The Senate Economic Development Committee voted Tuesday to approve legislation regulating the business practices of rent-to-own companies.
The bill, S.73, passed 4-0 with Sen. Ann Cummings, D-Washington, absent.
Two rent-to-own companies, Aaron’s and Rent-A-Center, operate 14 stores in Vermont, where they lease new and used furniture and electronics for what advocates say is two and a half to four times the actual cost of the product.
The bill’s supporters say low-income people are drawn to low monthly rates, but if they fall behind on payments the items are repossessed. Few customers actually wind up owning the items they’re making payments for, and if the returned items — which are often used — are considered damaged, the companies sue their customers, according to advocates.
Representatives of the rent-to-own companies argue that they are providing a service to people who have poor credit ratings and cannot secure loans or credit cards to buy the items.
S.73 would require rental companies to list the amount the products they carry would cost at retail stores in the area. An earlier version capped the effective annual percentage rate for interest on the leased products, but the version that passed uses caps on the maximum cash price. The change reflects language in a Maine law, one of at least nine states that have enacted similar rent-to-own regulations.
The bill also requires stores to disclose onsite whether the item is new or used, when the merchant acquired the item and the number of times a consumer has taken possession of the item under a rent-to-own agreement. There are also additional disclosure requirements for the rent-to-own agreement, including an inventory of taxes, fees and charges as well as the total cost to own the item at lease end, whether it’s new or used and any existing damage.
S.73 received a boost this session when Gov. Peter Shumlin held a news conference to voice his support, calling current rent-to-own practices “a problem that’s really hurting low-income Vermonters.”
The bill now heads to the Senate floor.
