Consumer Leases Act Summary

The Uniform Consumer Leases Act (UCLA) was promulgated in 2001 by the National Conference of Commissioners on Uniform State Laws (NCCUSL) to provide substantive contractual and procedural protections to consumer lessees of personal property. The UCLA bridges the gap between federal law (the Consumer Leases Act, and associated Regulation M of the Federal Reserve Board), which primarily addresses fair disclosure of lease terms, and Article 2A of the Uniform Commercial Code, which provides the basic contract rules for personal property leasing in every state except Louisiana. In short, the UCLA seeks to define a fair balance of interests between lessors and consumer lessees, and in so doing establishes reasoned, substantive law covering leasing agreements.

Unlike many uniform laws promulgated by NCCUSL, the UCLA is not a "default" statute. The protections it offers to consumers may not be waived by agreement. The parties to a consumer lease under the Act are free to define almost all of the financial terms of the agreement. The Act’s provisions may be supplemented by other state and federal law. Otherwise, the procedural and other consumer protections it contains may only be waived in the narrow context of settling a dispute or collection claim.

The UCLA does not cover all leases of personal property. It does not apply to a lease with a term of less than four months, or a total value that exceeds $150,000. Also, while parties may contractually agree to make otherwise non-qualifying transactions subject to the Act, only leases of property for the personal, family, or household uses of the lessee are expressly covered. Thus, the Act does not apply to commercial leases, nor does it apply to short-term rental car or tool rental agreements, or to rent-to-own arrangements.

The Act is organized as follows:

Article 1 of the UCLA states the scope of coverage of the Act, establishes standards of good faith and unconscionability, reasonably limits choice of law and forum to convenient jurisdictions for the lessee, and restricts waivers of lessee rights under the Act.

Article 2 addresses informational responsibilities of lessors. It prohibits deceptive advertising about leases. It adopts the federal Consumer Leasing Act disclosure rules for all leases covered by the Act, entitles lease customers to a copy of the lease form before entering a contract, specifies certain informational content for the lease itself, and requires lessors to furnish statements of account and payoff information on request.

Article 3 imposes restraints on certain terms and practices to assure that consumers are not subjected to unfairness in the marketing or content of lease transactions. Specifically, the Act provides that a lessor must promptly return a trade-in and refund payments received if the lessee's application is disapproved. Absent such a rule, consumers are vulnerable to manipulation, especially in "spot delivery" situations. Certain onerous types of lease terms, such as confessions of judgment and wage assignments, are prohibited. The Act bars a lessor from taking a broad security interest in the lessee's property in addition to its residual interest in the leased goods themselves. Late, delinquency, and default charges are restricted, and consumers are afforded a reciprocal right to attorney's fees if the lease provides them for the lessor. The Act incorporates standard protections now available to consumers purchasing on credit by denying "holder in due course" status to anyone to whom the lessor assigns lease rights. This means a lessee's transactional claims and defenses may also be raised against that assignee of the lessor’s rights. The UCLA constrains a lessor's ability to overcharge in connection with force-placed insurance coverage, and prohibits "referral" gimmicks in lease marketing. Finally, the UCLA extends lessee warranty protection to include implied warranties whenever the supplier of the leased goods makes a written warranty or provides a service contract, as is the case with regard to consumer buyers under the federal Magnuson Moss Warranty Act.

Article 4 deals with issues at the termination stage. It prohibits the imposition of so-called "gap liability" on consumer lessees when the leased goods are lost or destroyed. It establishes a right of the lessee to "cure" delinquent payments (within a set period of at least 30 days) before repossession can occur. Controls are placed on the manner of establishing the realized value of leased goods as a premise for fixing the lessee's termination liability. Protective standards are imposed on the practice of assessing early termination charges and excess wear-and-tear charges against lessees, and consumers are protected from adverse credit reports when there is a voluntary early termination of the lease.

Article 5 creates an enforcement structure for the Act, both by designated public officials, and also by consumers themselves. As incentives for private enforcement, lessees may recover statutory damages for certain violations, and court costs and attorneys fees for all violations. Class actions are authorized only for actual damages. Sections 502-505 provide various limitations on civil liability, patterned on those provided under the federal Consumer Leasing Act.

Uniform enactment of the UCLA would assure a level playing field for lessors, and respectable but not intrusive protections for consumer lessees of all forms of consumer goods whether transactions are conducted face-to-face or at a distance. The federal Consumer Leasing Act and its implementing Regulation M, as revised in 1996, mandate important disclosures in most consumer leases, but do not impose specific restraints on lease terms or practices. The UCLA encourages the nationwide development and innovation of consumer lease products and practices, subject to baseline protections for consumers in those transactions. The UCLA attempts to protect a fair balance between the need to provide consumer protections and the commercial realities of personal property lessors, and should be a valuable addition to state consumer protection law.