How Does the Consumer Leasing Act Protect Your Rights?

Rather than making purchases with cash or in credit installments, some people choose to enter into leasing agreements. Leasing has become a common practice, whether for furniture, appliances, or vehicles. In fact, reports show that there were a record number of vehicle leases in 2019.

Whether an individual’s reason for leasing is for convenience or to save money, there is a federal law — the Consumer Leasing Act — that was created to protect consumers from falling victim to misleading lease agreement terms. The Consumer Leasing Act rights afforded to consumers help ensure that those who are looking to lease personal property can compare costs before entering into a contract with a lessor and that consumers are fully informed before executing any agreement.   

What Is the Consumer Leasing Act?

First passed in 1976 as part of the Truth in Lending Act, the Consumer Leasing Act definition is found in 15 U.S.C. § 1667.

The Act requires an owner who is leasing property (the “lessor”) to provide full and accurate disclosure as to the lease agreement terms to the consumer (the “lessee”). Enforced by the Consumer Financial Protection Bureau pursuant to the Dodd-Frank Act, lessors are not permitted to omit certain terms or use language with unclear provisions and hidden clauses under the Act.       

The Consumer Leasing Act also limits the balloon payments that are sometimes imposed at the end of lease terms, generally prohibiting lessors from charging a payment of over three times the average monthly payment. 

Additionally, the Act regulates lease advertising and specifies the information that the advertisements must state.

What Kinds of Leases Does the Act Cover?

The Consumer Leasing Act covers leases on personal property for contract obligations of up to $50,000 lasting longer than four months. It applies to leases involving property used for personal, family, or household purposes. Some common examples of covered leases can include a vehicle for personal use, residential appliances, furniture, or electronics.

Often, consumer leases are carried out through finance companies, the retailer, or specialized subsidiary banks, rather than a traditional bank.   

The Act does not cover leases related to agricultural, business, or commercial purposes, nor for leases to the government. The Act also excludes apartment rentals, daily car rentals, and for credit sales. 

What Are Your Consumer Leasing Act Rights?

The Consumer Leasing Act helps to ensure that consumers fully understand a lease agreement before they sign it. Specifically, the Act provides that the property owner provides a written and dated statement which clearly outlines the lease agreement terms, including:

• The property’s description
• The amount of the initial payment 
• Amounts charged for official fees, license fees, taxes, registration, and certificate of title
• Any other charges the consumer must pay not included in the periodic payments
• The consumer’s liability at the end of the lease for wear-and-tear costs
• Whether the property can be purchased at the end of the lease term
• A description of insurance coverage provided by the lessor or required by the consumer
• A description of the lessor’s security interest
• The number of payments, the amount, and the due dates
• A statement concerning conditions for lease termination

A consumer must be provided with a new disclosure if the lease is extended or renegotiated. 

Can You File a Consumer Leasing Act Lawsuit?

Violations of the Consumer Leasing Act are serious matters. Both civil and criminal penalties may be imposed on lessors who are in violation of the Act. In addition, consumers who have been harmed by misleading lease agreements may be able to recover their damages by filing a lawsuit. A consumer has one year from the end of the lease term to commence legal action.

In recent years, a number of Consumer Leasing Act lawsuits have been filed, resulting in consumers recovering monetary damages due to a lessor’s violations of the Act. In one case involving allegations of an auto lender charging hidden fees, a class action settlement of nearly $20 million was reached. In that case, the Class Members contended that they were provided with a standardized lease giving them the option to purchase the vehicle at the end of the lease term. They claimed that they were charged hidden fees beyond the set price of the lease terms. As part of the class action settlement, each Class Member received up to the full amount of the excess fees charged.   

Consumers facing similar circumstances may also be entitled to join a class action lawsuit to recover their monetary damages due to a lessor’s violation of the Consumer Leasing Act. An attorney who handles class action lawsuits can discuss your legal rights and remedies.  

Free CLA or TILA Class Action Lawsuit Evaluation

If you entered into a lease or loan within the past two years, you may be eligible to join this class action lawsuit investigation and entitled to cash compensation.

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This article is not legal advice. It is presented
for informational purposes only.