Provides for greater protections to consumers in rental purchase agreements; repealer

Summary of specific provisions

This bill would make significant changes to the Rent to Own Program Law (Article 11 of the Personal Property Law), most notably by establishing well-defined price controls and requiring rent-to-own merchants to provide consumers with enhanced disclosures.

Under current law, the total amount a rent-to-own customer must pay in order to acquire ownership of the merchandise is limited to twice the "cash price" of the merchandise, which is defined as the price at which the merchant would sell the merchandise to the consumer for cash. This bill would implement a new price control scheme by:

* establishing a formula for determining the maximum cash price for new goods based on the merchant's actual cost of acquiring the merchandise;

* establishing a formula for determining the maximum amount a consumer must pay in order acquire ownership of the merchandise; and

* providing for the pricing of used merchandise based on a terming matrix that would allow merchants to consider the condition of the merchandise.

The bill would require rent-to-own merchants to provide consumers with enhanced disclosures. Specifically, the bill would require rent-to-own merchants to:

o include a "disclosure box" containing the total amount of payments, cost of rental, cash price, amount of each payment, number of payments and the rental period, along with a layman's explanation of the first three terms on every rental-purchase agreement. This disclosure box would also be required to be affixed to all merchandise;

o include a notice containing a layman's explanation of the rental-purchase transaction in each rental agreement;

o provide notice to consumers of the early purchase option, including the total amount necessary to acquire ownership or exercise the early purchase option on each payment receipt; and

o provide customers with a copy of the signed rental-purchase agreement.

In addition, the bill would:

o authorize the Attorney General to promulgate regulations necessary for the administration of the rent-to-own law;

o require rent-to-own merchants to offer customers extended reinstatement rights;

o require merchants to provide notice of the consumer's right to reinstate the agreement upon repossession of merchandise;

o require rent-to-own merchants to maintain rental merchandise in good working order and provide for repair and replacement of merchandise that is not operating properly; and

o require merchants to offer consumers that suffer an interruption or reduction of income the option of paying temporarily reduced rental payments in certain situations.

Justification

New York's "Rent to Own Program Law" (Article 11 of the Personal Property Law) was enacted in 1986 and has not been updated since that time. The law caps the total amount a consumer must pay in order to acquire ownership of the merchandise at twice the "cash price" of the merchandise, which is defined as the price at which the merchant would sell the merchandise to the consumer for cash. According to memoranda issued at the time of the law's enactment, several consumer groups, as well as Attorney General Robert Abrams, voiced concern that rent-to-own merchants could abuse their authority to set cash prices. According to recent reports and testimony received at the September 20, 2006 and October 5, 2006 Assembly public hearings on financial services for low-income consumers, rent-to-own merchants often sidestep the intent of the law by arbitrarily setting elevated cash prices.

This bill would significantly strengthen existing law by implementing several new and enhanced consumer disclosures. For example, rent-to-own merchants would be required to include a disclosure box containing important information for consumers, similar to the Schumer Box currently required to be included in credit card solicitations.

This legislation recognizes that rent-to-own merchants provide a unique transaction utilized by many consumers. This bill would ensure that consumers are aware of their rights and obligations prior to

entering into a rent-to-own agreement. The bill would also provide for reasonable price controls in order to ensure that consumers pay reasonable prices, while allowing the rent-to-own industry to continue to offer its unique product in New York state.

Prior legislative history

2007-2008: A.66-C - Advanced to Third Reading 2005-2006: A.230 - Referred to Consumer Affairs and Protection 2003-2004: A.3511 - Referred to Consumer Affairs and Protection 2001-2002: A4018 - Referred to Consumer Affairs and Protection

Fiscal implications for state and local governments

None to the State.

Effective date

This act shall take effect on the one hundred eightieth day after it shall have become a law and shall apply to all agreements entered into or offered on or after such date.