Rent-to-own stores get 'capped'

[quaoar]

http://www.nj.com/statehouse/ledger/index.ssf?/base/news-0/1142489227199640.xml&coll=1

Justices, reversing lower courts, rule such businesses cannot charge 80% or higher interest

BY ROBERT SCHWANEBERG
Star-Ledger Staff

Consumers who rent furniture, televisions and other goods with an option to buy them cannot be charged more than 30 percent interest, the New Jersey Supreme Court ruled yesterday, putting the future of "rent-to-own" stores in doubt.

The ruling was a resounding victory for consumer organizations that have long accused those businesses of preying on the poor. It reversed a state appeals court decision last year that said Rent-A- Center, the industry leader, could legally charge more than 80 percent annual interest on rent-to-own contracts.

In a 6-1 decision written by Justice Virginia Long, the state's highest court said Rent-A-Center's contracts are subject to the Retail Installment Sales Act -- which in turn is covered by the 30 percent annual interest cap set by the law against usury.

The court rejected Rent-A-Center's arguments that its contracts are different from retail credit agreements and exempt from the interest ceiling. The installment sales law, Long wrote, was intended to "protect consumers from themselves and rapacious sellers."

[Eric J in MN]

1. Notice that it was the NJ Supreme Court who made this pro-consumer

ruling, and not Bush-appointed federal judges.

[LostinVA]

2. Yay! My quite blue home state!!!

[Blaze Diem]

3. Ren-A-Center will take it to the Supreme Court,

where it will be overturned.
A corporation's gotta make a profit, afterall. This is the New American way.

[SlavesandBulldozers]

17. i've noticed that New Jersey has some very good pro-consumer laws.

n/t

[Marie26]

4. Good. nt

[napi21]

5. More than 20 years ago a friend of mine told me how a guy he

went to school with was really rolling in the dough! My friend and I were both accountants and slthough not starving, we were working 80 hrs a week to remain lower middle class.

He told me the guy had started a "rent to own furniture store". I remember remarking how strange I thought that was, and didn't think there was that much profit in it. Obviously, I didn't know about the 80% interest!!!!! WOW!

[flvegan]

6. They'll just change the contract.

They'll call it "rent with an option to buy" or something. Rather than the property conveying to the renter after payment 12 or 24 or 36 (or whatever it is), they'll state that after said last payment, the property must be returned to the store, unless renter wishes to exercise his/her option to BUY the furniture for $1 or $5. It'll be nominal.

If an idiot like me can figure that out in 10 minutes, don't think that their lawyers don't already have the paperwork done up.

[FloridaPat]

9. I use to rent from those stores when I needed a VCR for a week or

furniture for a month. Yes, it's easy to see how your're getting ripped off if you rent to actually own. But I notice they brought the numbers down to where credit cards are, not where usury is. Usually a private individual can only charge 10% because anything else is considered usury - unless you're a corporation.

[NaturalHigh]

7. When will something be done about "payday loan" ripoffs?

They are charging interest of up to 350%. When is something going to be done about them?

I thought we had usury laws in this country. Taking advantage of poor people like that is reprehensible.

[flvegan]

10. They're going after that here in Florida.

The "lenders" are seen as backing down a little, as well. It's obscene, though.

[Tesha]

12. "HAD" is the operational word in your posting. (NT)

[sarcasmo]

15. In our depressed economy here in West Michigan these vultures have

popped up on every major corner in the area. Once they suck you in you are screwed. Pay Day Loans are a very bad idea, tell all of your friends.

[NaturalHigh]

25. You hit it on the head.

VULTURES

Enough said.

[hang a left]

22. I agree it is horrible.

The bigger issue IMO is paying people a living wage.

[hang a left]

8. I agree they shouldn't be able to charge 80% interest. But here is

why rent-to-own stores are good.

Where I live there is a large mexican immigrant population. I would suppose that there are approximately half of them that are here illegally. These are very poor people. These people would never be able to qualify for a furniture store credit card, or a department store credit card. Basically anyone can qualify to buy something at these stores.

These rental centers sell new appliances, televisions, and furniture. I would imagine the only way these people would ever be able to own new furniture or a new appliance would be through one of these stores. BTW the furniture is really cheap and ugly. I am sure that these people make a conscious decision to buy this stuff. That is their choice over a garage sale somewhere. I am sure they have a very high delinquency rate. As well as there probably isn't a real good market for this cheap used furniture.

