The Senate passed legislation Wednesday that aims to regulate the business practices of rent-to-own companies in the state. The measure passed on a voice vote, and is now on its way to the House.
Sen. Becca Balint, D-Windham, a sponsor of S.73, called it a “compromise bill” that will protect consumers but will not chase rent-to-own companies out of state.
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 retail cost of the product.
The bill’s supporters say low-income people are drawn to low monthly rates, but the ownership costs are often many times what the item retails for elsewhere. If customers fall behind on payments, the items are repossessed. Few customers actually wind up owning the items they are making payments for, and if the returned items — which are often used — are considered damaged, the companies sue their customers, according to advocates.
Rent-to-own companies say the service allows people who have poor credit ratings and cannot secure loans or credit cards to obtain items they would otherwise be unable to own.
S.73 “continues to give people who want it the rent-to-own option, and we heard from quite a few people who didn’t want us to crack down on rent-to-own companies to the point they would leave,” Balint said.
“Where many of us felt uncomfortable is the extent to which many customers were paying 300 to 400 percent over what the cost of the item was,” she said.
The bill requires rental companies to set a maximum cash price for each item and list the cost of comparable products at retail stores. The rent-to-own companies must also disclose onsite whether the item is new or used, when the merchant acquired it and the number of times a customer has taken possession of the product under a rent-to-own agreement.
There are additional disclosure requirements for the rent-to-own agreement, too, 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 has any existing damage. Finally, when customers miss a payment, they have a six-month window to resume making payments and remain eligible to own substantially the same item.
“This legislation creates important consumer protections and looks to other states to implement meaningful regulations that make the industry more consumer-friendly,” said Falko Schilling, with the Vermont Public Interest Research Group, part of a coalition of advocacy organizations that are pushing for the bill’s passage.
Portions of the bill are modeled after existing laws in Maine, and at least nine other states have similar laws regulating rent-to-own companies.
Previous efforts to pass rent-to-own regulation have died in committee, but this session the proposal got a boost from Gov. Peter Shumlin, who threw his support behind S.73 at a Statehouse news conference.