Rent-To-Own Contracts

Rent-To-Own Contracts

Last updated: December 2003

Form Agreements

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Overview of Rent-to-Own Contracts

The Illinois Rental-Purchase Agreement Act (815 ILCS 655/1 et. seq.) controls in any case where there is an agreement for the use of merchandise by a consumer for personal, family or household purposes, where the agreement:

  • is for an initial period of 4 months or less, and is automatically renewable with each payment after the initial period, and
  • permits the consumer to become the owner of the merchandise.

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Form Agreements

Requirements for Form Agreements:  Form agreements:

  • must be written in plain English;
  • must state numerical amounts in figures;
  • must print or type required disclosures in a size equal to at least 10 point bold faced type;
  • must not contain certain types of provisions, such as:
    • confessions of judgment
    • allowance of a breach of the peace to repossess
    • waiver of any defenses or claims
    • requirement to purchase of insurance
    • requirement of a late fee or reinstatement fee unless the payment is more than 3 days late and the charge is not more than $5
    • requirement of a payment at the end of the term in excess of or in addition to a regular periodic payment;
  • must provide that a charge in addition to periodic payments, if any, must be reasonably related to the service performed;
  • must allow a consumer who fails to make a timely payment the right to reinstate the agreement, without losing rights or options, by taking the required action before the later of one week or half of the number of days in regular payment period after the due date of the payment.
  • must disclose the following:
    • whether the merchandise is new or used;
    • the amount and timing of payments;
    • the total number of payments necessary and the total amount to be paid to acquire ownership of the merchandise;
    • the amount and purpose of any payment, charge or fee in addition to the regular periodic payments;
    • whether the consumer is liable for loss or damage to the merchandise, and if so, the maximum amount for which consumer may be liable;
    • that the consumer does not acquire ownership rights unless the consumer had complied with the ownership terms of the agreement, and
    • the cash price of the merchandise, whether new or used.

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A rent-to-own advertisement must clearly and conspicuously state:

  • that the transaction advertised is a rental-purchase agreement;
  • the total amount and number of payments necessary to acquire ownership; and
  • that the consumer does not acquire ownership rights unless the merchandise is rented for a specified number of payment periods.

If an item is displayed in the store and offered for rental-purchase, it must have attached to its front (or displayed just as prominently) a tag disclosing the amount to be paid to acquire ownership of the merchandise.

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Any consumer who is actually damaged by a violation of this Act by a merchant is entitled to recover from the merchant:

  • actual damages
  • statutory damages, computed as 25% of an amount equal to the total amount of payments required to obtain ownership of the merchandise involved, but not less than $250 nor more than $1,000, and
  • attorneys’ fees and court costs.

The merchant can escape liability if, before suit is filed, or before the merchant receives written notice of the error from the consumer, the merchant gives the consumer written notice of the error and makes adjustments in the consumer’s account, as necessary, provided he does this within 31 days after discovering the error.

Intentional violations of the Act are criminal. The merchant is then guilty of a petty offense and can be fined not more than $500.

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