My only point is this: These poor people who work hard and love their kids have an opportunity to have something nice where they live. It is a choice they make. They can buy something from a garage sale, or they can buy something brand spanking new to make their existence here a little nicer.

[politicat]

11. And with things like appliances, they can be necessities.

If the family owns their house - or has a mortgage, or has bought a mobile home on an owner-financed contract (as happens in my area a lot - and something goes kerflooey, the only way to get a new fridge or stove may be to rent to own.

Doing so on 80% interest is not appropriate, but if a family needs a new fridge, they'll either do it on RTO or not eat for several weeks to save up. I'd rather their kids had access to milk and vegetables.

[ret5hd]

14. think how much lower the delinquincy rat will be at 30%...

think how much more "something nice" they could afford at 30%

think how much fairer the final price for "cheap and ugly" is at 30%

just sayin...

[niallmac]

20. NO!

WRONG!
Poor Mexican immigrants, poor minorities are NOT god given cash cows for interest predators.
I say to ANY immigrant who is fortunate enough to make it to the U.S. and be employed at a better wage than they
ever had a chance for in Mexico or wherever... : SAVE YOUR MONEY. Do NOT be dazzled by American consumer B*** SH*T.
Your obligation is to your families future not the kids immediate clamoring for a large screen Tee Vee.
If you get sucked into huge never ending interest payments for something that wore out years ago then how will
you feel when you would rather put that money into the education of your children?
Dear Hang a left, I disagree with lots of stuff here on DU but never as much as I disagree with your
logic on this one.

[hang a left]

21. Well, you are entitled to disagree.

Here is my thinking:

You could make the same statements about people that have their homes mortgaged to the hilt, and their 6 department store credit cards near their max, and their 4 bank credit cards near their max. It is not my job to re-educate them on how to live within their means.

It is these people's choice. They can buy somebody's used couch and twin beds at some garage sale, or they can rent to own something new. They do have a free will, just like every other human being that lives in this country.

These stores don't sell big screen TVs. They sell off brand 27 inch TVs, off brand appliances, and cheap furniture, but they are new. They can make the cramped livings spaces that many live in a nice and comfortable home for them.

These are proud people. They are good, hard working people. They are shunned by most of the white people in the community. 70% of the parents don't speak fluent english, and their isn't a computer in the home. Their children wear hand-me-downs, or off brand clothing from a Walmart or the swap meet. There are at least 3 children in the home and, a lot of the time, more that one family lives in the 2 bedroom apartment or other rental. These children's clothes are always clean and pressed. Their hair is always combed. They will never wear a Volcom jacket to school, like their white classmates. Not that that is the end of the world, but certainly you remember what it was like to be in middle school or high school. In my district, the racist way they drew the lines, some of these kids go to a school that is 70% upper middle, middle class, and white. The other schools in the district are more balanced.

Less than one percent of any of these kids will go to college, if that. They will always live hand to mouth. There should be no illusions that their lives will ever be any different. Actually what will probably happen is that more of the "white" folks will join them in poverty.

IMO, if they can make their home a nice and comfortable refuge for them to return to everyday, so be it. If it makes them feel good to have a few new things in their homes, so what. If they are willing to make a monthly payment for that luxury, that is their right and choice.

[NashVegas]

43. This White Girl Never Owned a Piece of 1st-Hand Furniture til She Was 35

Paying 80% interest rates is a good way for a poor person to remain poor. Some of the smartest, wealthiest people you'll ever meet drive used cars they paid well under $25k for. Under $5k even.

It is not my job to re-educate them on how to live within their means.

If they are your neighbors, it wouldn't kill you to.

Lately I have begun to suspect the breakdown of community, of people across social and economic lines, has done just as much to widen the gap between the haves and have-nots as any outrageous CEO salary. Regardless of your income, when you are plugged into your community you get to hear about or are offered deals by people who know you're in need. All it takes it the willingness to sacrifice a small amount of pride and retaining the notion that people who have more money than you aren't necessarily assholes.

