or options previously acquired, by taking the required action before the later of one week or half of the number of days in a regular payment period after the due date of the payment, this period of time hereinafter referred to as the "reinstatement period"; and .

(3) if the merchandise is returned to the merchant during the applicable reinstatement period, other than through judicial process, the right to reinstate the agreement must be extended for a period of not less than one year.

(f) Notice of the right to reinstate an agreement must be disclosed in the agreement. This Act does not prevent a merchant from attempting repossession of merchandise during the reinstatement period, in accordance with the agreement, and the consumer's right to reinstate an agreement does not expire because of such a repossession. If the consumer is entitled to reinstatement after repossession, then, within 15 days of the repossession, the merchant must provide written notice to the consumer of the consumer's right to reinstate the agreement. If the merchandise is returned to the merchant during the applicable reinstatement period, other than through judicial process, the right to reinstate the agreement shall be extended for a period of not less than 30 days if the consumer has paid less than 60% of the total amount to be paid to acquire ownership of the merchandise and shall be extended for a period of not less than 60 days if the consumer has paid 60% or more of the total amount to be paid to acquire ownership of the merchandise. On reinstatement, the merchant shall provide the consumer with the same merchandise or substitute merchandise of comparable quality and condition. If substitute merchandise is provided, the merchant shall also provide the consumer with the disclosures required in subsection (g) of this Section.

(g) A rental-purchase agreement must be contained in a single document and must clearly and conspicuously disclose all of the following disclose:

(1) whether the merchandise is new or used;

(2) the names of the merchant and the consumer, the merchant's business address and telephone number, the consumer's address, the date on which the agreement is executed, and a description of the merchandise sufficient to identify it the amount and timing of payments;

(3) the minimum period for which the consumer is obligated under the rental-purchase agreement, the duration of the rental-purchase agreement if all regularly scheduled periodic payments are made, the amount of each periodic payment, and the total amount and number of periodic payments necessary to acquire ownership of the merchandise if the renter makes all regularly scheduled periodic payments the total number of payments necessary and the total amount to be paid to acquire ownership of the merchandise;

(4) the amount and purpose of any payment, charge or fee in addition to the regular periodic payments;

(5) whether the consumer is liable for loss or damage to the merchandise, and, if so, the maximum amount for which the consumer may be liable, which in the case of loss shall in no event be greater than the price the consumer would have paid to exercise an early purchase option pursuant to this Act or the cost of repair as determined by the merchant;

(6) that the consumer does not acquire ownership rights unless the consumer has complied with the ownership terms of the agreement; and

(7) the cash price of the merchandise, whether the merchandise is new or used; .

(8) the cost of rental;

(9) a statement of the consumer's right to acquire ownership by the early purchase option as provided in this Act, including substantially the following statement: "The attached chart shows the amount required to exercise your early purchase option after each renewal payment, assuming you make each periodic payment on time." The rental-purchase agreement shall be accompanied by a chart showing the amount required to exercise the consumer's early purchase option after each periodic payment if payments are made as scheduled;

(10) a description of the consumer's reinstatement rights as provided in subsection (e) of this Section;

(11) a description of the consumer's right to lower periodic payment amounts as provided in Section 2.2 of this Act;

(12) a statement that the unexpired portion of all warranties provided by the manufacturer, distributor, or seller of the merchandise will be transferred by the merchant to the consumer at the time the consumer acquires ownership of the merchandise from the merchant, if such warranty coverage is transferable;

(13) a description of the merchant's obligation to maintain the rental merchandise and to repair or replace rental merchandise that is not operating properly, as provided in Section 2.3 of this Act; and

(14) the following notice:

NOTICE

You are renting this merchandise. You will not own it until you make all of the regularly scheduled payments or until you exercise the early purchase option.

You do not have the right to keep this merchandise if you do not make required payments or do not use the early purchase option. If you miss a payment, the merchant can repossess the merchandise, but you may have the right to have the same or similar merchandise returned.

See the contract for an explanation of your rights.

(h) The disclosures required by items (3), (7), and (8) of subsection (g) of this Section shall be printed in the following form that shall appear immediately above the space reserved for the consumer's signature in the rental-purchase agreement: ______________________________________________________

(i) The form prescribed in subsection (h) of this Section shall be clearly and conspicuously placed on a tag or sticker affixed to the merchandise available for rental-purchase. If the merchandise available for rental-purchase is not displayed at the merchant's place of business but appears in a photograph or catalog shown to consumers, a tag or sticker of the form shall be affixed to the photograph shown to consumers or shall be given to consumers at the time of the showing. This subsection does not apply to photographic depictions of merchandise in advertisements complying with the provisions of Section 3 of this Act.

