Rent to Own Hotline:
Will the N.J. Legislature:

Bergen Record Opposes Rent to Own bills

Philadelphia Inquirer calls RTO bills "wood rot" and "bad legislation"

Home News Tribune says the poor should get the same consumer protections as the middle class enjoy

N.J. Suits on Rent to Own- All Courts Find Consumer Fraud

What is the N.J. Attorney General doing?

Why is Governor Whitman silent?

Suit Challenges Attorney General to enforce the criminal usury law

CLNJ Opposes A.1097/S.1343

CLNJ Supports A294/S.1491

What do normal merchants charge for electronics, etc?

How does A.1097/S.1343 legalize criminal usury?

Rent to own is a civil rights issue

NAACP Opposes bills A.1097/S.1343

How did Legislators vote in 1998?

Rent to Own Educational Campaign

CLNJ Home Page

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? Click here for link to CLNJ statement on HR 1701

Rent to Own Defeated in N.J.

The rent to own lobbyists planned to march through the N.J. Assembly on December 9, 1999. Speaker Jack Collins posted industry bill A.1097 (1999 session number), which CLNJ condemned, for a vote. But with five newspapers denouncing the bill in editorials, and N.J PIRG educating legislators in person, the sponsor found it hard to round up support. So there was no vote on December 9, nor on December 13.Unfortunately, Jack Collins posted the bill again for January 10. But the rent to own lobbyists were not able to get 41 supporters, so consumers won when the bill died. It will likely be reintroduced in the new year 2000 session of the Legislature. Assemblyman Craig Stanley withdrew his sponsorship of the bill, when the industry would not agree to make amendments. Faced with the prospect of no Democratic votes in the Assembly, the RTO supporters retreated.

Much of the credit for the consumer victory must be given to NJ Public Interest Research Group, the watchdog who lobbied the Legislature until its final hour. This is the eleventh year that the RTO industry has tried to get loanshark-high interest for the poor legalized. Doubtless the bills will return in 2000.

Meanwhile, Assemby members Wilfredo Caraballo and Nia Gill have sued Attorney General John Farmer, Jr. in an attempt to force the state goverment to enforce the criminal usury law against rent to own operators.

What do newspapers editorials say about the rent to own legalization bill, A.1097/S.1343? The Star-Ledger called it "A Green Light for Usury," stating that the bills are trying to "...legalize the very same commercial behavior" as the Judges found "to be in violation of state usury and consumer protection law." (Dec. 13). The Asbury Park Press said "Protections must remain" (Dec 13), else rent to own would be able to "charge poor people what amounts to outrageous amounts for credit." "The point of the bill, from the credit cap exemption to the overpricing of merchandise, appears specifically designed to give rent-to-own merchants permission to take advantage of vulnerable customers." The Record (Dec. 8) stated that A.1097 "...would allow these stores to continue their practice of charging up to 100 percent annual interest, often to people who cannot make ends meet."... "Passage of the bill, however, would be blatantly unfair to the low-income people victimized by these high rates of interest." The Philadelphia Inquirer (Dec. 9) compared the bill to "Like wood rot on a second hand chair, bad legislation keeps popping up in the New Jersey legislature that would exempt the rent-to-own industry from normal consumer legal protections against usury credit rates." [Click here for entire text of Inquirer editorial.] The Home News Tribune (Dec. 9) posed the question: "Should poor people have the same consumer safeguards as those with more income and better credit?" Answering yes, the Home News Tribune said the "big issue" is that rent to own customers "shouldn't end up paying more than double the initial cost. And they do." The poor "shouldn't have to pay through the nose, again and again..."

Rent to own is a civil rights issue, because RTO stores charge the urban poor, double or quadruple what the middle class pays at the mall. The poor should not have fewer consumer protections than the middle class.

A.1097 is the rent to own industry's wish list. The bill will let RTO exploit New Jersey's urban poor. Stay tuned here for updates. For ten years, the rent to own operators could not get this bill passed. Will they succeed this time? Will Governor Whitman and Attorney General John Farmer enforce the criminal usury law, or gut it?

Consumers League Opposes A.1097/S.1343, which has three formulas which would legalize interest of 103% to 369% (see chart) for rent to own stores.

These bills to legalize criminal usury are also opposed by the NAACP, [click here for text of NAACP letter] the AARP, and N.J. PIRG. Prior versions have been condemned by the Consumer Federation of America and US PIRG. Similar bills were defeated in the Kean and Florio administrations, during times when state officials took a more active part in opposition. as compared to official silence now. Similar bills failed to pass in 1998. Click here to see how your Legislator voted in 1998.

The choice could not be clearer:

  • the Legislature can fleece the poor with S.1343/A.1097, which allows interest rates of over 100% in rent to own sales, or
  • the Legislature can protect the poor with S.1491(Allen & Codey)/A.294 (Bagger/Gill et al), which limits rent to own to the 30% criminal usury ceiling, the same law honest merchants obey. (Bill numbers from 1999 session.)

The bill would permit Rent to own stores to sell $250 TVs for $960, at undisclosed 369% interest, to inner city residents, while suburbanites buy the same TVs for $290 on 21% credit at Sears. Separate and unequal prices for the poor amounts to discrimination, pure and simple.

