If you need a new washer and dryer or a set of furniture and don't have either the cash or good credit to purchase them, you might choose to rent the household goods with an option to buy them later.
It is called rent-to-own, a transaction commonly entered into by lower-income consumers who – much to their surprise – could end up owing nearly quadruple the typical retail price and a heavy financial burden in trying to keep up with payments.
What’s more, if they fall behind in payments as little as a day, they could face hounding phone calls, visits to their homes and even threats of jail.
If the merchandise had been purchased with credit, where laws require disclosures and debt-collection protections, these customers could find help.
But there’s little state and federal regulators can do to help consumers who acquire household goods from Rent-A-Center, the country’s leading rent-to-own company with nearly 2,500 stores across the U.S. and annual revenues of $3 billion.
A joint investigation by Raycom News Network and Nerdwallet, a personal finance website, turned up lawsuits, complaints and customer records showing Rent-A-Center’s lease agreements and lax government regulation leave consumers vulnerable in these transactions.
An analysis of more than 3,000 complaints filed with the Federal Trade Commission and attorneys general in 15 states revealed customers face high prices and exorbitant fees. They sometimes struggle to get an accurate payment history from the company. They are subject, in some instances, to harassment and threats of arrest when payments are overdue. The contract terms overwhelmed some customers when they fell sick or lost their jobs.
Rent-A-Center, and other rent-to-own companies, do not answer to the Federal Trade Commission or the Consumer Financial Protection Bureau. Rent-A-Center, a publicly-traded company headquartered in Plano, Texas, has spent more than $7.2 million lobbying Congress in the last decade to restrict regulations, according to data collected by the Center for Responsive Politics.
If you’re considering a rent-to-own deal or are already in a contract, here’s what you need to know.
Some 47 states have laws on rental-purchase agreements that “are favorable to us,” Rent-A-Center told its investors in March. New Jersey, North Carolina and Wisconsin have strict regulations over consumer transactions, including rental-purchase agreements.
The company said in an email attributed to Executive Vice President Chris Korst that "those (47) state laws provide comprehensive, substantive consumer protections that in many instances go far beyond those provided to credit consumers. Finally, all of those statutes provide consumers with robust remedies in the event of violations, and confer enforcement jurisdiction to the states’ attorneys general."
Ohio Attorney General Mike DeWine said the industry needs tougher regulation.
“Under current law, it’s perfectly legal what this company is doing,” DeWine said. “But this is an industry that is really hurting poor people.”
Rent-A-Center appeals to consumers who earn less than $50,000 a year and lack the credit score or savings account to buy products outright or charge them on a credit card, according to its annual investor report. Many of its stores are located near low-income neighborhoods or military bases. They specialize in appliances, furniture, computers and electronics with the slogan, “Big Brands. Small Payments.”
The stores' showrooms offer new and used rent-to-own goods that require customers to pay a weekly, bi-weekly or monthly fee. The company says its business model offers a hassle-free option to traditional purchasing that allows customers to return merchandise at any time, for any reason, as long as they aren’t behind in payments.
To obtain ownership of the products, customers make payments for up to three years, paying as much as five times what they would pay at traditional retailers such as Best Buy or Ashley Furniture.
But, on average, only 25 percent of rented items actually end up being purchased by customers, company and court records show.
DeWine calls Rent-A-Center “a rip-off.” Ohio is home to more than 140 Rent-A-Center stores, the third highest in the nation.
The company denied repeated requests for either on-camera, in-person or telephone interviews, responding only to written questions.
“Our mission is to improve our customers’ quality of life, providing access to durable goods for cash- and credit-constrained consumers and serving as a welcome hand up amid a sea of thumbs down,” wrote Gina Hethcock, senior manager of public and community relations for Rent-A-Center.
The price paid
For many struggling consumers, like Jessica Gonzalez, a Miami mother, Rent-A-Center is a source of last resort. She walked into a Florida Rent-A-Center in the spring of 2015, looking for a good deal on a used bedroom set. She signed an agreement for a $500 washer and $1,250 for the furniture. But over time they cost her more than $4,000, she said.