(Source: P.A. 87-256; 88-644, eff. 9-9-94.)

(815 ILCS 655/2.1 new)

Sec. 2.1. Early purchase option.

(a) The consumer has the right to acquire ownership of the merchandise at any time by tendering to the merchant all past due payments and fees and an amount equal to the cash price stated in the rental-purchase agreement multiplied by a fraction that has as its numerator the number of periodic payments remaining under the agreement and that has as its denominator the total number of periodic payments. A consumer must affirmatively elect to exercise an early purchase option. In no event shall the consumer's early purchase option be less than the amount of one periodic payment.

(b) In a clear and conspicuous manner on the consumer's receipt for every periodic payment, which the merchant shall deliver to the consumer within a reasonable time after payment, the merchant shall provide the consumer with a written statement of:

(1) The total amount the consumer would have to pay to acquire ownership of the rental merchandise if the consumer makes all regularly scheduled payments remaining under the rental-purchase agreement; and

(2) The total amount the consumer would have to pay to acquire ownership of that merchandise pursuant to this Section.

(815 ILCS 655/2.2 new)

Sec. 2.2. Interruption or reduction of income in certain instances.

(a) If any consumer 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 one-half or more of the total amount of the rental payments necessary to acquire ownership under the agreement have been paid, and such consumer provides to the merchant some evidence of the amount and cause of the interruption or reduction of income, the merchant shall reduce the amount of each rental payment by: (1) the percentage of the reduction in the consumer's income or (2) 50%, whichever is less, for the period during which the consumer's income is interrupted or reduced.

(b) If payments are reduced, the total dollar amount of payments necessary to acquire ownership shall not be increased, provided, however, that the number of payments necessary to acquire ownership may be increased accordingly and the rights and duties of the merchant and the consumer shall not otherwise be affected.

(c) When the consumer's income is restored, the merchant may increase the amount of rental payments, but in no event shall rental payments exceed the originally disclosed amount of rental payments as provided in the rental-purchase agreement.

(815 ILCS 655/2.3 new)

Sec. 2.3. Maintenance of merchandise.

(a) The merchant shall maintain the property subject to the rental-purchase agreement in good working order while the agreement is in effect without charging any fee to the consumer in addition to the regularly scheduled rental payments set forth in the rental-purchase agreement.

(b) By the end of the second business day following the day on which the merchant received notice from the consumer that the property is not operating properly, the merchant shall repair or replace the property without any fee to the consumer in addition to the regularly scheduled rental payments set forth in the rental-purchase agreement.

(c) If a repair or replacement cannot be immediately effected, the merchant shall temporarily substitute property of comparable quality and condition while repairs are being effected. If repairs cannot be completed to the reasonable satisfaction of the consumer within 30 days after the merchant receives notice from the consumer or within a longer period voluntarily agreed to by the consumer, the merchant shall permanently replace the property.

(d) All replacement property shall be the same brand, if available, and comparable in quality, age, condition, and warranty coverage to the replaced property. If the same brand is not available, the brand of the replacement property shall be agreeable to the consumer, provided, however, that any request by the consumer shall not be unreasonable.

(e) All of the consumer's and merchant's rights and obligations under the rental-purchase agreement that applied to the property originally subject to the rental-purchase agreement shall apply to any replacement property.

(f) The consumer shall not be charged, or held liable for, any pro rata portion of a periodic payment for any period of time greater than one full day and each full day thereafter during which the property that is the subject of the rental-purchase agreement or any property substituted for it pursuant to this Section is not in good working order.

(g) This Section shall not apply to repairs or damage for which the consumer is liable under the rental-purchase agreement.

(h) A merchant shall not deliver to a consumer any property which the merchant knows or has reason to know is defective.

(i) In the case of damage to the merchandise other than normal wear and tear, the consumer shall be liable for the lesser of the price the consumer would have paid to exercise an early purchase option pursuant to Section 2.1 of this Act or the cost of the repair as determined by the merchant.

(815 ILCS 655/2.4 new)

Sec. 2.4. Availability, enforcement, and cancellation.

(a) Every rental-purchase agreement shall indicate that a consumer at his or her request shall be permitted to review a rental-purchase agreement for up to 48 hours prior to signing.

