1.1                          A bill for an act 
  1.2             relating to commerce; regulating rental-purchase 
  1.3             agreements; modifying the definitions of certain 
  1.4             terms; providing for the calculation of the cash price 
  1.5             of property; limiting charges for cost-of-lease 
  1.6             services; amending Minnesota Statutes 1998, sections 
  1.7             325F.84, subdivision 3, and by adding a subdivision; 
  1.8             325F.85; 325F.86; and 325F.91, by adding subdivisions. 
  1.9   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.10     Section 1.  Minnesota Statutes 1998, section 325F.84, 
  1.11  subdivision 3, is amended to read: 
  1.12     Subd. 3.  [CASH PRICE.] "Cash price" means an amount equal 
  1.13  to the equivalent fair market value for goods offered under a 
  1.14  consumer credit sale as provided under section 325G.15 the price 
  1.15  at which the merchant would have sold the property to the 
  1.16  consumer for cash on the date the rental-purchase agreement is 
  1.17  executed.  The cash price is subject to the limits established 
  1.18  in section 325F.91, subdivision 2a. 
  1.19     Sec. 2.  Minnesota Statutes 1998, section 325F.84, is 
  1.20  amended by adding a subdivision to read: 
  1.21     Subd. 4a.  [COST-OF-LEASE SERVICES.] "Cost-of-lease 
  1.22  services" means the total dollar amount of rental charges under 
  1.23  a rental-purchase agreement in addition to the cash price of the 
  1.24  goods.  Cost-of-lease services includes charges for delivery, 
  1.25  set up, pick up, servicing or warranty of the goods, early 
  1.26  purchase option, the right to terminate the transaction at any 
  1.27  time without penalty, the right to reinstate a terminated 
  2.1   rental-purchase agreement without losing rights or options 
  2.2   previously acquired, and the fee a lessor charges under a 
  2.3   rental-purchase agreement for the option to acquire ownership of 
  2.4   the goods over time by renewing the agreement in lieu of 
  2.5   acquiring ownership of the goods by cash price.  The term does 
  2.6   not include late fees, taxes, processing fees, application fees, 
  2.7   or other fees required by law. 
  2.8      Sec. 3.  Minnesota Statutes 1998, section 325F.85, is 
  2.9   amended to read: 
  2.10     325F.85 [APPLICATION OF OTHER LAW.] 
  2.11     If the consumer protection provisions of sections 325F.84 
  2.12  to 325F.97 conflict with sections 325G.15 and 325G.16, sections 
  2.13  325F.84 to 325F.97 apply to a rental-purchase agreement and 
  2.14  supersede sections 325G.15 and 325G.16 Sections 325G.15 and 
  2.15  325G.16 and chapter 334 do not apply to rental-purchase 
  2.16  agreements. 
  2.17     Sec. 4.  Minnesota Statutes 1998, section 325F.86, is 
  2.18  amended to read: 
  2.19     325F.86 [DISCLOSURES.] 
  2.20     In a rental-purchase agreement, the lessor shall disclose 
  2.21  the following items, as applicable: 
  2.22     (a) The total of rental payments necessary to acquire 
  2.23  ownership of the property accompanied by an explanation that 
  2.24  this term means the "total dollar amount of rental payments you 
  2.25  will have to make to acquire ownership." 
  2.26     (b) The total number, amounts, and timing of all payments 
  2.27  and other charges including taxes or official fees paid to or 
  2.28  through the lessor that are necessary to acquire ownership of 
  2.29  the property. 
  2.30     (c) The difference between the amount disclosed under 
  2.31  paragraph (a) and the cash price of the leased property, using 
  2.32  the term "cost of lease services" to mean the difference between 
  2.33  these amounts. 
  2.34     (d) Any initial or advance payment such as a delivery 
  2.35  charge or processing fee, application fee, or trade-in allowance.
  2.36     (e) A statement that the lessee will not own the property 
  3.1   until the lessee has made the total of payments necessary to 
  3.2   acquire ownership of the property. 
  3.3      (f) A statement that the total of rental payments does not 
  3.4   include additional charges such as processing fees, application 
  3.5   fees, late payment charges, taxes, or other fees required by 
  3.6   law, and a separate listing and explanation of these charges, as 
  3.7   applicable. 
  3.8      (g) A statement that the lessee is liable for loss or 
  3.9   damage to the property and the maximum amount for which the 
  3.10  lessee is liable, which in the case of loss shall in no event be 
  3.11  greater than the price the lessee would have paid to exercise an 
  3.12  early purchase option.  In the case of damage to the property 
  3.13  other than normal wear and tear, the lessee shall be liable for 
  3.14  the lesser of the price the lessee would have paid to exercise 
  3.15  an early purchase option or the cost of repair as reasonably 
  3.16  determined by the lessor. 
  3.17     (h) A statement that the lessee is not required to purchase 
  3.18  a liability damage waiver from the lessor. 
  3.19     (i) A description of the goods or merchandise including 
  3.20  model numbers as applicable and a statement indicating whether 
  3.21  the property is new or used.  It is not a violation of this 
  3.22  subdivision to indicate that the property is used if it is 
  3.23  actually new. 
  3.24     (j) A statement that the lessee has the option to purchase 
  3.25  the leased property during the terms of the rental-purchase 
  3.26  agreement and at what price, formula, or by what method the 
  3.27  price is to be determined. 
  3.28     (k) The cash price of the merchandise. 
  3.29     (l) A statement of the following lessee rights:  
  3.30  reinstatement rights under section 325F.90, default notice under 
  3.31  section 325F.89, and consumer warranties under sections 325G.17 
  3.32  to 325G.20. 
  3.33     (m) A statement in bold typeface of at least ten points as 
  3.34  follows:  "If you wish to purchase this or similar property now, 
  3.35  you may be able to get cash or credit terms from other sources 
  3.36  which will result in a lower total cost than the total of 
  4.1   payments shown below." 
  4.2      The commissioner of commerce may prescribe the disclosure 
  4.3   form by rule. 
  4.4      Sec. 5.  Minnesota Statutes 1998, section 325F.91, is 
  4.5   amended by adding a subdivision to read: 
  4.6      Subd. 2a.  [CASH PRICE CALCULATIONS.] The cash price of 
  4.7   property offered under a rental-purchase agreement must not 
  4.8   exceed the greater of: 
  4.9      (1) the manufacturers' list price or suggested retail 
  4.10  price; 
  4.11     (2) twice the documented actual cost of the property to the 
  4.12  merchant, including the cost of shipping to the merchant's place 
  4.13  of business and the cost of purchasing the property from a 
  4.14  wholesaler, distributor, or manufacturer, provided, however, 
  4.15  that the cost of shipping shall not exceed ten percent of the 
  4.16  cost of purchasing the property; or 
  4.17     (3) the published or advertised selling price of the same 
  4.18  property in the same trade area. 
  4.19     Sec. 6.  Minnesota Statutes 1998, section 325F.91, is 
  4.20  amended by adding a subdivision to read: 
  4.21     Subd. 4.  [COST-OF-LEASE SERVICES.] The total dollar amount 
  4.22  charged by the lessor for the cost-of-lease services under a 
  4.23  rental-purchase agreement must not exceed an amount equal to the 
  4.24  original cash price of the property. 
  4.25     Sec. 7.  [EFFECTIVE DATE.] 
  4.26     Sections 1 to 6 are effective the day following final 
  4.27  enactment and apply to agreements entered into on and after that 
  4.28  date.