Brenda Brown relies on small disability payments to cover her living expenses, but at any given time, monthly payments to the local rent-to-own center for furniture and electronics eats into her meager income. The amount she pays on the used couch she is leasing from Aaron’s in Barre never seems to go away. The East Montpelier woman says she didn’t realize her $46 a month payments would go on so long.
“I’ve been renting a couch for three years,” Brown said. “It’s now getting down to the end. I called to see what the payout was and it was still at 100 something dollars.”
Robbie Britch of St. Albans lives on $800 a month disability payments. Desperate to keep up with laundry for three children, Britch signed up for weekly $20 payments for a front-loading washer and dryer from the local Rent-A-Center. She was told the total cost would be $600. Later, Britch found out the unit would cost $1,300. The appliances kept breaking down, and every time the center repaired the unit, they added more time to her contract.
Frustrated by the extended payments, which she says went on for 65 weeks, Britch didn’t pay the last two weeks. Shortly afterward, the company threatened to take her small claims court.
Advocates say low-income people are enticed by low weekly and monthly lease rates offered by two national chain rent-to-own stores doing business in Vermont, Rent-A-Center and Aaron’s. The companies lease used and new furniture and electronics at 14 locations in Vermont for two and a half to four times the actual cost of the product, advocates say. And when lessors don’t make the payments, the items are repossessed.
Most of the furniture available at the Aaron’s in Barre is advertised in the store as “preleased,” meaning that the couches, beds and recliners were used by someone else until the items were returned or repossessed. “The Hudson” model, a fabric covered, used couch and chair set is selling for a monthly payment of $224.99 for 24 months. The total cost with “lease fees”? $5,939.51. A 60” flat screen Samsung TV costs $169.99 a month or about $2,000 after 12 months. The price at Walmart? Half that.
If a preleased or new item is considered “damaged,” the companies sue people like Brenda and Robbie in small claims court. Three hundred and seventy claims against low-income Vermonters have been filed by Aaron’s and Rent-A-Center, according to Christopher Curtis, an attorney with Vermont Legal Aid. And the companies are winning judgments because customers don’t want to face going to court.
Representatives for the rent-to-own companies argue they are providing a service to people who have bad credit ratings and can’t get loans or credit cards to buy goods.
Sen. Kevin Mullin, R-Rutland, has introduced a committee bill in Senate Economic Development, Housing and General Affairs, that would put new restrictions on the rent-to-own industry in Vermont. The legislation mandates that the companies list comparable cash prices for the products available at other stores in the area. The leasing businesses must also calculate the effective annual percentage rate for interest on the products. The total amount of interest allowed would be capped at 24 percent under the proposed law. In some cases the annual percentage rate (APR) charged for leases on electronics or furniture is as high as 400 percent, according to documents provided by Vermont Legal Aid. In one case, a customer paid $150 a month for a laptop computer over a 12-month period for a total of $1,800.
While there are existing consumer protection laws on the books, advocates say the national retailers have circumvented the regulations and are exploiting low-income Vermonters. Instead of telling customers how much they are paying in interest on leases, the companies charge exorbitant lease fees.
Housing advocates say some low-income families don’t know how to deal with the Hobson’s choice of fighting the companies in court versus missing rent payments and facing eviction.
Curtis, of Vermont Legal Aid, said one family in southern Vermont had to choose between paying the local rent to own store and paying for their children’s Dr. Dynasaur premium.
“Guess what they did? They paid the rent to own store,” Curtis said. “No one is going to sue you if you don’t pay your health care premium when that lapses. You are exposed to the financial risk of a major medical disaster, but you’re not being taken to court for that. That’s the kind of decision Vermonters are having to make. People are facing untenable situations where they didn’t know what they were agreeing to.”
Byron Stookey, a retired history teacher who volunteers for the Brattleboro Area Affordable Housing Agency, says families have been destabilized by rent-to-own agreements in the Brattleboro area.
“People were at risk of eviction because they were paying the rent-a-center instead of the rent,” Stookey said. “They were making that choice because their furniture would be repossessed and they would have nothing to show for all the money they had paid over the months.
“We began talking with people and seeing the same thing: Poor people making rent-to-own payments with money that should go to basic needs,” he continued.
Stookey describes the companies as “predatory” because they target low-income people. When customers miss a payment, the companies repossess the couch, or laptop or TV. On average, merchandise from a rent-to-own company is bought 3.6 times, Stookey said. Only 20 to 25 percent of people who lease goods from Aaron’s or Rent-A-Center achieve ownership.
Used goods are the stock in trade, Stookey said. At one Aaron’s store, he counted 26 used TVs out of a total of 30.
Stookey said the annual interest rate calculation and a comparable, average cash price of the product must be disclosed to customers. The industry, he said, must also be held accountable to state consumer laws regarding truth in lending, usury and installment sales.
“They maintain, remarkably, that they are neither selling anything nor extending credit,” Stookey said. “Their account of what they do zigzags through the law and regulation.”
Representatives from Rent-A-Center who attended the Senate hearing oppose new regulations. They say stricter disclosure rules are unnecessary.
Kevin Wright, another district manager for Rent-A-Center who supervises five stores in Vermont, said when you walk into a center everything has a price on it with a weekly rate, a monthly rate, a full term price and a 90 days same as cash price. “So there is no confusion as to what the payments could be,” Wright said. “There’s a lot of information because this is what we’ve all agreed to work on and try to educate the consumer on.”
“The money you put on that product, it’s yours. We don’t want you to make payments if because of life circumstances if you are able to afford it again,” Wright said. “We want to keep the relationship going with the consumer.”
Jay Fish, a district manager for Rent-A-Center who runs two stores in Vermont, says says customers can return goods anytime. “There’s no penalties,” Fish says.
“It hurts me to hear some of their stories,” Fish said. “If only my customers would tell me they are struggling to pay rent versus making payments. There are so many different options. I can find them less expensive items. There’s a lot of choices, if i knew what the customer needed.”
Margaret Laggis, a lobbyist for Rent-A-Center said if a customer went to Best Buy and bought that same product with a credit card, the customer couldn’t return the product to Best Buy with no penalty. “You’re stuck with that product and you’re stuck with that payment until the end,” Laggis said.
Typically, in other industries if a product is repossessed, the customer still owes money on it and the company take the consumer to small claims court, Laggis said.
“If Rent-A-Center comes and gets it, you don’t owe Rent-A-Center a penny and you can go back a month later or two days later or whatever it is and pick up right where you left off and you don’t lose any of the money you’ve already spent,” Laggis said.
Advocates say customers who delay payment risk repossession of the item or seeing additional payments tacked on to the plan.
AARP Vermont, which supports Mullin’s bill, estimates that 72 percent of rent-to-own customers earn $36,000 a year or less. The industry, meanwhile has expanded from 2.7 million customers in 2004 to 4.8 million customers in 2012. The industry is worth $8.5 billion.
