Chapman Law Review - Chapman University

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34 Chapman Law Review [Vol. 15:1
unlikely because the Bureau or any court interpreting the Act
will have to look to the Act‘s definition of credit, not any
individual state‘s definition of credit. The Act sets out a
definition of credit. 58 It does not defer to states‘ definitions of
credit, so courts will have to analyze transactions in light of the
Act‘s definition regardless of state law. In similar contexts,
courts look only to the federal statute‘s definition of a term to
determine its meaning. For example, in determining whether
rent-to-own transactions are credit within the meaning of the
Truth in Lending Act, courts do not consider state law but
instead just evaluate the definition of credit in the Truth in
Lending Act statute. 59
Looking instead to the Act itself, it seems unlikely rent-toown
is credit. Credit means (1) ―the right granted by a person to
a consumer to defer payment of a debt, incur debt and defer its
payment‖ or (2) ―the right granted by a person to . . . purchase
property or services and defer payment for such purchase.‖ 60
Rent-to-own agreements fall outside both of these parts of the
definition. The statute does not define debt, but debt is
commonly defined as an obligation to pay money arising out of a
transaction. 61 Rent-to-own-agreements do not involve taking on
debt because the rental agreements obligate consumers to pay for
rental periods at the start of the rental period, not the end, so the
consumer generally does not owe money because of the
agreement. 62
Additionally, rent-to-own agreements do not involve
deferring payment for a purchase. Like debt, the statute does
not define purchase, but in most cases purchase involves a
transfer of an interest in property for money. 63 Because
58 Dodd-Frank § 1002(7).
59 See Ortiz v. Rental Mgmt., Inc., 65 F.3d 335, 341 (3d Cir. 1995) (determining rentto-own
is not ―credit‖ based on the definition in the statute and the Regulations
promulgated to implement it and the federal commentary on the statute); Starks v. Rent-
A-Center, No. 3-89-0786, 1990 U.S. Dist. LEXIS 20099 (D. Minn. May 16,
1990) (concluding that rent-to-own contracts are not extensions of credit under TILA even
though the court found that rent-to-own contracts were credit sales under Minnesota
law); In re Crawford, No. 90-50066, 1992 Bankr. LEXIS 2515 (E.D. Bankr. Ky. 1992)
(assessing whether rent-to-own was a credit sale under TILA completely separately from
assessing rent-to-own‘s status under Kentucky law).
60 Dodd-Frank § 1002(7).
61 See, e.g., 15 U.S.C. § 1692a(5) (2006) (reporting the Fair Debt Collection Practices
Act‘s definition of debt).
62 Even cases finding that rent-to-own agreements are credit sales state that rent-toown
does not entail accumulating debt. See Miller, 518 N.W.2d at 549.
63 See, e.g., 16 U.S.C. § 3372(c)(2) (2006) (―It is deemed to be a purchase of fish or
wildlife in violation of this Act for a person to obtain for money or other
consideration . . . (A) guiding, outfitting, or other services; or (B) a hunting or fishing
license or permit . . . .‖); U.C.C. § 1-201(29) (2007) (―‗Purchase‘ means taking by sale,
lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift,