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Date: February 28, 1999
To: Uniform Consumer Leases Act Drafting Committee;
Observers & Mailing List Recipients
From: Ralph J. Rohner, Reporter
Re: Draft # 7, for Drafting Committee Meeting, March 19-21
Enclosed is the latest draft of the Uniform Consumer Leases Act, for review by the Drafting Committee in Indianapolis later in March.
This draft reflects decisions made by the Drafting Committee at its meeting in October 1998, basically up to and including Section 304 of Draft # 6. The Drafting Committee also conferred by telephone conference call on January 26, 1999, to give the Reporter guidance on the remainder of the October draft.
The major consequence of the October meeting and January conference call was the decision to collapse Parts 2 and 3 of Draft # 6 together, making all provisions of the Act applicable to all leases of consumer goods, with only a few special carve-out rules for motor vehicle leases. The result is that Draft # 7 is substantially reorganized. It is now arranged in six "Parts," as follows:
Part 1: General Provisions
Part 2: Advertising; Disclosure
Part 3: Limitations on Terms and Practices
Part 4: Lease Termination
Part 5: Penalties; Enforcement
Part 6: Interpretation and Transition
This reflects a structural reorganization of the draft Act, but it does not represent substantive changes in its provisions. The "Contents" pages of Draft # 7 identify where each section of the draft can be traced back into Draft # 6. Inevitably, however, in rearranging the draft Act, I found instances that suggest the need for further refinement. All of these are flagged in the Draft itself, and in the "Issues List" that follows.
I have tried to adjust the "Reporter's Notes" in the Draft to focus on the current version, but also to retain sufficient background to remind readers of the evolution of the provision. The "Proposed Comments," which have been carried forward from several earlier drafts with only minor changes, are the Reporter's very tentative explanation of the reasoning underlying the Act. The Drafting Committee has not reviewed or even discussed the draft Comments.
The Drafting Committee has expressed its desire to coordinate this draft Act with terminology and usage emerging from the Uniform Commercial Code revision process. I will try to bring the latest word on that process to the March 19-21 meeting.
So far as I know, this proposed Uniform Consumer Leases Act is still scheduled for its first reading at the NCCUSL meeting in Denver in July of this year. At the upcoming March meeting, the Drafting Committee will want to put it in virtually final form. I therefore urge everyone to review it carefully, and please communicate any questions, suggestions, or critiques to me before March 19. I've put all my numbers in the margin.
Ralph J. Rohner:
Office phone: (202) 319-5140
Office fax: (202) 319-4459
E-mail: rohner@law.cua.edu
UCLA Draft # 7 -- February 28, 1999
Section Issues
102 Are definitions OK? Especially: "authenticate," "conspicuous," "consummation," "motor vehicle."
Are incorporation-by-references to UCC and federal CLA OK and complete?
104 Is (a) adequate/useful for "recharacterization" purposes? Should it be separate section?
107 Are (b) and (c) adequate to deal with "choice of forum" issue?
109 This tracks UCC 2A-108. Is it necessary? Should it be cross-referenced to § 501 re civil penalties?
201 Need to sort out how to deal with advertising of "annual lease rate." See suggested language changes. Supposition is: If ALR is computed properly under § 207, it can be advertised and is not deceptive.
203 Subsection (a)(2) deals with renegotiations and extensions. Is this clear enough?
Subsection (b)(3) requires notices for vehicle leases, but not others. OK?
Subsection (c) authorizes "lease rate" disclosure. Is it clear? Should be worry about preemptive effect of Reg. M.?
204 This gathers up disclosure rules re insurance, with more specific rules for motor vehicle leases in (b). Are they clear and consistent?
205 See Reporter's Notes: Have we clearly enough distinguished a "guarantor" from someone who merely signs the lease without any identification of his/her role or relationship to primary lessee?
207 This still needs technical and mathematical clean-up, especially as to definitions of "lease amount financed" and "lease finance charge." I need industry and consumer input on the ingredients of each.
301 Substitute "approval" for "execution" in caption and throughout: Appropriate?
In (a)(3), retain bracketed language re offset of mileage charge?
304 In (b)(2)(B), need to decide whether cumulative late charges are permissible or not.
305 In subsection (b), is there any desire to allow lessee to assert manufacturer warranty claims against lease assignee, as in Lotito case?
307 Need a policy decision on open-end leases: Permit or prohibit?
308 Are warranty changes in UCC Art. 2 likely to be replicated in UCC Art. 2A, and if so are they adequate for consumer lessees?
309 In or out?
401 This restates what was in earlier § 304. Is subsection (a)(1)(B) workable for holders?
In subsection (b)(1), need choice of language re substitute insurance.
402 Subsection (c)(1) is new: lessee remains liable for "gap" amount if lessee doesn't maintain insurance. Justifiable?
403 Are mechanics of "right to cure" clear?
404 Subsection (c) picks up on question of application of security deposit. Clear? Consistent with Committee suggestion?
405 This combines former 308 and 309. Subsection (a) tracks Reg. M; subsection is meant as a safe harbor; is it helpful?
In subsection (c), second sentence is inconsistent with subsection (d). One or the other has to give.
Subsection (c) is new, fixing "realized value" at retail market value if holder has mis-behaved. Is this the right approach?
Note that nothing in this draft, or in UCC 2A, requires any post-repossession notice or accounting to the lessee. Compare fairly elaborate notice under new UCC Art. 9. Is there need for comparable notice here?
406 In subsection (c), why do we emphasize "constant yield method" as opposed to other actuarial formulas? Could definition be relegated to Comment?
What opening language for (c)(2)? "Sum" vs. "components"?
In (c)(2)(B)(iii), can holder collect full rent for period in which termination occurs? It would seem so if rent is deemed earned in advance.
Subsection (d): is there any basis not to cap ETC at amount of remaining payments? (Waiting for industry reaction on this.)
Should subsection (e), with its "rebuttable presumption" limitation on deficiency claims, be retained? Cf., § 405(e).
407 In subsection (b)(1)(C), is this adequate protection for lessees who dispute excess wear and tear charges?
Subsection (b)(2) tries to encourage holders and lessees to do a pre-termination inspection. Does it work?
501 Option A is new. It defers to existing state UDAP acts for lessee remedies for violations of this Act. Is this preferable to spelling out those remedies (and defenses) here?
In Option B, several questions:
* Does subsection (b) identify the right sections for violations that permit statutory damages?
* In (b)(1), what should be the measure of statutory damages?
* In (b)(2), is the cap for class actions appropriate?
* In (g)(1), what statute of limitations? What about "equitable tolling"? * * In (g)(2), what about defensive assertion of violations by way of recoupment?
502 Re bracketed § 502(a)(2): is there any sentiment for permitting lessees to rescind for certain violations? If, which ones?
504 Committee's tentative conclusion is to bracket this as an option for the states. Is this realistic? Is it conducive to uniformity among states, if there is interpretive authority in some states but not others?