Rent to Own HOTLINE:
Legislative Update
Rent to Own Campaign
* RENT TO OWN RAP
* Pamphlet and Poster
RTO Bills in Legislature
Three Requirements for Real Reform in
rent to own
Why do people use rent to own?
RTO Compared to department store credit
RTO industry bills are loophole-ridden
frauds
Contents of bills A.1097/S.1343
Choice for New Jersey:
Fleece the poor, or
Protect the Poor
Contact your representatives
CLNJ Home Page |
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Rent to own is the worst way
in the world to buy televisions, appliances and furniture. A
"rent to own" store will sell these goods on credit
by calling the transaction a "lease."
The ultimate scam:
Will U.S. House Committee vote to legalize unlimited interest
for Rent to Own stores? And Prohibit Disclosure of the Annual
Percentage Rate?
The problem with rent to own is that, to buy the goods, the
effective interest rate can be higher than 100% interest! To
buy a small TV, you may have to pay $1,000! Worse yet, rent to
own customers never get a disclosure of the interest rate, which
is inherently deceptive. A customer cannot "agree"
to pay a rate which is hidden from him.
Sad to say, many states (but not New Jersey) have passed laws
permitting RTO operators to charge legalized loanshark rates.
In those places, it may be legal, but it is still immoral. The
United States actually had laws legalizing slavery, and then
segregation, and it took a long time to change them. RTO is a
form of peonage (debt slavery), similar to sharecropping and
the "company store" of mining towns-- you pay and pay,
but never get to the end. Consumers ought to rise up and demand
that their states pass laws limiting the interest on rent to
own sales to the reasonable interest rates which honest credit
merchants already obey. Poor and urban consumers deserve equal
credit and banking opportunities - not fourth class treatment
from rent to own, with prices four times higher than the middle
class pays.
Rent to Own Educational Campaign
Consumers League Education Fund, with a NCCE grant, funded by
AT&T, has a campaign to tell consumers the true cost of buying
with rent to own.
Consumers League has produced a
rap song-- the RENT TO OWN RAP, which
is available as a 60 second public service announcement for the
radio. Media may contact CLNJ to obtain
the PSA.
Consumers League has a pamphlet, With
Rent to Own Your Paycheck's Blown, which warns about
the true cost of RTO. Consumers League also has a poster, Rent to Own- $1,000 for one small TV- $1,000
could buy you five TVs, for distribution to consumer
groups, churches, social agencies and government. Just click
on the name of the poster, pamphlet or RAP song above to see
it.
Rent to Own Bills in N.J. Legislature:
The Choice is Clear:
Fleece the poor with S.1343/A.1097, (Legalizes Interest
Rates of 100% and higher), or
Protect the poor with S.1491/A.294 with the 30% Criminal
Usury Limit
Rent to own is a retail installment sale pretending to be a lease,
as the Superior Court of NJ decided in Green v. Continental
Rentals, 292 N.J. Super 241 (1994). Three NJ judges have
held RTO illegal. Rent to own sales should be governed by the
same set of rules that all credit merchants now obey, such as
the 30% criminal usury law. Consumers League condemns S.1343
and A.1097 because they would legalize interest rates of over
100%. CLNJ supports S.1491/A.294, which limits rent to
own to 30% interest.
Real reform in rent to own would come about if the Legislature
made rent to own:
* obey the law NJ's 30% criminal usury law like legitimate merchants
do,
* disclose the Annual Percentage Rate- to conceal the interest
rate is inherently deceptive, consumers do not now know what
they are paying,
* base the APR on actual fair market values such as the price
at "Sears" for the goods.
Consumers League calls on Attorney General John Farmer, our state's
chief law enforcement officer, to enforce the criminal usury
law! No free ride for usury! You should oppose these bills to
legalize loanshark rates.
Rent to own stores will be found only in poor and urban
neighborhoods. If you have a car to get to the mall, you likely
will use a credit card, and avoid rent to own. RTO sells TVs,
appliances, and furniture on credit. For $13 per week, and after
78 weeks or 87 weeks, the item is yours. A TV which sells for
$250 cash at Sears, etc, is sold for $1,014 at RTO:
Rent to own sale of $250 TV:
Amount financed: $250
Weekly payment: $13
Number of weeks: 78 [18 months]
Finance charge: $764
Total of Payments: $1,014 Annual Percentage Rate: 265%
Yes, 5 percent per week!
The very same TV, purchased with store credit or a credit card
is vastly cheaper:
Department Store Sale of $250 TV:
Amount financed $250
Monthly payment $16.17
Number of months 18
Total of Payments $291.06
Annual Percentage Rate 19.8%
Excess dollars paid if you buy at Rent to Own: $723 --enough
for apx. 3 additional TV sets!
Doubt the figures? visit a rent to own store, note the prices,
then check out the same goods at Sears. There is no arguing with
the math: RTO charges from 75% to 300% routinely. Ask RTO to
produce a few actual RTO contracts. Ask for the Totals. You will
be shocked.
Why would anyone ever buy at RTO? Rent to own looks like the
traditional 30% credit sellers, who have always been abundant
in the inner city. The RTO prices are "weekly" in order
to seem low. But RTO buyers never get a nice chart setting forth
the APR. Rent to own never discloses the Annual Percentage
Rate. The people who buy at RTO are being fooled. To
conceal the Annual Percentage Rate is inherently deceptive.
If your RTO contract mentioned 265% interest, we doubt many people
would do it. The Annual Percentage Rate has been the universal
yardstick of credit for over 25 years. The APR has worked well
to control outright fraud in interest disclosures, and to eliminate
unfair calculation methods.
Real consumer legislation would force RTO to disclose the APR,
and limit it to 30%. But the RTO industry claims a loophole exempts
them from disclosing the APR the same way that legitimate creditors
do. In fact, RTO claims an even more outrageous whopper: that
they are not charging interest at all! But Green v. Continental
Rentals exploded that one, holding: "There are no services.
This is interest."
Despite the heavy emphasis on the "OWN" in the term
"rent to own," RTO claims that it is "leasing"
goods, that the consumer can return them in the middle of the
contract. But the consumer can't win with rent to own. If you
"lease" a $250 TV for a year, then give it back, you
will have paid $676 for a $250 TV, which you don't get
to keep. You've been had. If you pay the full $1,014 for
one $250 TV, you've also been had. Either way, the consumer
always loses with rent to own. There is no "service"
to the poor in making them pay four times the fair value of the
goods.
RTO Industry bills S.1343 and A.1097 Contain
No Real Protections for consumers
The loopholes are a mile wide. A.1097 would allow the RTO operator
to set his own artificially high "cash price,"
then double that price as the total of payments. This would allow
over 100% interest. For example, a TV with FMV of $250 would
be sold under A.1097 for $500, at a minimum interest rate
of 103% over 18 months, or 152% in 12 months.
In normal stores, goods are sold for a 20% discount below
the Manufacturer's Suggested Price. Bill S.1343 would also allow
a phoney cash price, set by the RTO dealer, for used goods. For
new goods, the RTO store could double their acquisition cost,
including shipping, for the phoney cash price, then RTO could
double the cash price for the credit price.
In sum, if these bills pass, the Legislature would allow RTO
to do exactly what RTO is already doing: charging the poor four
times what the middle class pays. Charging the poor more
is exploitation, plain and simple.
Thus if the Legislature passes S.1343 or A.1097, the Legislature
will be an accomplice in fleecing NJ consumers by the rent to
own scam. Bills S.1343 and A.1097 legalize the very same practices
which three judges held to be consumer frauds. |