(b) A copy of the signed rental-purchase agreement and all other documents which the merchant requests the consumer to sign shall be given to the consumer at the time they are signed. The rental-purchase agreement shall not be enforceable against the consumer until the consumer has received a signed copy.

(c) In addition to any other right of cancellation, a consumer has the right to cancel a rental-purchase agreement, without penalty or obligation, if the consumer has not taken possession of the merchandise.

(815 ILCS 655/2.5 new)

Sec. 2.5. Mandatory arbitration.

(a) Subject to federal law and regulation, no rental-purchase agreement shall contain a mandatory arbitration clause. Nothing herein shall be construed to prohibit a merchant from incorporating a provision within a rental-purchase agreement that the decision of the arbitrator or panel of arbitrators shall be final in its application to the parties and not subject to court review.

(b) The provisions of a mandatory arbitration clause within a rental-purchase agreement shall be null and void but shall not constitute a violation of this Act. The inclusion of a mandatory arbitration clause shall not serve to impair the enforceability of any other provision of the rental-purchase agreement.

(815 ILCS 655/2.6 new)

Sec. 2.6. Maximum cash price and total of payments.

(a) A merchant shall maintain records that establish the merchant's cost for each item of merchandise that is the subject of a rental-purchase agreement. A merchant shall maintain a copy of each rental-purchase agreement and of the records required by this Section for at least 2 years following the termination of the agreement.

(b) The maximum cash price for the merchant's first rental of the merchandise that is the subject of the rental-purchase agreement may not exceed 1.75 times the merchant's cost for appliances, 1.75 times the merchant's cost for electronic sets having a merchant's cost of less than $150, 2.0 times the merchant's cost for electronic sets having a merchant's cost greater than or equal to $150, 2.15 times the merchant's cost for furniture, 2.0 times the merchant's cost for automotive accessories, jewelry, and musical instruments, and 1.75 times the merchant's cost for all other items.

(c) The maximum cash price for merchandise on its second or subsequent rental may not exceed the maximum total of payments for that merchandise as permitted under this Section using the terming matrix, divided by 2.25.

(d) The maximum total of payments may not exceed 2.25 times the maximum cash price that could have been charged for the first rental of the merchandise as prescribed by this Act.

(e) The maximum total of payments for the merchant's second or subsequent rental of the merchandise that is the subject of a rental-purchase agreement may not exceed the maximum total of payments permitted under the terming matrix contained in this Section.

(f) The following terming matrix shall be used to lower the number of periodic payments, which shall result in a lower total of payments and a lower maximum cash price for used merchandise based on its age and condition. The merchant may choose to maintain the number of periodic payments for used merchandise as if it were new in lieu of reducing the number of payments, provided that the merchant lowers the total of payments and maximum cash price on a pro-rata basis using the terming matrix as guidance. The merchant shall keep in electronic or hard copy form, the matrix used, together with a record of the number of periodic payments provided in the first agreement when the merchandise was offered as new, as well as a record of the item's condition as determined by the merchant pursuant to the matrix each time it is priced as used. No merchant shall price used goods in excess of the prices dictated by the matrix.

Terming Matrix for Used Merchandise

(g) Immediately below the terming matrix the following language shall be printed in 10 point type:

New = Full term.

Excellent = In great shape. Refurbished to look like new.

Good = In good working order. Refurbished, but imperfections still exist.

Fair = Completely operational, but refurbishment has not concealed obvious wear and tear.

Poor = Ripped, faded, cracked, or broken and refurbishment did not improve the condition.

(h) The Attorney General shall make available in printed form in at least 10 point type to merchants and publish on an appropriate website the terming matrix in chart form to be used by merchants as required by this Section.

(i) Upon written request of the Attorney General, a merchant shall provide copies of the records described in this Section.

(j) If a merchant intentionally discloses a cash price or a total of payments that exceeds the amount permitted by this Section, the rental-purchase agreement is void, the consumer shall retain the merchandise without any obligation, and the merchant shall refund to the consumer all amounts paid.

(815 ILCS 655/3) (from Ch. 121 1/2, par. 1803)

Sec. 3. Advertisement.

(a) An advertisement for a rental-purchase agreement that refers to or states the amount of a payment or the right to acquire ownership of any one particular item under the agreement must clearly and conspicuously state:

(1) that the transaction advertised is a rental-purchase agreement;

(2) the total amount and number of payments necessary to acquire ownership; and

(3) that the consumer does not acquire ownership rights unless the merchandise is rented for a specified number of payment periods; and .

(4) whether the advertised terms are for new or used merchandise.