[hang a left]

48. Hi Crisco

They are not my neighbors. However I do know many of the children in our community I have spoken of from volunteering in the schools for years. I know some of the parents by face but we do not really talk to each other because I am not fluent in Spanish. I don't look down on them at all. In fact I like them for the reasons I have stated in my other posts. I treat them with kindness and respect and I love their kids.

I don't know anyone personally that has made a purchase at the one rent-to-own store that is in our city. I only have experience with the immigrant population through the children I know.

There are many bigoted people that live here. It is full of Bushbots and Rush fans. I am in Cunningham's old district. My liberal existence in town is not going to change things for them. However we do our little part. We always donate old clothing, shoes, toys, bikes, to the Catholic church. We have donated old computers from our business to the school for the children without one in their homes to have an opportunity to win. We have an immigrant gardener, and we hire day laborers to do work around our home or to move office furniture.

My kids will never grow up and be racist assholes. They have the same values as I. I do my small part to have a positive impact.

[NashVegas]

51. That's Great

We have an already large, and growing, immigrant population in Nashville. Mexican, African, ME, Asian, you name it.

I tried tutoring English last year with Mexicans but eventually gave it up. One of the most difficult things to get around is their "job mobility." The people I worked with are ambitious and always looking for newer, better-paying jobs and it keeps throwing too many wrenches into the session schedules.

I didn't get the idea that you look down on them, not at all. I just had a major issue with giving a nod to the 80% rate. There are ways to live within ones means and be very comfortable, if not luxurious.

[hang a left]

23. I didn't address something else in your post...

The immigrants that make it here make minimum wage. They wash dishes, clean floors, mow lawns, or some kind of work like that. There aren't any jobs that pay any better than that for an immigrant who can't speak the language. Some may work as day-laborers, those are the luck ones, as they get paid under the table and may make a buck or two more an hour than the minimum wage. However, it is not consistent employment. They may only work a couple days a week.

The cheapest 2 bedroom rental here is around $1000 a month. $6.75 an hour multiplied by 160 hours is $1080 before taxes. There is also gas and electric. Also you must have cable to get television reception here. Then there is transportation and food. You can see where I am going here. These people have about the same savings rate as the rest of the country does at this point. I think the last time the national savings rate was reported it was something like -01%.

[niallmac]

36. I am a D minus Capitalist.

I admit it. My beef is with the usuary. I am not sure it is morally defensible.
What would Jesus call his Rent To Own Store?
There is an ugly side to our system of society that is hidden from our view.
Hurricane Katrina forced America to have to look at its poor.
Good Morning America doesn't have a lot of shows featuring what capitalism would call
our 'losers.'
America has winners and losers. The Rent To Own guy is a winner. The customer is a loser.
There is to my observation a tendency in America, yes, on DU to feel smug if we have somehow 'won'
the financial struggle amidst those who had the same chance as we.
Compassion is not what legalizing immoral usuary is all about.
I don't want to win on someone else's back.
I'm a loser and proud of it...but I'm wise to those stores!

[hang a left]

41. The usury is indefensible, I couldn't agree with you more.

I am a loser too. :hi:

[BiggJawn]

24. A "Choice"?

Sounds like "Hobson's Choice", that is to say NO "choice".

Even if they pay off the contract and avoid repo or other legal action, they've still payed L & J. G. Stickley prices for what I always referred to as "Mobile Home Furniture", Masonite and plastic, with cheap grade-3 pine for "strength".

Yes, isn't Murka a wunnerful place? Where a hard-working person can CHOOSE to get fucked up the butt by the Rich?

[Coventina]

29. What you said, BiggJawn. I can't believe I'm seeing apologists for these

creeps.

Those factory workers in the 19th century had a "choice" as well. They could starve out in the countryside or be the slaves of the factory owners.
:eyes:

I guess the labor movement was unneccessary.

Yeesh.

The only difference between these rental places and the mob is that the rental places aren't allowed to break knees.

We grew up dirt poor, but my parents either made stuff last or bought used. They could figure out a bad deal when they saw one. Preying on the immigrant population who may not fully understand the contract is just plain evil.

[hang a left]

32. I am no fucking apologist for anyone....

I provided my thinking respectfully in three different posts. You could use a lesson or two in civility.

[Coventina]

44. Wow, pot meet kettle.

In your first posts, to which I referred, you said NOTHING about the interest rates charged by these places, only stuff about "why they are good".

