Minnesota Session Laws - 1990, Regular Session

  

                         Laws of Minnesota 1990 

                        CHAPTER 527-S.F.No. 1499 
           An act relating to consumer protection; regulating 
          certain rental-purchase agreements; prescribing the 
          rights and duties of all parties; requiring 
          disclosures; regulating advertising; providing 
          remedies; proposing coding for new law in Minnesota 
          Statutes, chapter 325F. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:  
    Section 1.  [325F.84] [DEFINITIONS.] 
    Subdivision 1.  [APPLICABILITY.] As used in sections 1 to 
14, the following terms have the meanings given them.  
    Subd. 2.  [ADVERTISEMENT.] "Advertisement" means a 
commercial message in any medium, including signs, window 
displays, and price tags, that promotes, directly or indirectly, 
a rental-purchase agreement. 
    Subd. 3.  [CASH PRICE.] "Cash price" means an amount equal 
to the equivalent fair market value for goods offered under a 
consumer credit sale as provided under section 325G.15. 
    Subd. 4.  [CONSUMMATION.] "Consummation" means the time at 
which the lessee enters into a rental-purchase agreement. 
    Subd. 5.  [LESSEE.] "Lessee" means a natural person who 
rents personal property under a rental-purchase agreement for 
personal, family, or household use. 
    Subd. 6.  [LESSOR.] "Lessor" means a person who, in the 
ordinary course of business, regularly leases, offers to lease, 
or arranges for the leasing of property under a rental-purchase 
agreement. 
    Subd. 7.  [PERSONAL PROPERTY.] "Personal property" means 
property that is not real property under the laws of this state 
when it is made available for a rental-purchase agreement. 
    Subd. 8.  [RENTAL-PURCHASE AGREEMENT.] "Rental-purchase 
agreement" means an agreement for the use of personal property 
in which all of the following apply: 
    (1) the lessor is regularly engaged in the rental-purchase 
business; 
    (2) the agreement is for an initial period of four months 
or less, whether or not there is any obligation beyond the 
initial period, that is automatically renewable with each 
payment and that permits the lessee to become the owner of the 
property; 
    (3) the lessee is a person other than an organization; and 
    (4) the lessee takes under the rental-purchase agreement 
primarily for a personal, family, or household purpose. 
    Sec. 2.  [325F.85] [APPLICATION OF OTHER LAW.] 
    If the consumer protection provisions of sections 1 to 14 
conflict with sections 325G.15 and 325G.16, sections 1 to 14 
apply to a rental-purchase agreement and supersede sections 
325G.15 and 325G.16. 
    Sec. 3.  [325F.86] [DISCLOSURES.] 
    In a rental-purchase agreement, the lessor shall disclose 
the following items, as applicable: 
    (a) The total of payments necessary to acquire ownership of 
the property accompanied by an explanation that this term means 
the "total dollar amount of payments you will have to make to 
acquire ownership." 
    (b) The total number, amounts, and timing of all payments 
and other charges including taxes or official fees paid to or 
through the lessor that are necessary to acquire ownership of 
the property. 
    (c) The difference between the amount disclosed under 
paragraph (a) and the cash price of the leased property, using 
the term "cost of lease services" to mean the difference between 
these amounts. 
    (d) Any initial or advance payment such as a delivery 
charge or trade-in allowance. 
    (e) A statement that the lessee will not own the property 
until the lessee has made the total of payments necessary to 
acquire ownership of the property. 
    (f) A statement that the total of payments does not include 
additional charges such as late payment charges, and a separate 
listing and explanation of these charges as applicable. 
    (g) A statement that the lessee is liable for loss or 
damage to the property and the maximum amount for which the 
lessee is liable, which in the case of loss shall in no event be 
greater than the price the lessee would have paid to exercise an 
early purchase option.  In the case of damage to the property 
other than normal wear and tear, the lessee shall be liable for 
the lesser of the price the lessee would have paid to exercise 
an early purchase option or the cost of repair as reasonably 
determined by the lessor. 
    (h) A statement that the lessee is not required to purchase 
a liability damage waiver from the lessor. 
    (i) A description of the goods or merchandise including 
model numbers as applicable and a statement indicating whether 
the property is new or used.  It is not a violation of this 
subdivision to indicate that the property is used if it is 
actually new. 
    (j) A statement that the lessee has the option to purchase 
the leased property during the terms of the rental-purchase 
agreement and at what price, formula, or by what method the 
price is to be determined. 
