Rent to Own stores sell $200 TVs for $1,000, and pretend there is no interest.
Rent to Own stores conceal interest rates of 100% to 300% Annual Percentage Rate.
To conceal the interest rate is deceptive, pure and simple, a consumer fraud. No one would agree to a 300% contract, if he knew Rent to own charged 300%.
Rent to Own stores pretend to help minorities and the urban poor, but Rent to Own discriminates against the poor, and treats them as second class citizens, as suckers worthy only to pay 300% interest, instead of the 20% interest normal people pay.
A person who can afford to pay $12 per week at rent to own, can afford to pay much less at Sears- $12 per month at Sears, and buy five TVs for $1,000, not one at Rent to own.
H.R. 1701 scams the urban poor by concealing from them the loanshark interest rates Rent to Own charges. The bill cruelly denies the poor any disclosure of the Annual Percentage Rate, and then prevents any States from blowing the whistle as well. The bill preempts any pro- consumer state laws to mandate disclosure of the Annual Percentage Rate, or to regulate rent to own stores.
What would real Rent to own reform include?
1. Congress should mandate that Rent to Own disclose the Annual Percentage Rate.
2. The APR should be capped at 30% (as in New Jersey) to prevent loansharking.
3. Close the "Cash price" loophole (HR 1701 allows RTO stores, which do not sell items for cash, to hide extra interest in inflated "cash" prices)--Instead Congress should define RTO Cash Price as the fair market value which competing area merchants sell similar goods for cash.
4. Permit the States to enact consumer protection laws which protect the consumer.
In sum, Congress should enact consumer protection laws, and enforce the law.
H.R. 1701 is a bill to legalize loansharking.
The better bill is HR 2498 (Rep. Maxine Waters) which mandates disclosure of the Annual Percentage Rate, and requires the RTO stores obey the federal consumer protection laws, not evade them.
The U.S. House Financial Services Committee voted in July 2002 to release the scam-protecting bill, HR 1701. The full House may vote on this bill now. How does HR 1701 handcuff law enforcement?
More information in the September CLNJ Newsletter. and also in the December 2001 CLNJ Newsletter.