William Clark appeals from the district court's April 24, 1981, order dismissing, pursuant to Fed.R.Civ.P. 12(b)(6), his lawsuit for damages under the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq. (TILA).1 Clark v. Rent-It Corporation, 511 F. Supp. 796 (S.D.Ia.1981). Because we conclude that the district court erred in dismissing Clark's suit solely on the pleadings before any evidence was presented, we reverse its judgment and remand for further proceedings.

In November, 1979, and again in February, 1980, Clark entered into contracts with Rent-It Corporation to "rent" a television set for seventeen dollars per week. In both instances, the parties executed standard form contracts that were supplied by Rent-It and that provided at the top in bold face type: "THIS IS A RENTAL AGREEMENT WITH OPTION TO PURCHASE." Under the agreements, Clark was entitled to become the owner of the television if he paid the weekly fee for seventy-eight consecutive weeks. The sole issue presented here is whether the "Rental Agreement with Option to Purchase" executed by Clark and Rent-It constituted a "credit sale" under the TILA within the meaning of 15 U.S.C. § 1602(g).2 If the "Rental Agreement with Option to Purchase" constituted a "credit sale" under the TILA, Rent-It was required by 15 U.S.C. § 1638 to make certain disclosures to Clark. If, on the other hand, the agreement was not such a "credit sale," the TILA was not applicable, and Clark's complaint would not state a claim for relief under the federal statutory scheme. Clark has filed an appellate brief in this Court, but Rent-It has not despite repeated requests by our Clerk's office.

The case authority on the issue presented here is limited to a few decisions by district courts, which have split on the question.3 The court below rejected the decisions holding that agreements like the one involved here were, or might be shown to be, "credit sales" because they "gloss(ed) over the limited obligation of the lessee." Clark v. Rent-It Corporation, supra, 511 F.Supp. at 798. It reasoned that because the "Rental Agreement with Option to Purchase" specifically obligated Clark to "rent" the television for "only one week,"4 his obligations as a "weekly lessee" were much less than those of a purchaser under a conditional sales contract. Moreover, it rejected Clark's contention that under Iowa Code § 554.1201(37), the "Rental Agreement with Option to Purchase," was a security instrument, that is a conditional sales contract, rather than a true lease.5 Finally, it concluded that discovery and further proceedings were not necessary prior to adjudication of the issue. Clark v. Rent-It Corporation, 511 F. Supp. at 798-799. Accordingly, it held that as a matter of law, the agreement between Clark and Rent-It did not constitute a "credit sale" as defined in 15 U.S.C. § 1602(g). It stated: "(a) lease giving an option to acquire title is a disguised 'credit sale' * * * only if the lessee is obligated to pay rent in an aggregate sum equal to or in excess of the value of the rented property." Id. at 799 (emphasis included). Clark filed a timely notice of appeal.

Clark essentially argues in this Court that: (1) the district court erred in denying him an opportunity to offer evidence that would prove facts entitling him to relief under the TILA; and (2) the district court's analysis of the "Rental Agreement with Option to Purchase," the TILA, and the relevant case authority was unduly restrictive. We agree with both contentions.

Preliminarily, we are mindful of the general legal principles applicable to this case. The district court "is constrained by a stringent standard in passing on a Rule 12(b)(6) motion to dismiss." Fusco v. Xerox Corp., 676 F.2d 332, 334 (8th Cir. 1982). This Court in Fusco explained:

(A) complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (, 78 S. Ct. 99, 101-102, 2 L. Ed. 2d 80) (1957) (footnote omitted). A complaint must be viewed in the light most favorable to the plaintiff and should not be dismissed merely because the court doubts that a plaintiff will be able to prove all of the necessary factual allegations. "Thus, as a practical matter, a dismissal under Rule 12(b)(6) is likely to be granted only in the unusual case in which a plaintiff includes allegations that show on the (face) of the complaint that there is some insuperable bar to relief (citations omitted)." Jackson Sawmill Co. v. United States, 580 F.2d 302, 306 (8th Cir. 1978), cert. denied, 439 U.S. 1070 (, 99 S. Ct. 839, 59 L. Ed. 2d 35) (1979).

Id.

The TILA "is remedial in nature, and the substance rather than the form of credit transactions should be examined in cases arising under it." Hickman v. Cliff Peck Chevrolet, Inc., 566 F.2d 44, 46 (8th Cir. 1976). Moreover, in interpreting agreements possibly covered by the TILA, "the practices of the trade, the course of dealing of the parties, and the intention of the parties in addition to specific contractual obligations" must be considered. Joseph v. Norman's Health Club, Inc., 532 F.2d 86, 90 (8th Cir. 1976). The legislative history of the TILA shows that Congress was aware that "some creditors would attempt to characterize their transactions so as to fall one step outside whatever boundary Congress attempted to establish," Mourning v. Family Publications Service, Inc., 411 U.S. 356, 365, 93 S. Ct. 1652, 1658, 36 L. Ed. 2d 318 (1973), and that it intended to include within the statutory definition of "credit sales" purported leases "if they are, in essence, disguised sale arrangements." 1968 U.S.Code Cong. & Ad.News 1962, 1980.

In light of the foregoing legal principles, we hold that the district court committed reversible error by dismissing plaintiff's complaint. Moreover, we disagree with the district court's observation that evidence reflecting that Rent-It "enters into numerous similar transactions and that most customers keep (their) TV set(s) for 78 weeks and exercise the option to become its owner" is "irrelevant." Clark v. Rent-It Corporation, supra, 511 F.Supp. at 798-799. Such evidence is clearly relevant to Clark's explanation of the totality of the circumstances surrounding his transactions with Rent-It, and the parties' contractual expectations. See the decisions in note 3, paragraph 2, supra, at 247.

Clark argues that if given the opportunity he would attempt to show that: (1) when he signed the contracts with Rent-It, he was led to believe, and did in fact believe, that he was purchasing the television set; (2) Rent-It's business is aimed at low income customers who cannot obtain loans and who cannot afford to pay cash but who desire to purchase television sets; and (3) Rent-It entered into numerous transactions in which the "lessee" of its property eventually became owners of such property. Clark should be given an opportunity to substantiate these claims, and to establish that the "Rental Agreement with Option to Purchase" was in fact a disguised credit sale.

Accordingly, the district court's April 24, 1981, order is reversed and the case is remanded for further proceedings consistent with this opinion.