    (k) The cash price of the merchandise. 
    (l) A statement of the following lessee rights:  
reinstatement rights under section 7, default notice under 
section 6, and consumer warranties under sections 325G.17 to 
325G.20. 
    The commissioner of commerce may prescribe the disclosure 
form by rule. 
    Sec. 4.  [325F.87] [FORM REQUIREMENTS.] 
    Subdivision 1.  [GENERALLY.] The disclosure information 
required by section 3 must be disclosed in a rental-purchase 
agreement, and must: 
    (1) be made clearly and conspicuously with items appearing 
in logical order and segregated as appropriate for readability 
and clarity; 
    (2) be made in writing; 
    (3) need not be contained in a single writing or made in 
the order set forth in section 3; and 
    (4) may be supplemented by additional information or 
explanations supplied by the lessor, but none shall be stated, 
used, or placed so as to mislead or confuse the lessee, or to 
contradict, obscure, or detract attention from the information 
required by section 3, and so long as the additional information 
or explanations do not have the effect of circumventing, 
evading, or unduly complicating the information required to be 
disclosed by section 3. 
    Subd. 2.  [TIMING.] The lessor shall disclose all 
information required by section 3 before the rental-purchase 
agreement is executed.  These disclosures must be made on the 
face of the writing evidencing the rental-purchase agreement. 
    Subd. 3.  [COPY TO LESSEE.] Before any payment is due, the 
lessor shall furnish the lessee with an exact copy of each 
rental-purchase agreement.  The agreement shall be signed by the 
lessee and is evidence of the lessee's agreement.  If there is 
more than one lessee in a rental-purchase agreement, delivery of 
a copy of the rental-purchase agreement to one of the lessees 
constitutes compliance with this subdivision; however, a lessee 
not signing the agreement is not liable under it. 
    Subd. 4.  [TYPE SIZE.] The terms of the rental-purchase 
agreement, except as otherwise provided in this section, must be 
set forth in not less than eight-point standard type. 
    Subd. 5.  [BLANK SPACES.] All blank spaces on the 
rental-purchase agreement form must be filled in before the 
rental-purchase agreement is executed.  Blank spaces that are 
provided for items or terms not applicable to the agreement must 
be crossed out. 
    Sec. 5.  [325F.88] [ADVERTISING.] 
    Subdivision 1.  [PROHIBITION.] An advertisement for a 
rental-purchase agreement shall not state or imply that a 
specific item is available at specific amounts or terms unless 
the lessor usually and customarily offers or will offer that 
item at those amounts or terms. 
    Subd. 2.  [DISCLOSURES.] (a) If an advertisement for a 
rental-purchase agreement refers to or states the amount of any 
payment, or the right to acquire ownership, for a specific item, 
the advertisement must also clearly and conspicuously state the 
following terms as applicable: 
    (1) that the transaction advertised is a rental-purchase 
agreement; 
    (2) the total of payments necessary to acquire ownership; 
and 
    (3) that the lessee will not own the property until the 
total amount necessary to acquire ownership is paid in full or 
by prepayment as provided for by law. 
     (b) Every item displayed or offered under a rental-purchase 
agreement shall have clearly and conspicuously indicated in 
Arabic numerals, so as to be readable and understandable by 
visual inspection, each of the following affixed to the item: 
    (1) the cash price of the item; and 
    (2) the amount of the lease payment and the total of lease 
payments required for ownership. 
    Subd. 3.  [NONAPPLICATION.] This section does not apply to 
the owner or personnel, as such, of any medium in which an 
advertisement appears or through which it is disseminated. 
    Sec. 6.  [325F.89] [DEFAULT.] 
    Subdivision 1.  [ENFORCEABILITY.] An agreement of the 
parties to a rental-purchase agreement with respect to default 
is enforceable only to the extent that one of the following 
apply: 
    (1) the lessee both fails to renew an agreement and also 
fails to return the property or make arrangements for its return 
as provided in the agreement; or 
    (2) the prospect of payment, performance, or return of the 
property is materially impaired due to a breach of the 
rental-purchase agreement, with the burden of establishing the 
prospect of material impairment on the lessor. 
    Subd. 2.  [AUTHORIZATION.] If a lessee has been in default 
for three business days, the lessor may give the lessee a 
default notice and request surrender of the property as provided 
under subdivision 3.  Mailing written notice to the last known 
address of the lessee meets the requirement of giving written 
notice under subdivision 3. 
