House Committee on Financial Institutions
Subcommittee on Financial Institutions and Consumer Credit
U.S. House of Representatives
2129 Rayburn House Office Building
Washington, DC 20515
 

Re: H.R. 1701 - Consumer Rental Purchase Agreement Act

Dear Subcommittee Members:

     The undersigned State Attorneys General write to urge the House Subcommittee on Financial Institutions and Consumer Credit to delete state-preemptive language from the current draft of H.R. 1701, the "Consumer Rental Purchase Agreement Act." H.R. 1701 sets federal standards for disclosures in what are commonly known as "rent-to-own" transactions, whereby consumers lease merchandise for a short, renewable term and, upon payment of a specified amount, may acquire ownership of the leased goods.

The bill proposes to add a new section 1018 to the Consumer Credit Protection Act that would preempt State laws that are inconsistent with any provision of the bill, to the extent of that inconsistency. Under section 1018, any State law that affords consumers the benefit of disclosures in rent-to-own agreements beyond those required by H.R. 1701 could be invalidated. In addition, section 1018 expressly preempts any State law that regulates a rent-to-own transaction as a credit sale or similar arrangement, or that requires the disclosure to consumers of an effective interest, annual percentage or similar rate.

Consumer protection, including in the area of consumer credit, has historically been an appropriate matter for State regulation, alone or in concert with federal authorities. Thus, a number of federal consumer statutes - including the statute of which H.R. 1701 would become a part - expressly exempt from preemption State laws that are more protective of consumers than related federal standards. See, e.g., Telephone Consumer Protection Act of 1991, 47 U.S.C. § 227(e)(1); Telephone Disclosure and Dispute Resolution Act, 15 U.S.C. § 5722(a); Truth in Lending Act, 15 U.S.C. § 1666j(a).

This same approach should be adopted in connection with H.R. 1701: to set a federal "floor" for rent-to-own disclosures, but not to bar the States from responding to local conditions and concerns through the enactment of more protective standards. In that way, the goal of protecting consumers can be advanced within a federalist framework.

Please feel free to contact any one of us directly, or NAAG Executive Director Lynne Ross at (202) 326-6061, if you have any comments or questions regarding our views on preemption under H.R. 1701.

     Thank you for your consideration.

1. Of the states listed, Hawaii is not represented by its Attorney General. Hawaii is represented by its Office of Consumer Protection, an agency which is not a part of the state Attorney General's Office, but which is statutorily authorized to represent the State of Hawaii in consumer protection actions. For the sake of simplicity, the entire group will be referred to as the "Attorneys General," and such designation as it pertains to Hawaii, refers to the Executive Director of the State of Hawaii Office of Consumer Protection.