BY Margaret Jasper for Lawyers.comsm
The rent-to-own industry has been one of the country's fastest growing industries since the economy has taken a downturn. These companies cater to customers who don't have the money or credit to buy big-ticket items, such as televisions and appliances. Rent-A-Center is the largest rent-to-own company in the US.
On July 24th, 2009, the Washington state Attorney General filed a lawsuit against the company, accusing their agents of using illegal collection practices against its customers.
The lawsuit alleges, among other things, that Rent-A-Center employees:
- Harassed customers with profanity during collection calls
- Scared children by telling them that their parents would be jailed
- Tried to break down one customer's door
- Harassed the neighbors and relatives of their customers as part of their debt collection efforts
Other state Attorneys General have accused Rent-A-Center of similar strong-arm tactics as well. In addition, Rent-A-Center and other rent-to-own companies have been accused of price gouging and violating state usury laws by charging unlawful interest rates.
Pay Later, Pay More
Rent-A-Center executives defend their practices by claiming they offer a valuable service to people going through difficult financial times because they don't require a down payment. It's like layaway, but you get to take the big screen TV or sofa bed home with you right away. It sounds like a good deal, right? Unfortunately, you can end up paying triple or more than what the item you "purchased" was worth in the first place when fees and interest are taken into consideration.
In New York City, Rent-A-Center dominates the rent-to-own market. According to a survey of Rent-A-Center stores conducted by the New York City Department of Consumer Affairs, an air conditioner with a market value of $279 typically requires 30 weekly payments of $25.99. By the time you make all of the payments, you'll have paid a total of $779.70 for that $279 air conditioner. The additional $500 you pay for the air conditioner represents a 179% mark-up from the price.
Evading Consumer Protection Laws
Rent-A-Center and other rent-to-own companies have been able to avoid consumer protection and usury laws by calling their contracts "rental" agreements instead of loans. If the contracts were loans, the high interest rates charged would be illegal under state usury laws, and would violate the federal Truth in Lending Act that requires interest rate disclosure.
Consumer rights organizations have been pushing state legislatures to close the loophole and force the rent-to-own industry to disclose interest rates and comply with consumer protection laws.
Despite the intense lobbying of the rent-to-own industry, some states, including New Jersey, Vermont, Minnesota, Wisconsin and North Carolina, have successfully protected consumers against the rent-to-own industry by treating rent-to-own sales as small loans and requiring them to comply with usury laws, annual percentage rate disclosures and other consumer protection provisions.
Questions for Your Attorney
- Are there any pending class actions in our area related to consumer rental or rent-to-own contracts?
- Is a lawsuit a possibility if a rent-to-own company was completely out of hand regarding my rental contract? What if there were threats against me or my family?
- Do any consumer protection laws that apply to collection agencies apply to rental companies? If I have a rental payment issue, can I tell the company or collection agency not to contact me again about the matter?