    Subd. 3.  [DEFAULT NOTICE.] The first default notice and a 
subsequent default notice that is sent more than 12 months after 
sending the last written notice must be in writing and 
conspicuously state the following: 
    (1) the name, address, and telephone number of the lessor 
to whom payment is to be made; 
    (2) a brief identification of the transaction; 
    (3) the lessee's right to cure the default; 
    (4) the amount of payment and date by which payment must be 
made to cure the default; 
    (5) a statement of the lessee's reinstatement rights as 
provided under section 7; and 
    (6) a request to voluntarily surrender the property if the 
payment is not made. 
    A subsequent default notice given within the 12 months 
after a written default notice may be given orally and 
constitutes proper notice under this section. 
    Subd. 4.  [PROPERTY RECOVERY.] A lessor may not bring a 
court action to recover the property until seven days after a 
proper default notice has been given. 
    Subd. 5.  [VOLUNTARY SURRENDER OF PROPERTY.] This section 
does not prohibit a lessee from voluntarily surrendering 
possession of the property or the lessor from enforcing a past 
due obligation which the lessee may have at any time after 
default. 
    Subd. 6.  [COMPLIANCE.] If the lessee cures the default by 
taking the action required in the default notice, a breach of 
the agreement is considered as not having occurred. 
    Sec. 7.  [325F.90] [LESSEE'S REINSTATEMENT RIGHTS.] 
    Subdivision 1.  [GENERALLY.] A lessee who fails to make 
timely lease payments may reinstate the original rental-purchase 
agreement without losing any rights or options previously 
acquired under the rental-purchase agreement if both of the 
following apply: 
    (1) after having failed to make a timely payment, the 
lessee has surrendered the property to the lessor within seven 
days of a request to surrender the property made by the lessor 
as provided in section 6; and 
    (2) in the case of a lessee that has paid less than 60 
percent of the total of payments necessary to acquire ownership 
of the property, not more than 60 days have passed since the 
lessee returned the property.  If the lessee has paid more than 
60 percent of the total of payments necessary to acquire 
ownership of the property, the lessee's rights to reinstate 
shall be extended for a period of not less than 180 days after 
the lessee has returned the property. 
    Subd. 2.  [CHARGES.] As a condition to reinstating a 
rental-purchase agreement, a lessor may charge the outstanding 
balance of any accrued payments; a reinstatement fee not to 
exceed $5 for each reinstatement; and a delivery charge not to 
exceed $15 for five items or less or $30 for more than five 
items, if redelivery of the item is necessary. 
    Subd. 3.  [SUBSTITUTE ITEMS.] If reinstatement occurs as 
provided in this section, the lessor shall provide the lessee 
with the same item, if available, leased by the lessee before 
reinstatement.  If the same item is not available, a substitute 
item of comparable worth, quality, and condition may be used.  
If a substitute item is provided, the lessor shall provide the 
lessee with all the information required by section 3. 
    Sec. 8.  [325F.91] [PROHIBITED PRACTICES.] 
    Subdivision 1.  [PROHIBITED RENTAL AGREEMENT PROVISIONS.] A 
rental-purchase agreement may not contain a provision: 
    (1) requiring a confession of judgment; 
    (2) authorizing a lessor or an agent of the lessor to 
commit a breach of the peace in the repossession of property; 
    (3) waiving a defense, counterclaim, or right the lessee 
may have against the lessor or an agent of the lessor; 
    (4) requiring the payment of a late charge unless a lease 
payment is delinquent for more than two business days for a 
weekly lease or three business days for a monthly lease, and the 
charge or fee shall not be in an amount more than the greater of 
five percent of the delinquent lease payment or $3; 
    (5) requiring a separate payment in addition to lease 
payments in order to acquire ownership of the property, other 
than by exercising an early purchase option pursuant to section 
10; and 
    (6) authorizing a lessor to charge a penalty for early 
termination of a rental-purchase agreement. 
    Subd.  2.  [CASH PRICE LIMITS RULES.] The commissioner of 
commerce shall adopt rules governing cash price limits for 
rental-purchase agreements.  Notwithstanding section 14.18, the 
rules are effective 45 working days after the notice of adoption 
is published in the State Register. 
