Thursday, March 4, 2010

Of course, states other than New Jersey say a loan is a loan unless it's called a rent-to-own contract.

From the State PIRG Consumer Protection Site (emphasis added):
Problem: The predatory rent-to-own industry promises consumers the American dream of ownership. "For only 78 weekly payments of $10, you, too, can own this television." The industry doesn't tell you that the that the effective interest rate on that loan, however, is 220%APR with $560 in iterest and finance charges.
Many states have enacted industry-friendly laws that allow the rent-to-own industry to deceive consumers by disguising their loans as rentals. But a few states enforce tough consumer protection laws. New Jersey PIRG has helped defend its strong law for years.
Unable to win in the state legislatures, the RTO industry has asked Congress to preempt, or over-ride, those strong state consumer protection laws and replace them with a weak industry-friendly federal law.
Background: The multi-billion dollar rent-to-own industry (Rent-A-Center, Rentway and others) sells televisions, appliances, computers, jewelry and furniture by making consumers loans payable on a weekly or a monthly basis. A television with a market value of $220 typically requires 78 weekly payments of ten dollars, or a total of $780. A customer who rents-to-own, or purchases, that television has paid $560 of finance charges at an imputed annual percentage rate (APR) of 220%. But the industry contends it does not sell. It claims it only rents, because if a consumer wants to stop making payments, he or she can do so and return the goods without further payments. RTO stores generally refuse to comply with state usury ceilings or interest rate disclosure laws such as the Truth In Lending Act. The industry, over the years, has also been accused of selling used goods as new, tacking on deceptive add-on fees and worse, bullying and sometimes illegal tactics when consumers are late with payments.
Over ten years ago, RTO operators convinced about 45 states to enact weak legislation that treats rent-to-own as a lease. Yet, several states -- backed by consumer groups -- insist on treating rent-to-own sales as small loans, requiring compliance with usury ceilings (New Jersey), APR disclosures (Vermont), or other consumer protection provisions (Minnesota, Wisconsin, North Carolina).

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