Rent-To-Own A Raw Deal For Poor People, Lawmakers Say
The rent-to-own industry has mushroomed into an $8.5 billion business nationwide. But advocates for low-income Vermonters say that stores like Rent-A-Center are profiting too heavily from the desperate circumstances of poor people.
This script from a television commercial for Rent-A-Center is designed to get people in the door:
“Red hot deals are here at Rent-A-Center. Right now you can make the hottest brands yours for as low as $17.99 per week … Choose a red hot deal on a new 50'' Toshiba LED Smart TV, only $19.99 per week.”
And East Montpelier resident Brenda Brown says it works.
“That’s where it gets you. That’s where people go in and, like, OK yeah, we can rent, you know, hey, I can afford that or $12 a month,” Brown says.
Brown speaks from experience. And she shared her story with the Senate Committee on Economic Development, Housing and General Affairs Wednesday morning.
Brown has long since returned most of her rented goods, having learned she’d end up paying three or four times their retail price if she ever wanted to own them. But she says her low-income peers – Brown lives exclusively on disability payments – aren’t as wise to the marketing ploys of places like Rent-A-Center, or Aaron’s, the two companies that dominate the rent-to-own sector in Vermont.
“If you don’t have the money, yes, it’s there, but in the long run they’re getting you one way or another,” Brown says.
"If you don't have the money, yes, it's there, but in the long run they're getting you one way or another." - East Montpelier resident Brenda Brown
People who can least afford premium prices on retail goods are those most attracted to rent-to-own deals, advocates say. Credit history is a non-issue. And for very little money down, they can outfit their apartments with a washer and dryer, bedroom set, or flat screen television – items they might never be able to afford in a store.
But Tory Emery, a social worker at Upper Valley Haven in White River Junction, says stores aren’t doing enough to make sure low-income, and often financially illiterate consumers, know about the above-market prices they’re actually paying.
“People in poverty are vulnerable,” Emery says. “They’re vulnerable to seeing a shiny carrot placed in front of them that they can have what other people have.”
Senate lawmakers are considering legislation that would require rent-to-own stores to spell out more clearly for customers the all-in price of retail goods, by totaling the aggregate price of all the weekly payments that would be needed to own the item. They also want to cap the “interest rate” stores can earn on a sale. The magazine Consumer Reports found in 2011 that rent-to-own agreements feature weekly payments that can result in consumers paying the equivalent of more than 300 percent interest on retail purchases. Lawmakers think the number should be capped at 24 percent.
Rent-to-own agreements feature weekly payments that can result consumers paying the equivalent of more than 300 percent interest on retail purchases; lawmakers think the number should be capped at 24 percent.
Jay Fish, district manager for 10 Rent-A-Center stores, including two in Vermont, says testimony from advocates and low-income residents in the Statehouse doesn’t reflect the customer experience at her stores.
“It hurts me to hear those stories,” Fish says. “If only my customer would tell me that they are struggling to pay the rent versus pay my payment … I can find them less expensive items.”
Fish and Kevin Wright, another Rent-A-Center district manager with stores in Vermont, say the legislation is unnecessary, since they already work diligently to educate customers about the true costs of renting to own.
They say it’s inaccurate to say customers are being charged interest rates at all, since they’re renting to own, as opposed to buying on credit. And they say the arrangement delivers a key benefit to customers, who can return the items at any time with no obligation to pay additional installments.
"If only my customer would tell me that they are struggling to pay the rent versus pay my payment ... I can find them less expensive items." - Jay Fish, Rent-A-Center district manager
As for the aggregate cost of weekly installments totaling well more than the retail price of the item, Fish says that’s the nature of the transaction.
“If you pay your minimum balance on your credit card or you pay your payment all the way to the end, you pay more than if you just paid me cash today. But that’s the customer’s decision,” Fish says.
Rutland Sen. Kevin Mullin isn’t convinced.
“There are too many horror stories out there,” Mullin says. “And it’s time to take a look at it.”
Byron Stookey, founder of Brattleboro Area Affordable Housing, began examining the industry locally after seeing so many of the organization’s clients struggling to pay their rent-to-own bills.
“What we found was a predatory business, predatory because it targets low-income people, encourages heavy debt, and leaves people usually with nothing to show for the money they’ve paid,” Stookey says.
"What we found was a predatory business, predatory because it targets low-income people, encourages heavy debt, and leaves people usually with nothing to show for the money they've paid." - Byron Stookey, founder of Brattleboro Area Affordable Housing
Stookey says the rent-to-own industry has found “shrewd” sidesteps around consumer protection regulations and usury laws governing other installment sales or consumer leases.
“Marketing debt to the poor has become big business,” Stookey says.
A trade organization for the rent-to-own industry, called the Association of Progressive Rental Organizations, notes that “what distinguishes rent-to-own from a retail credit sale is the term ‘rent.’”
Chris Curtis, a staff attorney at Legal Aid, says many low-income rent-to-own customers find themselves unwittingly in violation of rental agreements. Curtis says Rent-A-Center has filed civil suits against customers hundreds of times in Washington County alone over the past two decades. He says the threat of litigation has pressured some of his clients into some ill-advised financial decisions.
“And they were forced with the decision of, do we pay the local rent-to-own store? Or do we pay for our children’s Dr. Dynasaur premium? And guess what they did? They paid the rent-to-own store,” Curtis told lawmakers. “Nobody’s going to sue you if you don’t pay your health care premium.”
This isn’t the first time Vermont lawmakers have targeted the rent-to-own industry. But industry lobbyists succeeded four years ago in stripping most of the provisions from legislation under consideration then.
Mullin says he thinks this latest push will be more successful.
“I don’t know what the success will be this time around,” Mullin says. “But I’m fairly confident that a bill of some sort will pass.”