    Subd.  3.  [DELIVERY CHARGES; SECURITY DEPOSITS; COLLECTION 
FEES.] A lessor may not charge a delivery charge that is greater 
than $15 for five items or less or $30 for more than five 
items.  A lessor may not charge a security deposit.  A lessor 
may contract for and receive a charge for picking up payments 
from the lessee if the lessor is required or requested to visit 
the lessee's dwelling to pick up a payment.  In a consumer 
rental-purchase agreement with payment or renewal dates which 
are more frequent than monthly, this charge shall not be 
assessed more than three times in any three-month period.  In 
consumer rental-purchase agreements with payments or renewal 
options which are at least monthly, this charge shall not be 
assessed more than three times in any six-month period.  A 
charge assessed pursuant to this subdivision shall not exceed 
$7.  This charge is in lieu of a late charge assessed for the 
applicable payment period. 
    Sec. 9.  [325F.92] [LESSOR'S COMMUNICATIONS CONCERNING 
LESSEE.] 
    Subdivision 1.  [LOCATION INFORMATION.] A lessor in 
communication with any person other than the lessee for the 
purpose of acquiring information as to the location of a lessee 
shall: 
    (1) identify the lessor and state that the lessor is 
confirming or correcting location information concerning the 
lessee; 
    (2) not communicate with any person more than once unless 
requested to do so by the person or unless the lessor reasonably 
believes that the earlier response is erroneous or incomplete 
and that the person now had correct or complete location 
information; 
    (3) not communicate by postcard; 
    (4) not use any language or symbol on any envelope or in 
the contents of any communication that indicates that the 
communication relates to the recovery or repossession of 
property; and 
    (5) not communicate with any person other than the lessee's 
attorney, after the lessor knows the lessee is represented by an 
attorney with regard to the rental-purchase agreement and has 
knowledge of, or can readily ascertain, the attorney's name and 
address, unless the attorney fails to respond within a 
reasonable period of time to communication from the lessor or 
unless the attorney consents to direct communication with the 
lessee. 
    Subd. 2.  [TIME AND PLACE.] Without the prior consent of 
the lessee given directly to the lessor or the express 
permission of a court of competent jurisdiction, a lessor may 
not communicate with a lessee in connection with the recovery or 
repossession of property: 
    (1) at the lessee's place of employment; or 
    (2) at any unusual time or place or a time or place known 
or which should be known to be inconvenient to the lessee.  In 
the absence of knowledge of circumstances to the contrary, a 
lessor shall assume that the convenient time for communicating 
with a lessee is after 8:00 a.m. and before 9:00 p.m., local 
time at the lessee's location. 
    Subd. 3.  [AUTHORIZED COMMUNICATIONS.] A lessor may not 
communicate, in connection with the rental-purchase agreement, 
with any person other than the lessee, the lessee's attorney, or 
the lessor's attorney, except as reasonably necessary to acquire 
location information concerning the lessee as provided under 
subdivision 1, or upon prior consent of the lessee given 
directly to the lessor, or upon express permission of a court of 
competent jurisdiction, or as reasonably necessary to effectuate 
a post-judgment judicial remedy. 
    Subd. 4.  [CEASING COMMUNICATION.] If a lessee notifies the 
lessor in writing that the lessee wishes the lessor to cease 
further communication with the lessee, the lessor shall not 
communicate further with the lessee with respect to the 
rental-purchase agreement, except: 
    (1) to advise the lessee that the lessor's further efforts 
are being terminated; 
    (2) to notify the lessee that the lessor may invoke 
specified remedies allowable by law which are ordinarily invoked 
by the lessor; or 
    (3) where necessary to effectuate any post-judgment remedy. 
    Subd. 5.  [HARASSMENT OR ABUSE.] A lessor may not harass, 
oppress, or abuse any person in connection with a 
rental-purchase agreement.  The following conduct is a violation 
of this subdivision: 
    (1) the use or threat of use of violence or the criminal 
means to harm the physical person, reputation, or property of 
any person; 
    (2) the use of obscene, profane, or abusive language; 
    (3) causing a telephone to ring, or engaging any person in 
telephone conversation repeatedly or continuously with intent to 
annoy, abuse, or harass any person; and 
    (4) the placement of telephone calls without disclosure of 
the caller's identity. 
    Sec. 10.  [325F.93] [EARLY PURCHASE OPTION.] 
     At any time after the first periodic payment is made, the 
lessee may acquire ownership of the property by tendering 55 
percent of the difference between the total of scheduled 
payments and the total amount paid on the account. 
    Sec. 11.  [325F.94] [CLAIMS AND DEFENSES.] 
