Consumer Leasing Act (CLA)

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 What Is the Consumer Leasing Act?

The Consumer Leasing Act (CLA) amended the Truth in Lending Act. It regulates personal property leases that are longer than four months in duration which are made to a consumer for family, personal, or household purposes.

The CLA was enacted to ensure that there was meaningful and accurate disclosure of lease terms provided to a consumer before they entered into a contract. The CLA requires that certain least terms and costs be disclosed.

It also imposes limitations on the size of penalties for default or delinquency on the size of residual liabilities. In addition, the CLA requires certain disclosures in lease advertising.

All of this information can help an individual compare the different available leasing opportunities as well as whether leasing or purchasing is best for them. The information that must be disclosed under the CLA includes:

  • Number of monthly payments;
  • Penalties for default;
  • Amount of initial payment;
  • Total amount for fees; and
  • Other disclosures.

What Is the Truth in Lending Act?

The Truth in Lending Act is a federal law that was passed in 1968. It was designed to promote informed use of consumer credit by requiring disclosures be given regarding the terms and costs.

This Act is part of a broader set of laws called the Consumer Credit Protection Act. The Act protects consumers from unfair lending practices in many ways, including:

  • Clear disclosure of terms: The Act requires lenders to provide clear and detailed information about the terms of a loan, including:
    • the annual percentage rate (APR);
    • the total cost of the loan; and
    • the total amount that will be repaid over the duration of the loan;
  • Right of rescission: For certain types of loans, such as home equity loans or refinances, the Act provides a cooling off period during which a borrower can rescind the loan agreement without penalty;
  • Accurate advertising: The Act provides strict guidelines for how loans can be advertised in order to prevent deceptive or misleading practices;
    • For example, if an ad states a rate of finance charge, it must state the rate as an “annual percentage rate;” and
  • Limitations on certain loan features: The Act places limitations on certain types of loan practices, for example, prepayment penalties and mandatory arbitration clauses.

What Are Common Violations of the CLA?

Violations of the Consumer Leasing Act may include, but may not be limited to:

  • Unreasonable early termination formula: If an individual wishes to terminate the lease before the termination date, the amount due to the lessor is determined by the early termination formula set down in the lease;
    • If the lessor unreasonably charges or penalizes the individual, it may be a violation of the CLA;
  • Failure to follow the early termination formula: In certain jurisdictions, a failure to apply the early termination formula as set forth in the lease may violate the CLA;
  • Disclosure of warranties: All warranties that are available on vehicles are required to be stated in the lease;
  • Failure to disclose the trade-in or down payment: If the lessor fails to state the trade-in or down payment of the lease, the CLA may have been violated; and
  • Disclosure of interest on security deposits: In some jurisdictions, it may be a requirement to disclose whether interest on a security deposit will be paid and to whom;
    • If this is not disclosed, the lessor may be violating the CLA.

What Is Not Covered under the CLA?

Although the Consumer Leasing Act does cover personal property that is leased for more than four months, it does not cover:

  • Apartment or house leases;
  • Daily or month-to-month car rentals; or
  • Property leased to companies for business use.

If an individual has any questions regarding whether property is covered under the CLA, they can consult with a consumer lawyer.

What Can I Do If the Lessor Failed to Provide Me the Required Information?

If a lessor fails to provide an individual with the required individual, they may sue the company. The individual may request 25% of the total of the monthly payments, and not less than $100 or more than $1,000, in addition to actual damages.

If an individual is successful in their claim, they may also be awarded court costs and attorney’s fees. In some cases, a lessor may also possibly face criminal penalties.

What Is a Warranty?

The Consumer Leasing Act requires the lease to contain information on any warranties that apply to the personal property covered in the lease. A warranty is a guarantee that is made by a seller of products or goods regarding those products or goods.

When a warrant is provided, the seller is giving an assurance about the quality of the products, goods, or services that the seller provides. Warranties can be useful to buyers because, if a product an individual purchases fails to perform in the manner in which the buyer believed it would, the seller may be held accountable.

There are two main categories of warranties that offer protections and rights, including:

  • Express warranties; and
  • Implied warranties.

Express warranties are warranties that are created by overt actions or works of a seller. An express warranty may be created in many different ways, such as:

  • A promise regarding a product by a seller;
  • A description of the product; or
  • A model of the product.

Implied warranties are created by law. Implied warranties apply automatically when sellers offer a product for sale, even if the seller does not say anything about the manner in which their product will perform.

There are two categories of implied warranties, the implied warranty of merchantability and the implied warranty of fitness for a particular use. The implied warranty of merchantability guarantees that the product is fit to be used in the way that it is supposed to be.

When a product is sold, the implied warranty of merchantability provides a guarantee that:

  • The product is fit and suitable and can thus be used for the ordinary purposes that buyers would intend to use it;
  • The quality of the product is sufficient; and
  • The product conforms to any promises made by the manufacturer, typically found on the container or label.

The implied warranty of fitness for a particular use applies when a consumer informs a seller that they wish to use a product in a certain manner and that seller recommends or provides them with a specific product. This guarantees that the product the seller provided is fit for the use that the consumer explained.

An implied warranty of fitness for particular will apply in situations such as:

  • The seller is aware that the buyer will be using a product or good for a particular purpose; and
  • The seller knows that the buyer is relying on the seller’s expertise and knowledge about the product’s ability to be used in the way the buyer would like to use it or intends to use it.

Do I Need a Lawyer Experienced with Leasing Issues?

If you have any issues, questions, or concerns regarding the Consumer Leasing Act, it is important to consult with a consumer lawyer. Your lawyer can review any contract or lease before you sign it to ensure that it complies with the law and is in your best interests.

If any issues arise, your lawyer can advise you of your legal rights and options under the CLA. For example, if a lessor or company failed to disclose the required information, your lawyer can help you with a claim.

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