As used in this chapter, unless the context otherwise requires:
"Advertisement" means a commercial message in any medium that aids,
promotes, or assists, directly or indirectly, a lease- purchase agreement.
"Cash price" means the price at which retail sellers are selling and retail
buyers are buying the same or similar property for cash in the same trade area
in which the lessor's place of business is located. Cash price may be
evidenced by an amount no greater than twice the documented actual cost,
including freight charges and applicable taxes, of the lease-purchase property
from an unaffiliated wholesaler, distributor, or manufacturer. A lessor shall
maintain records that establish that the price disclosed as the cash price in
a lease-purchase agreement is the cash price as defined.
"Consummation" means the time a lessee becomes contractually obligated on a
"Lessee" means a natural person who rents personal property under a
"Lessor" means a person who regularly provides the use of property through
lease-purchase agreements and to whom lease payments are initially payable on
the face of the lease-purchase agreement. [L 1997, c 248, pt of §1]
Lease-purchase agreement defined.
A lease- purchase agreement is an agreement for the use of personal property by
a natural person primarily for personal, family, or household purposes, for an
initial period of four months or less that:
(1) Is automatically renewable with each payment after the initial
(2) Does not obligate or require the lessee to continue leasing or
using the property beyond the initial period; and
(3) Permits the lessee to become the owner of the property. [L 1997, c
248, pt of §1]
Agreements exempt from other laws.
(a) Lease- purchase agreements are not subject to:
(1) Chapter 476; and
(2) Article 2A or 9 of chapter 490.
(b) This chapter does not apply to the following:
(1) Lease-purchase agreements primarily for business, commercial, or
agricultural purposes, or those made with governmental agencies or
instrumentalities or with organizations;
(2) A lease of a safe deposit box;
(3) A lease or bailment of personal property which is incidental to the
lease of real property, and which provides that the lessee has no option
to purchase the leased property; or
(4) A lease of a motor vehicle. [L 1997, c 248, pt of §1]
Provisions prohibited in agreements.
A lease- purchase agreement may not contain:
(1) A confession of judgment;
(2) A negotiable instrument;
(3) A security interest or any other claim of a property interest in
any goods except those goods delivered by the lessor pursuant to the
(4) A wage assignment;
(5) A waiver by the consumer of claims or defenses; or
(6) A provision authorizing the lessor or a person acting on the
lessor's behalf to enter upon the consumer's premises or to commit any
breach of the peace in the repossession of goods. [L 1997, c 248, pt of
[§481M-5] Limit on total
(a) No lessor shall offer a lease-purchase agreement in which the total lease
payments necessary to acquire ownership exceed twice the cash price of the
(b) When fifty per cent of all rental payments made by a lessee equals the
cash price of the property disclosed to the lessee in the lease-purchase
agreement, the lessee shall own the rented property and the lease-purchase
agreement shall terminate. [L 1997, c 248, pt of §1]
[§481M-6] Early termination.
The lessee shall have the right to acquire ownership of the property at any time
after the initial payment by tendering to the lessor all past due payments and
fees and an amount equal to the cash price stated in the lease-purchase
agreement multiplied by a fraction that has as its numerator the number of
periodic payments remaining under the agreement and that has as its denominator
the total number of periodic payments. [L 1997, c 248, pt of §1]
[§481M-7] Additional charges.
(a) A lessor may contract for and receive an initial nonrefundable fee not to
exceed $10 per contract. If the lessor requires a security deposit, the amount
of the deposit and the conditions under which it will be returned shall be
disclosed pursuant to section 481M-13.