    An assignee of the contract or obligation relating to the 
rental-purchase lease transaction is subject to all claims and 
defenses of the lessee against the lessor arising from the 
rental-purchase lease transaction, notwithstanding any agreement 
to the contrary. 
    Sec. 12.  [325F.95] [LIABILITY; LIABILITY DAMAGE WAIVER.] 
    Subdivision 1.  [LIABILITY OF LESSEE.] The lessee is liable 
for loss, destruction, or damage of the rental property during 
the term of the rental agreement.  The amount for which the 
lessee may be held liable in the case of loss or destruction of 
the property may not exceed the price that the lessee would have 
paid to exercise an early purchase option.  In the case of 
damage to the property other than normal wear and tear, the 
lessee is liable for the price that the lessee would have paid 
to exercise an early purchase option or the cost of repair as 
reasonably determined by the lessor, whichever is less. 
    Subd. 2.  [LIABILITY DAMAGE WAIVER.] (a) The lessor must 
offer a liability damage waiver to the lessee to cover the 
lessee's liability for any loss, destruction, or damage of the 
rental property.  The cost of the liability damage waiver may 
not exceed ten percent of the lessee's lease payment. 
    (b) The lessor must inform the lessee of the following 
options available to the lessee regarding the property subject 
to a rental-purchase agreement: 
    (1) furnish insurance coverage on the property through an 
existing insurance policy that is owned by the lessee; 
    (2) purchase insurance coverage on the property through any 
insurer authorized to transact business in this state; 
    (3) purchase liability damage waiver coverage from the 
lessor; or 
    (4) decline to furnish or purchase insurance coverage or 
liability damage waiver coverage. 
    Sec. 13.  [325F.96] [EXEMPTED TRANSACTION.] 
    Sections 1 to 14 do not apply to agreements for the rental 
of property in which the person who rents the property has no 
legal right to become the owner of the rented property at the 
end of the rental period. 
    Sec. 14.  [325F.97] [PENALTIES AND REMEDIES.] 
    Subdivision 1.  [DISCLOSURE PENALTIES AND REMEDIES.] A 
lessor who is found to have violated sections 3 to 5 is subject 
to the penalties and remedies provided in section 8.31. 
    Subd. 2.  [APPLICATION OF OTHER LAW.] A violation of 
section 7, 8, or 10 shall be treated as a violation of section 
325F.69.  The remedies provided by section 7, 8, or 10 are 
cumulative and shall not be construed as restricting any remedy 
that is otherwise available. 
    Subd. 3.  [OFFSETS LIMITED.] A lessee may not take any 
action to offset any amount for which a lessor is potentially 
liable under this section against any amount owed by the lessee, 
unless the amount of the liability of the lessor has been 
determined by a judgment of a court of competent jurisdiction in 
an action in which the lessor was a party.  This section does 
not bar a lessee in default on an obligation arising from the 
rental-purchase agreement from asserting a violation of this 
chapter in an original action, or as defense or counterclaim to 
an action brought by the lessor to collect amounts owed by the 
lessee pursuant to the rental-purchase agreement. 
    Subd. 4.  [LESSOR'S RIGHT TO CORRECT ERROR.] A lessor is 
not liable under this section for a violation of sections 1 to 
13 if, within 60 days after discovering an error and before an 
action for damages is filed against the lessor pursuant to this 
section or written notice of the error is received from the 
lessee, the lessor notifies the lessee of the error and makes 
adjustments to the account of the lessee that are necessary to 
assure that the lessee is not required to pay an amount in 
excess of the amounts actually disclosed.  This subdivision 
applies whether the error was discovered through the lessor's 
own procedures or by any other means. 
    Subd. 5.  [LIMITATION OF LIABILITY.] A lessor is not liable 
under this section for damages in excess of the actual damage 
sustained by the lessee if the lessor shows by a preponderance 
of the evidence that the violation of sections 1 to 13 resulted 
from a bona fide error notwithstanding the maintenance by the 
lessor of procedures reasonably adopted to avoid the error.  As 
used in this subdivision, "bona fide error" includes, but is not 
limited to:  clerical, calculation, computer malfunction and 
programming, and printing errors.  
    Sec. 15.  [325F.98] [LEGISLATIVE RECOMMENDATIONS.] 
    The commissioner of commerce shall review and may make 
recommendations concerning the cost of liability damage waivers 
required under section 12, subdivision 2, to the legislature. 
    Presented to the governor April 24, 1990 
    Signed by the governor April 26, 1990, 10:02 p.m.