After years of factfinding and deliberation, the N.J. Judiciary is unanimous that rent to own violates the N.J. Consumer Fraud Act:

A vote for A.1097 is a vote to legalize consumer fraud and criminal usury.

CLNJ Supports A.294/S.1491:

Instead, the Legislature should pass the pro-consumer S.1491/A.294, limiting RTO sales to the 30% criminal usury ceiling.
True reform in rent to own also needs:

  • disclosure of the annual percentage rate,
  • a cash price equal to fair market value,
  • Attorney General Farmer should enforce the 30% criminal usury law.

Persons to wish to rent will still rent. Persons who wish to buy, will no longer be fleeced, as they switch to merchants who charge less than 30% interest. If consumers prevail, then RTO customers will pay $200-$300 for their televisions instead of $960.
CLNJ urges the Legislature to end the scam, condemned by three N.J. Court decisions, in which $200 TVs are sold for $1,000, at undisclosed interest rates of 100%-300%.

RTO stores need no special law to be in a RENTAL business. Rather these bills A.1097 and S.1343 deal with legalizing the OWN in rent to own -- authorizing sales on credit at 100% - 300% interest.

CLNJ calls on the Whitman administration to protect the poor and urban minorities, who are the main customers of rent to own, by announcing opposition to A.1097/S.1343. The representatives of Governors Kean and Florio opposed similar RTO special interest bills, which failed to pass for ten years in the Legislature. State government ought to prosecute criminal usury violations, not legalize them, not create loopholes encouraging criminal usury.

What do normal merchants charge for electronics, etc?

Competitive merchants in the NJ region take their acquisition cost, then add 10% to 20% to get a fair market price, i.e., the average price charged by honest merchants. Competitive merchants always charge much less than "Manufacturer's Suggested Retail Price." Competitive interest rates for credit sales are apx. 21% for large chains such as Sears, and up to 30% for small inner city merchants, such as furniture stores. Honest merchants charge less than 30% APR, which is New Jersey's criminal usury maximum. N.J.S.A. 2C: 21-19.

How does A.1097/S.1343 legalize criminal usury?

Section 15 of the bill allows for an inflated "cash price," which Section 16 then Doubles for the credit price, i.e., the Total of Payments.

The Unconscionable Choice: Fleece the poor with S.1343/A.1097:

Three unfair formulas in S.1343/A.1097 would permit Rent to Own to charge interest rates well over 100% APR:

Formula 1: If Cash Price were equal to fair market value, then that amount were doubled for the credit price, the MINIMUM interest rates will be:

Fair Market Value:

A $250 TV

"Cash Price"

(the first example assumes "no cheating" on price)

Total of Payments:

(Double the cash price, as per bill S.1343/A.1097)

Months Annual
$250 $250 $500 18 months 103%
$250 $250 $500 12 months 152%
$250 $250 $500 6 months 291%

Bill S1343/A1097 does not specify the length of the contract: any number of months would be allowed under this loophole! So conceivably the interest could be collected in 6 months, or less.

The results are even worse under several S.1343/A.1097 formulas,
which allow the "Cash Price" to be padded artificially:

Formula 2: Manufacturer's Suggested Retail Price (20% higher than FMV)
(competitive stores charge substantially less than MSRP),
then double the MSRP for the credit price
$250 $300 $600 18 months 136%
$250 $300 $600 12 months 203%

Formula 3: Double times (Acquisition Cost plus shipping) for "Cash Price,"
then Double phoney cash price for credit price
(This will be the one used, because it is the highest.)
$250 $480 $960 18 months 247%
$250 $480 $960 12 months 369%

The Civilized Choice--Protect the poor with bill A.1491/A.294 (Allen, Codey, Bagger)-
Enforce New Jersey's 30% criminal usury ceiling

New Jersey's CRIMINAL Usury Law allows a maximum of 30%:
$250 $250 $314 18 months 30%

What would you pay at Sears or Tops?
$250 $250 $291 18 months 20%

Rent to own is a civil rights issue

The middle class can go to the mall and buy TVs, VCRs, which are marked up only 10-20%, and pay only 21% interest. So a $250 TV costs $250 cash, $291 on credit.

The poor go to rent to own in the inner city (you won't find any rent to own in Alpine or Bernardsville) and the goods are marked up 100% for the phoney cash price, then the inflated cash price is doubled again for the credit price. So the $250 TV can cost $960 to buy on credit at rent to own. The annual percentage rate in this example is 369% APR.

CLNJ thinks treating the poor this poorly is outright discrimination. Separate and unequal stores aimed at the urban poor, with quadruple the prices the middle class pay, have no place in America. Separate laws for the poor, with fewer consumer protections than the middle class enjoy, allowing the poor to be exploited at 369%, have no place in America.

Any poor person who can pay $53/month for that TV at rent to own is creditworthy enough to pay only $16/month at a department store. It is rent to own who treats the poor as second class citizens-- by these grievous overcharges, and by failure to disclose the high interest rates.

With "friends" like rent to own, the poor don't need any enemies.

See NAACP Letter Opposing Rent to Own bills

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