(b) A lessor may contract for and receive an initial delivery charge per
contract not to exceed $15 in the case of a lease-purchase agreement covering
five or fewer items if, in either case, the lessor actually delivers the items
to the lessee's dwelling and the delivery charge is disclosed pursuant to
section 481M-14. The delivery charge shall be assessed in lieu of and not in
addition to the initial charge in subsection (a). A lessor may not contract for
or receive a delivery charge on property redelivered after repair or
(c) A lessor may contract for and receive a charge for picking up late
payments from the lessee if the lessor is required to do so pursuant to the
rental purchase agreement or is requested to visit the lessee to pick up a
payment. In a lease- purchase agreement with payment or renewal dates which are
on a monthly basis, this charge may not be assessed more than three times in any
six-month period. In lease-purchase agreements with payments or renewal options
on a weekly or biweekly basis, this charge may not be assessed more than six
times in any six-month period. No charge assessed pursuant to this subsection
may exceed $10. A pickup fee may be assessed pursuant to this subsection only in
lieu of and not in addition to any late charge assessed pursuant to subsection
(d) The parties may contract for late charges as follows:
(1) For lease-purchase agreements with monthly renewal dates, a late
charge not exceeding $5 may be assessed on any payment not made within
five days after payment is due, or return of the property is required; or
(2) For lease-purchase agreements with weekly or biweekly renewal
dates, a late charge not exceeding $3 may be assessed on any payments not
made within three days after payment is due, or return of the property is
A late charge on lease-purchase agreements may be collected only once on any
accrued payment, no matter how long it remains unpaid. A late charge may be
collected at the time it accrues or at any time thereafter. A lessor may elect
to waive imposition of a late charge due on an accrued payment in accordance
with the terms of the lease-purchase agreement; except that, the waiver shall be
in writing and, once a late charge is waived for specific payment, the lessor
may not seek to impose a late fee for the accrued payment in question. No late
charge shall be assessed against a payment that is timely, even though an
earlier late charge has not been paid in full. [L 1997, c 248, pt of §1]
Assignee liability and notice of assignment.
(a) With respect to a lease-purchase agreement, an assignee of the rights of the
lessor is subject to all claims and defenses of the lessee against the lessor
arising from the lease of property or services, notwithstanding that the
assignee is the holder in due course of a negotiable instrument issued in
violation of the provisions prohibiting certain negotiable instruments.
(b) A claim or defense of a lessee specified in subsection (a) may be
asserted against the assignee under this section only to the extent of the
amount owing and paid to the assignee and assignor.
(c) An agreement may not limit or waive the claims or defenses of a lessee
under this section.
(d) The lessee is authorized to pay the original lessor until the lessee
receives written notification that the rights to payment pursuant to a
lease-purchase agreement have been assigned to an assignee and that payment is
to be made to the assignee. A notification that does not reasonably identify the
rights assigned shall be ineffective. If requested by the lessee, the assignee
shall furnish reasonable proof that the assignment has been made, and unless the
assignee does so, the lessee may pay the lessor. [L 1997, c 248, pt of §1]
Unfair or deceptive acts or practices.
Any person who violates this chapter shall be deemed to have engaged in an
unfair or deceptive act or practice within the meaning of section 480-2. [L
1997, c 248, pt of §1]
[§481M-10] Remedies of lessee.
(a) In case of a violation by a lessor of any provision of this chapter with
respect to any lease-purchase agreement, the lessee may bring a suit in any
court of competent jurisdiction to recover from the lessor or may set off or
counterclaim in any action by the lessor actual damages. If the court finds that
any violation has occurred, the court shall award a minimum recovery of $250 or
twenty-five per cent of the total cost to acquire ownership under the lease-
purchase agreement, whichever is greater.
(b) The remedies specified in subsection (a) shall be in addition to any
other remedies provided by law.
(c) In any action brought pursuant to this section, the court shall award the
prevailing party the costs of the action and reasonable attorney fees. [L 1997,
c 248, pt of §1]
(a) With respect to a lease-purchase transaction, if the court as a matter of
law finds the transaction, agreement, or any clause of the agreement to have
been unconscionable at the time it was made, the court may:
(1) Refuse to enforce the agreement;
(2) Enforce the remainder of the agreement without the unconscionable
(3) Limit the application of any unconscionable clause to avoid any
(b) If it is claimed or appears to the court that the transaction, agreement,
or clause may be unconscionable, the parties shall be afforded a reasonable
opportunity to present evidence as to its setting, purpose, and effect to aid
the court in making a determination related to unconscionability.