(b) Every item of property displayed or offered for rental-purchase by a merchant shall have attached to its front or displayed as prominently as if attached to its front a tag disclosing whether the merchandise is new or used, in addition to any other tag or sticker required by this Act the amount to be paid to acquire ownership of the merchandise.

(Source: P.A. 88-644, eff. 9-9-94.)

(815 ILCS 655/4) (from Ch. 121 1/2, par. 1804)

Sec. 4. Enforcement. (a) A consumer damaged by a violation of this Act by a merchant is entitled to recover from the merchant:

(1) actual damages;

(2) 25% of an amount equal to the total amount of payments required to obtain ownership of the merchandise involved, except that the amount recovered under this item (2) may not be less than $250 nor more than $1,000; and

(3) reasonable attorney's fees and court costs.

(b) A merchant is not liable under this Section for a violation of this Act caused by the merchant's error if before the 31st day after the date the merchant discovers the error, and before an action under this Section is filed or written notice of the error is received by the merchant from the consumer, the merchant gives the consumer written notice of the error and makes adjustments in the consumer's account as necessary to assure that the consumer will not be required to pay an amount in excess of the amount disclosed and that the agreement otherwise complies with this Act.

(c) Nothing in this Act shall be construed to nullify or impair any right or rights which a consumer may have against a merchant at common law, by statute, or otherwise.

(d) A merchant or assignee may not be held liable in an action brought under this Act for a violation of this Act that was unintentional and resulted from a bona fide or clerical error notwithstanding the maintenance of procedures reasonably adopted to avoid any such error.

(e) An action shall not be brought under this Section more than 4 years after the occurrence of the act, method, or practice which is the subject of the action or more than one year after the last payment in a transaction involving the method, act, or practice which is the subject of the action, whichever is later.

(Source: P.A. 85-957.)

(815 ILCS 655/4.1 new)

Sec. 4.1. Enforcement by Attorney General. All remedies, penalties, and authority granted to the Attorney General by the Consumer Fraud and Deceptive Business Practices Act shall be available to the Attorney General for the enforcement of this Act. A violation of this Act shall constitute an unlawful practice as provided in the Consumer Fraud and Deceptive Business Practices Act.

(815 ILCS 655/5) (from Ch. 121 1/2, par. 1805)

Sec. 5. Penalty. Any person intentionally violating this Act shall be guilty of a petty offense and fined not more than $500, in addition to any other penalty imposed by this Act.

(Source: P.A. 85-957.)

Section 10. The Consumer Fraud and Deceptive Business Practices Act is amended by changing Section 2Z as follows:

(815 ILCS 505/2Z) (from Ch. 121 1/2, par. 262Z)

Sec. 2Z. Violations of other Acts. Any person who knowingly violates the Automotive Repair Act, the Automotive Collision Repair Act, the Home Repair and Remodeling Act, the Dance Studio Act, the Physical Fitness Services Act, the Hearing Instrument Consumer Protection Act, the Illinois Union Label Act, the Job Referral and Job Listing Services Consumer Protection Act, the Travel Promotion Consumer Protection Act, the Credit Services Organizations Act, the Automatic Telephone Dialers Act, the Pay-Per-Call Services Consumer Protection Act, the Telephone Solicitations Act, the Illinois Funeral or Burial Funds Act, the Cemetery Oversight Act, the Cemetery Care Act, the Safe and Hygienic Bed Act, the Pre-Need Cemetery Sales Act, the High Risk Home Loan Act, the Payday Loan Reform Act, the Mortgage Rescue Fraud Act, subsection (a) or (b) of Section 3-10 of the Cigarette Tax Act, subsection (a) or (b) of Section 3-10 of the Cigarette Use Tax Act, the Electronic Mail Act, the Internet Caller Identification Act, paragraph (6) of subsection (k) of Section 6-305 of the Illinois Vehicle Code, Section 11-1431, 18d-115, 18d-120, 18d-125, 18d-135, 18d-150, or 18d-153 of the Illinois Vehicle Code, Article 3 of the Residential Real Property Disclosure Act, the Automatic Contract Renewal Act, the Rental-Purchase Agreement Act, or the Personal Information Protection Act commits an unlawful practice within the meaning of this Act.

(Source: P.A. 95-413, eff. 1-1-08; 95-562, eff. 7-1-08; 95-876, eff. 8-21-08; 96-863, eff. 1-19-10; 96-1369, eff. 1-1-11; 96-1376, eff. 7-29-10; revised 9-2-10.)