You only mentioned the interest rates AFTER I had made my post.
Then you come back at me with profanity and obscene gestures, claiming that you have explained yourself "respectfully".


on edit: okay reading is fundamental and I owe "hang" an apology. S/he did say they shouldn't be allowed to charge 80% interest. I was wrong on that score.

[salin]

45. um.... I don't see him posting any "why they were good"

as I read the thread you are both in agreement - I think a different poster posted the post to which you refer - and thus the reaction you received was due to misatribution of "appologistism".

Just trying to clear up what reads like a bit of a misunderstanding.

[Coventina]

46. First line of post #8 n/t

[salin]

47. that is by a different poster

hence the misunderstanding.

Post you refer to was HangLeft; poster you are talking to is BiggJawn.

[salin]

52. Oops and sorta funny

I am the one who couldn't count which thread was connected to which thread... sorry.

[hang a left]

49. I owe you an apology for getting angry.

Thanks.

[hang a left]

33. I agree on that point

The interest that they are able to charge should have a cap that is not abusive. However they will just charge more for the products they sell and get their money that way. I don't think they will sacrifice their profits because of some unfriendly regulation. It will still be a person's choice to buy that product or go to a garage sale.

[BiggJawn]

39. I know a few things about garage sales...

Seeing's how I'm a unrepentant pack-rat, and there just aren't enough yard sales to go around.

I'm usully looking for knick-knacks, gadgets that people forgot how to change the batteries, clocks the kids lost the winding keys for, etc.

Clothes, furniture, and household items are in big demand and short supply.

These rent-to-own places are the worst offenders in terms of Usury, IMO.Worse than a hock-shop.

Like that ad that was on TV a while back, "Get a brand-NEW PC for your home for ONLY $25 a WEEK!" by the time you paid it off, you had over $1500 tied up in a box that you could have gotten at Dead Sam's for $300. That's really dishonest. Legal, sure, it's legal, just as legal as $75 a sheet plywood in FL before a big blow. Is it Ethical, or dare I say "Christian" (that's a funny word for ME to be using!) ? No, I don't think so, it's predatory.

[hang a left]

42. I agree. n/t

[SoCalDem]

13. How nice.. no more than 30% interest

:puke:

[the other one]

16. Great. Now go after so-called "Instant Tax Refunds"

Read the fine print that goes along with your instant tax refund. Besides the fact that it might take longer to get your "instant refund" than your IRS refund, it is not a refund at all. It is a loan using your tax refund as collateral. The catch is that this loan can be at an interest rate up to 500%. As they will tell you at the accountant: It behooves you to read the fine print before you sign the contract.

[seasat]

18. These stores often prey on the naive and elderly.

I worked back in the late 80s for a consumer electronics store (I eventually left because they were crooked also). Several times I had little elderly folk come in and tell me that they were needing a TV but didn't want to take out credit. They thought they could get this amazing deal from a rent-to-own store without taking out a loan. These folks usually had excellent credit but terrible math skills. I would usually sell them by adding up their payments. I remember in one case I found out a little old lady was going pay about $2000.00 for a $400.00 Magnavox console TV. I got her low payments and a much better Mitsubishi Console. Her credit was perfect. The elderly just have adversions to loans. Rent-to-own stores may benefit some with poor credit but they harm a lot more in my experience.

[bleedingheart]

28. they also prey upon those people who "want it all now"

the kind of folks who think that right out of college they should have a fully furnished apartment...or the couple who just got married and wants to make their home perfect...right now...

When I was in college I remember a friend of mine who went deeply into debt on furniture and stuff. The funny part was that she spent so little time in her apartment that having it furnished completely like that was a waste of money. Meanwhile I had a table and some chairs and a mattress and that was enough.

[Mythsaje]

19. I think it's funny that the usury cap is 30%.

Hardly biblical, that one.

[BlackHeart]

26. Rip-offs:

Rent to own, payday loans and instant tax refunds. All go after the vulnerable poor. But people should have enough sense to avoid them. Why rent to own? Use a lay away plan, it might take you a bit longer to get the item but you'll save a ton of money by waiting. Payday loans; I know it's tough to budget but please try. And maybe the worst are the instant tax refunds. Just wait for your refund, it only takes a coulple of weeks.

