Makes various provisions relating to rent-to-own sales practices and disclosure requirements for rental-purchase agreements

"Cash Price" means the bona fide retail price at which a merchant, in the ordinary cost of business, would offer to sell the merchandise to the consumer for cash on the date of the rental-purchase agreement. Such price shall be representative of merchandise offered within the market area and shall be competitive and comparable in price to similar merchandise for retail in such area.

"Effective Annual Percentage Rate" means the annual percentage rate of the merchandise subject to a rental-purchase agreement, calculated in the same manner as an annual percentage rate under section 107 of the Federal Truth in Lending Act except that (a) in the place of a finance charge, there shall be substituted the difference between total payments to acquire ownership and the cash price, less any amounts specifically excluded from the finance charge under the truth in lending act; (b) in the place of the amount financed, there shall be substituted the cash price less any down payment; and (c) it shall be assumed that the consumer shall pay the total of payments to acquire ownership in the merchandise.

Section Two amends subdivisions 5 and 7 of section 501 of the personal property law and adds a new subdivision 2-a to read as follows:

"A Rental Purchase Agreement" shall set forth the items required to be disclosed by (a) the Federal Truth in Lending Act and the regulations thereunder, as such act and regulations may from time to time be amended, (b) the Federal Equal Credit Opportunity Act as such statute may from time to time be amended, (c) the Federal Fair Debt and Collection Practices Act as such statute may from time to time be amended and (d) the Fair Credit Reporting Act as such statute from time to time be amended.

A consumer shall have the right to terminate the rental-purchase agreement at any time during the contract period and the termination fee for such shall not exceed five percent of the contract price.

In addition to what must be disclosed in a rent-to-own contract, already in law, the bill further requires that a contract must include the amount of periodic payment and the total number of periodic payments required for ownership under the terms of the agreement, an itemization of services offered under the rental-purchase agreement and the price for each service and the effective annual percentage rate associated with the merchandise under the rental-purchase agreement (which may be accompanied by a statement that this rate applies only if the consumer acquires ownership by making all payments.)

Section Three of the bill amends subdivisions 2 and 3 of section 505 of the personal property law that in addition to other disclosures, already required in law, for rental purchase agreements to disclose the effective annual percentage rate associated with the merchandise under the rental-purchase agreement (which may be accompanied by a statement that this rate applies only if the consumer acquires ownership by making all payments), include the amount of the periodic payment and the total number of periodic payments required for ownership under the terms of the agreement and an itemization of services offered under the rental purchase agreement and the price for each service.

Section Four of the bill amends Section 503 of the Personal Property Law to state that notwithstanding any general or special statutes, local laws or ordinances to the contrary, any late charge or fee assessed by a merchant pursuant to this article shall be treated and collected as interest assessed. No merchant shall assess any late charge or fee as a leasing charge. Any merchant assessing interest charges at a rate exceeding twenty-five per centum annum shall be punishable under criminal usury in the first degree or criminal usury in the second degree as defined in section 190.42 or 190.40 of the penal law, respectively.

Existing law

While New York's personal property law outlines specific consumer protections for rent-to-own contracts, the provisions do not go far enough. Rent-to-own businesses are able to charge sky-rocketing fees -- far beyond New York's usury statutes.

Justification

Consumers who decide to enter a rent-to-own purchase contract deserve full disclosure. Many times a consumer, by the end of their rent-to-own contract, has paid several times over the worth of the merchandise they have rented. Often, rent-to-own businesses overprice the cost of the merchandise to begin with. Terminating a rent-to-own contract is costly to the consumer, with many hidden termination fees. Finally, many rent-to-own businesses charge "fees" rather than "interest" to circumvent New York's usury laws.

Consumers deserve protections and full disclosure on what entering a rent-to-own contract will mean for them. Several states, including Vermont have these strong consumer protections already in place.

Legislative history

2006: S.8498 Died in Senate Rules Committee 2007-2008: S.2319 Died in Senate Judiciary Committee

Fiscal implications

Minimal.

Local fiscal implications

Minimal.

Effective date

This act shall take effect on the one hundred eightieth day after it shall have become a law.