Saturday, March 17, 2012

Beware Of The Rent-To-Own Trap


So you want that laptop computer. Only problem is you don't have the $750.00 to buy it, so you're off to your local Rent-to-Own store, and there it is, shiny, sleek, right in front of you. Or maybe you just moved, and need a new living room set, but after coming up with the first month's rent and security deposit, you just don't have a thousand dollars for that sofa, loveseat and tables. Before you fall into the Rent-to-Own trap, read on.

The Rent-to-Own business has over 4 million customers, more than 8,600 stores and rakes in over 7 billion dollars in annual sales. And their number one trap? Fooling people into focusing on the minimum payment, and not the total cost. For example, that same laptop that would cost you $750.00 in the store, will end up costing you three times that at your local Rent-to-Own store. In most cases people are unaware that these Rent-to-Own businesses can charge customers exorbitant interest rates as high as 300% or more!

But perhaps even more disturbing is the fact that Rent-to-Own companies specifically target minorities, and low income families. It is no mere coincidence that stores such as Rent-A-Center and Aaron's are located in mostly inner city neighborhoods, or in areas with a high concentration of minorities. Take, for example, the Carter St. and East Ridge Rd. area, while it's technically the Town of Irondequoit, it's on the edge of Rochester's eastside, an area with a high Latino and African-American population. There are not one, not two, but three Rent-A-Center locations on East Ridge Rd. And all three are located within a few blocks of each other! Coincidence? Not. These companies know exactly what they are doing. Much like inner city neighborhoods are littered with liquor stores and check cashing businesses, so too, one can find Rent-to-Own stores preying on single mothers, minorities and people on public assistance.

A few years ago, a young woman reached out to me via email, asking for some advise. She was renting a boombox stereo, from a Rent-to-Own store. This same boombox would have cost her about $150.00 at any store. Well, she was paying $15.00 per week for 36 weeks, which means that this same boombox, that she would have paid $150.00 for at a store, would end up costing her $540.00. That's 360% interest! In her email to me, the young woman described an incident which reminded of me of something I had previously heard about how these Rent-to-Own companies initimidate and harass innocent people.

One day she heard loud pounding at her front door. Not knocking, pounding. When she opened the door, she found two employees from the Rent-to-Own store. They were angry and demanding payment. As it turned out, she was a couple of days late on her payment. She paid the employees, and called the store and complained to the Manager about the unprofessional and rude conduct of the employees. The Manager was very non-chalant, and said he would talk to the employees. He almost seemed to justify his employees' actions, by explaining to her that alot of people skip payments and therefore, they (the store) needed to be aggresive. She asked me what I thought she should do. My answer? Quite simple, don't Rent-to-Own!

Throughout the country, Rent-to-own companies have come under fire for their questionable business practices. In 2006, Rent-A-Center settled for $7 million in restititution and $750,000 in civil penalties for deceptive businesses practices in California. The State of California claimed RAC, in violation of state law, illegally misrepresented merchandise prices.

In New Jersey, Rent-A-Center paid out $109 million into a restitution fund, after a class-action lawsuit accused the company of deceptive business practices, and in Wisconsin, Rent-A-Center agreed to pay $8.4 million to settle allegations it cheated customers.

In the state of Virginia, Rent-to-Own businesses are allowed to file felony criminal charges against individuals who fall behind on payments. Virginia isn't the only state with laws permitting criminal prosecution, the Wall Street Journal recently reported that more than a third of U.S. states allow rent-to-own customers to be jailed if they can't pay. Critics believe this is creating a modern-day version of "debtors' prisons".

In Atlanta, Georgia, a lawfirm has filed a class-action lawsuit against Aaron's Inc. concerning the company's leasing practices at its 1,900 stores. Aaron's leases furniture, appliances and electronics, promising customers that after a certain number of payments, the customer will own the items. However, the lawsuit alleges that Aaron's has breached its lease agreements by refusing to provide pay-off information to customers. The lawsuit also accuses Aaron's of using false advertising, and misrepresentations in order to induce customers to enter lease agreements.

And right here, in New York State, Senator Chuck Schumer called Rent-to-Own companies "one of the most despicable industries around". Schumer's staff found a 37 inch television at Rent-A-Center for 104 weekly payments of $31.99 each - a total of $3,326.96. The same tv could be purchased for $850.00 at Best Buy.

Perhaps, Brooklyn, New York Reverend Taharka Robinson, who has been arrested for his protests against Rent-A-Center's practices of preying on minorities and low income families, said it best "They prey upon the financially illiterate in certain communities".

Butthe most important question is: Who's really to blame? The answer, is quite simple. The customer! Rent-to-Own businesses are supplying a demand. And the demand comes from people who make these businesses thrive. Two very important words: "Delayed gratification", meaning a person's ability to wait in order to obtain something that he or she wants. And unfortunately not many of us can, delay gratification. We want it now... we have to have it now. And, by wanting it now, and having to have it now, we are keeping these corporations in business, and as a result allowing them to continue preying on minorities and low income families.

After all, you've never seen a Rent-A-Center in Pittsford, have you?


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