(c) If, in an action in which unconscionability is claimed, the court finds
unconscionability pursuant to this section, the court may award the costs of the
action and reasonable attorney fees to the lessee. If the court does not find
unconscionability and does find that the lessee claiming unconscionability
brought or maintained an action that the lessee knew to be groundless, the court
may award the costs of the action and reasonable attorney fees to the party
against whom the claim was made. In determining attorney fees, the amount of
recovery claimed on behalf of the lessee shall not be controlling.
(d) The remedies of this section shall be in addition to remedies otherwise
available for the same conduct authorized under law other than in this chapter,
but double recovery of actual damages shall be prohibited.
(e) For the purpose of this section, a charge or practice expressly permitted
by this chapter shall not be unconscionable. [L 1997, c 248, pt of §1]
A lessor shall not require a lessee to waive:
(1) Service of process;
(2) Any defense;
(3) Any counterclaim; or
(4) Right of action against the lessor or a person acting on the
lessor's behalf as the lessor's agent;
in collection of payments under the lease or in repossession of the lease
property. [L 1997, c 248, pt of §1]
[§481M-13] Disclosure of
The lessor shall disclose to the lessee the information required by this
chapter. In a transaction involving more than one lessor, only one lessor need
make the disclosures, but all lessors shall be bound by these disclosures. The
disclosures shall be made before consummation of the lease-purchase agreement.
The disclosures shall be made clearly and conspicuously in writing and a copy of
the lease-purchase agreement provided to the lessee in not less than ten-point
standard type. All disclosures required by this chapter shall be printed or
typed in a color or shade that clearly contrasts with the background. The
disclosures required under section 481M-14 shall be made on the face of the
contract above the line for the lessee's signature. Before any payment is due,
the lessor shall furnish the lessee with an exact copy of the lease-purchase
agreement, which shall be signed by the lessee and which shall evidence the
If a disclosure becomes inaccurate as the result of any act, occurrence, or
agreement by the lessee after delivery of the required disclosures, the
resulting inaccuracy shall not be a violation of this chapter. [L 1997, c 248,
pt of §1]
Information required in disclosure.
(a) For each lease-purchase agreement, the lessor shall disclose in the
agreement the following items, as applicable:
(1) The total number, total amount, and timing of all payments
necessary to acquire ownership of the property;
(2) A statement that the lessee shall not own the property until the
lessee has made the total payment necessary to acquire ownership;
(3) A statement that the lessee shall be responsible for the fair
market value of the property if, and as of the time, it is lost, stolen,
damaged, or destroyed;
(4) A brief description of the leased property, sufficient to identify
the property to the lessee and the lessor, including an identification
number, if applicable, and a statement indicating whether the property is
new or used, but a statement that indicates new property is used does not
violate this chapter;
(5) A brief description of any damages to the leased property;
(6) A statement of the cash price of the property. If the agreement
involves a lease of two or more items as a set, in one agreement, a
statement of the aggregate cash price of all items is sufficient;
(7) The total of initial payments paid or required at or before
consummation of the agreement or delivery of the property whichever is
(8) A statement that the total of payments shall not include other
charges, such as delivery, taxes, late payment, pickup, and reinstatement
fees, which fees shall be separately disclosed in the contract;
(9) A statement clearly summarizing the terms of the lessee's option to
purchase, including a statement that the lessee has the right to exercise
an early-purchase option and the price, formula, or method for determining
the price at which the property may be so purchased;
(10) A statement identifying the party responsible for maintaining or
servicing the property while it is being leased, together with a
description of that responsibility, and a statement that if any part of a
manufacturer's express warranty covers the leased property at the time the
lessee acquires ownership of the property, the warranty shall be
transferred to the lessee, if allowed by the terms of the warranty;
(11) The date of the transaction and the identities of the lessor and
(12) A statement that the lessee may terminate the agreement without
penalty by voluntarily surrendering or returning the property in good
repair, ordinary wear and tear excepted, upon expiration of any lease term
along with any past due rental payments; and
(13) Notice of the right to reinstate an agreement as provided in this
(b) In addition to the disclosures required pursuant to this section, the
lessor shall also make the following disclosure:
NOTICE TO LESSEE--READ BEFORE SIGNING
(1) DO NOT SIGN THIS BEFORE YOU READ THE ENTIRE AGREEMENT INCLUDING ANY
WRITING ON THE REVERSE SIDE, EVEN IF OTHERWISE ADVISED.
