Rent-to-own contracts a dubious business practice

Love ‘em or hate ‘em, rent-to-own contracts have found their way into the American economy. In fact, rent-to-own contracts have grown into a $7 billion industry serving more than 6 million customers a year, according to the Association of Progressive Rental Organizations.
 
Today’s consumers use them for everything from renting television and electronics to furniture and appliances. They are particularly attractive for people who don’t have a positive credit history or need something they cannot afford to buy. The problem is that by the time your rental becomes yours for keeps, you’ve often paid two to three times the retail value for that product.
 
Wisconsin is among a handful of states that treat rent-to-own contracts as consumer credit transactions, which under Wisconsin’s Consumer Act requires rent-to-own companies to disclose interest rates on their agreements with consumers. Those rates often exceed 100 and even 150 percent.
 
These requirements recently become a topic for political debate as Wisconsin Governor Scott Walker has included a provision in the state budget exempting the industry from consumer protection statutes. Opponents of that inclusion call rent-to-own practices usurious, especially considering that three-quarters of rent-to-own consumers have a high school education or less and more than half had household incomes that placed them only slightly above poverty lines.
 
The rent-to-own industry argues that they are not credit providers, as there is value added. Rent-to-own providers, for example, will often deliver items directly to your home and service them without charge as long as you are current under the contract terms.  Renting also gives you an opportunity to test out a product and decide if it’s the one you really want.
 
Primarily, rent-to-own contracts help people who are not eligible for credit from standard lenders or credit card companies get needed household items. Consider someone who needs a washer. In the long run, he’ll pay more for using a laundromat than he will renting-to-own his own washer.
 
If you think a rent-to-own contract may be something worth exploring, shop around for the best deals. And before you sign any agreements, be sure they address these questions to your comfort level:
  • What happens at the end of the contract?
  • Who is responsible for maintenance?
  • Is your buying option transferrable?
  • When are payments due? Is there a grace period or penalties for late payments?
  • What is your obligation if the item is stolen, damaged or destroyed?
  • What are your payment reinstatement rights in case you return the product and want it again at a later date?

One more tip before settling on the rent-to-own option: consider buying used products. Whether you need a washer or want an Xbox, you can often find used versions in great condition at thrift stores, such as the local Salvation Army or Goodwill, or on Craigslist. Whatever you need, it doesn’t have to be new to get the job done. And you don’t have to rent-to-own to afford it.

Joe Veenstra is an attorney at Johns, Flaherty & Collins. For a consumer lawyer in La Crosse WI, call Joe at 608-784-5678.

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