“I knew I was getting ripped off,” the 30-year-old legal secretary said.
Only 11 states have laws that limit how much rent-to-own companies can charge to acquire ownership: California, Connecticut, Hawaii, Iowa, Maine, Michigan, New York, Ohio, Pennsylvania, Vermont and West Virginia.
Those limits range from 2 to 2.4 times the cost of the product’s cash price, according to the industry’s trade group, the Association of Progressive Rental Organizations.
“It’s a horribly, horribly expensive way to watch a TV or to have a bed,” DeWine said. “People should do anything they can to avoid doing this.”
Raycom Media and NerdWallet compared Rent-A-Center costs to retailers such as Amazon, Best Buy, Target and Wal-Mart, finding noteworthy price gaps. For example, a VIZIO soundbar listed on Amazon for $148. To obtain ownership of that same product through Rent-A-Center, a customer would pay nearly $780.
A Rent-A-Center spokeswoman said its pricing is determined based on a number of factors, including that customers can return the products at any time without penalty.
The cost of being late
Nine out of every 10 complaints filed with government watchdog agencies focused on Rent-A-Center’s debt-collection tactics. Customers said employees peeked through the windows of their homes, rifled through their mailboxes, blocked their driveways, kicked in their doors. Some said that they even received repeated calls in their hospital rooms. One woman said she was in ICU at the time.
The company says that it does not have to abide by the federal Fair Debt Collections Practices Act, which bans debt collectors from harassing or threatening consumers because it is not considered a debt collector.
Yet the company’s aggressive debt collection tactics prompted the Washington State attorney general to file a civil lawsuit against Rent-A-Center in 2009. In its agreement to settle the case, the company vowed, among other things, to stop harassing customers for payments.
Rent-A-Center told the attorney general’s staff all such allegations were false. The company spokeswoman said that such actions are “expressly prohibited” by company policy.
It is not only customers who face Rent-A-Center’s wrath. Parents, friends, co-workers and others who have no ties to the rental contract but whose name was listed on the rent-to-own agreement as a “reference” have also been contacted.
Unlike a co-signer to a loan, a reference might not know that someone has used his or her name to vouch for the customer. Rent-A-Center requires the names of two relatives and two others.
Russell Hay, of Columbus, Ohio, had no idea Rent-A-Center had been harassing his elderly parents until he answered their phone during a visit. He said his brother, who is estranged from the family, listed their parents as a reference for something he rented then failed to pay or return. He said his parents were contacted repeatedly.
“It got to the point where my parents wouldn’t even answer the phone,” said Hay. “They were scared it was Rent-A-Center.”
Under existing laws, these contacts are “perfectly legal,” Ohio Attorney General DeWine said.
Rent-A-Center’s policy says that employees may contact a reference only once, the spokeswoman wrote.
Laws in many states allow companies to pursue criminal charges against customers who renege on rental payments and don’t return rented items within a few days of a written request by the company.
Murray Newman, a former Texas prosecutor, said he pursued criminal cases at Rent-A-Center’s request. He said he could justify filing theft charges against consumers if they rented an item, never made a payment and refused to give it back to the company.
But, Newman added, Rent-A-Center didn’t make such a distinction, and went after customers who fell behind on payments with no intent to steal furniture.
Gonzalez, the Miami mother, said the closer she inched toward ownership, the more aggressive the collection tactics became when she fell behind on payments.
She said she also was threatened with arrest and suspected that Rent-A-Center wanted the merchandise back so it could be re-rented. By then, she had paid more than triple the products' initial price tag.
Gonzalez said she has learned from what's become a devastating mistake. She now shops on the second-hand market.
Contact reporters Jill Riepenhoff and Megan Luther at firstname.lastname@example.org and email@example.com, respectively. Reporters Brad Wolverton and Alex Richards of Nerdwallet also contributed to this report, as did The Texas Tribune and the Sarasota Herald-Tribune.