(2) DO NOT SIGN THIS IF IT CONTAINS ANY BLANK SPACES.
(3) YOU ARE ENTITLED TO AN EXACT COPY OF ANY AGREEMENT YOU SIGN.
(4) YOU HAVE THE RIGHT TO EXERCISE ANY EARLY BUY-OUT OPTION AS PROVIDED
IN THIS AGREEMENT. EXERCISE OF THIS OPTION MAY RESULT IN A REDUCTION OF
YOUR TOTAL COST TO ACQUIRE OWNERSHIP UNDER THIS AGREEMENT.
(5) IF YOU ELECT TO MAKE WEEKLY RATHER THAN MONTHLY PAYMENTS AND
EXERCISE YOUR PURCHASE OPTION, YOU MAY PAY MORE FOR THE LEASED PROPERTY.
(c) With respect to matters specifically governed by the Federal Consumer
Credit Protection Act (15 U.S.C. 1601 to 1674), compliance with that Act
satisfies the requirements of this section. [L 1997, c 248, pt of §1]
[§481M-15] Reinstatement of agreement and repossession.
(a) A lessee who breaches any lease-purchase agreement, including but not
limited to the failure to make timely rental payments, shall have the right to
reinstate the original lease- purchase agreement without losing any rights or
options previously acquired under the lease-purchase agreement if both of the
(1) Subsequent to having failed to make a timely rental payment, the
lessee has promptly surrendered the property to the lessor, in the manner
as set forth in the lease-purchase agreement, and if and when requested by
(2) Not more than thirty days have passed since the lessee returned the
lease property; except that if the lessee has made more than sixty per
cent of the total number of payments required under the lease-purchase
agreement to acquire ownership, the thirty-day period shall be extended to
a sixty-day period.
(b) As a condition precedent to reinstatement of the lease- purchase
agreement, a lessor may collect a reinstatement fee as set forth in subsection
(c) If reinstatement occurs pursuant to this section, the lessor shall
provide the lessee with either the same item leased by the lessee prior to
reinstatement or a substitute item of equivalent quality and condition. If a
substitute item is provided, the lessor shall provide the lessee with all the
information required by section 481M-14.
(d) A reinstatement fee as provided for in this section shall equal the
outstanding balance of any accrued missed payments and late charges plus an
additional fee not to exceed $5. [L 1997, c 248, pt of §1]
Written receipts for cash or money order.
A lessor shall provide the lessee a written receipt for each payment made by
cash or money order. [L 1997, c 248, pt of §1]
[§481M-17] Renegotiation for new agreement and extensions.
A renegotiation shall occur when an existing lease-purchase agreement is
satisfied and replaced by a new agreement undertaken by the same lessor and
lessee. A renegotiation shall be considered a new agreement requiring new
disclosures. However, the following events shall not be treated as
(1) The addition or return of property in a multiple-item agreement or
in the substitution of the lease property, if in either case the average
payment allocable to a payment period is not changed by more than
twenty-five per cent;
(2) A deferral or extension of one or more periodic payments, or
portions of a periodic payment;
(3) A reduction in charges in the lease or agreement; and
(4) A lease or agreement involved in a court proceeding.
No disclosures are required for any extension of a lease-purchase agreement.
[L 1997, c 248, pt of §1]
Advertisement of lease-purchase agreement.
If an advertisement for a lease-purchase agreement refers to or states the
dollar amount of any payment and the right to acquire ownership of any one
specific item, the advertisement shall also clearly and conspicuously state the
following items, as applicable:
(1) That the transaction advertised is a lease-purchase agreement;
(2) The total of payments necessary to acquire ownership; and
(3) That the lessee acquires no ownership rights if the total amount
necessary to acquire ownership is not paid.
Any owner or personnel of any medium in which an advertisement appears or
through which it is disseminated is not liable under this section.
This section shall not apply to an advertisement which does not refer to or
state the amount of any payment, or which is published in the yellow pages of a
telephone directory or in any similar directory of business. [L 1997, c 248, pt