[bleedingheart]

27. My husband's cousin got filthy rich on a rent to own store

he is also a big donor to the republican party...figures...

It amazes me that people are so stupid as to rent to own...either you don't have the money for it or you should buy something at goodwill...

I would rather sit on the floor and sleep on a sleeping bag instead of incurring such unnecessary debt.

[InsultComicDog]

34. If every one of those places closed down tomorrow

the world would be no worse off for it

[noonwitch]

30. Good, those places prey on the poor.

Layaway at a better store is a better plan if you are cash-strapped. A temporary delay of gratification never hurt anyone.

[SuperWonk]

31. What about....

refund anticipation loans that companies like HSBC make a fortune off of.

Over 100% interest - You tell me who the real crooks are???

[sheelz]

35. Rent-to-own type stores are

all over western NY and charge 100% interest. My mother-in-law's whole apartment is rent-to-own. She's had large screen tv but just sent it back along with the computer and lost all the money she paid. I've talked to her numerous times, but she doesn't care. BTW, she's a Bush supporter and will remain happy as long as she gets her SS check, Foodstamps, LIHEAP, Cable (American Idol) and buy more rent-to-own crap. :crazy:

[sleipnir]

37. To Quote Aqua Teen Hunger Force (appropriate being NJ)

Frylock:

"Let this be a lesson. Don't buy rent-to-own furniture. The terms are unreasonable and it's usually shit you didn't need anyway."

[bullwinkle428]

38. I've looked at the flyers that come in the mailbox - I can't believe what

you actually have to pay in order to actually buy the item. It's literally a license to print money!

[sampsonblk]

40. Rent-to-Own veteran here! Ask me anything

...and I will reply tomorrow.

Some of you are missing very important points: There is a way to do business with RTO companies wisely - shop smart. If you see something that you feel is overpriced, DON'T GET IT. Second, look for steals. There are dozens of items that RTO companies sell that are great buys if they have superficial damage. A big screen TV for example, with a minor scratch on the side. Who cares about a little scratch? At an RTO store you can get it for almost nothing. Can't do that at other retail stores. Third, and I have said this to a zillion customers, only rent things you know you can pay off early. Where you lose a lot of money is in paying all those minimum payments for 2 or 3 years. Make sure you NEVER do that, and you'll be fine.

Also, a short-term rental is a great deal at an RTO store. Can't do that at other retail stores either. Large companies, gov't agencies, and universities frequently rent furniture, big screen TVs and other items to use to host dignitaries or for special events. For those companies, its a great choice. They make one phone call and they get everything set up at the appointed time, and removed at an appointed time. There is absolutely no other cheaper choice for such an event than an RTO company.

Add: That said, I don't favor having the average poor family renting an expensive TV for 3 years... Not at all.

[LeftyMom]

50. A little story about RTO

Once upon a time when the earth was young and there was a Dem in the White House (okay, it was 1999) a young woman came into the electronics store where I worked with a baby on one hip and a flyer in her hand. She was planning on buying a camcorder to record the baby for out-of-town relatives and had looked into getting one from one of the rent-to-own chains, but she wanted to check and see what it cost because she wasn't sure they were telling her it's correct value. It was a quiet weekday morning and I had nothing to do really, so I took a look at the paperwork they'd given her.

What she was looking at was a very basic 8mm camcorder. No flip-out screen, no image stablization, not much zoom. We carried it as well, but it was the cheapest model we offered. They had told her it was worth $600 (edit: over the life of the contract it would cost much more than that,) we normally sold it at $299 but it was on sale that week (as it was every six weeks or so) for $269.

Long story short, I sold her a slightly nicer camcorder (the 8 mm wouldn't have worked to send video to the relatives, she had no VCR to copy the tapes to, so I sold her a VHS-C model so she could send the relatives back east the adapter and they could play the videos back) on layaway for a little over $300. She came in every week for the rest of the month and put money down on it, every friday afternoon like clockwork. On the fourth week, she had already paid enough to take it home. She looked very proud of herself. I think, judging by the tone in her voice as I bagged her purchase up for the bus ride home, it was the first nice thing she'd ever bought for herself. It kills me that some jerk tried to take that feeling away from her just to make a little money off of somebody who couldn't really afford it.