Yesterday VPR reported on new legislation that would cap interest on rent-to-own purchases and require stores to clearly indicate the total price that the consumer will pay after installments to own each item. Advocates argue that these businesses target low-income consumers who also often lack proper financial education. Many lawmakers also agree that it is time to impose stricter regulations to protect those who are most vulnerable:
The rent-to-own industry has mushroomed into an $8.5 billion business nationwide. But advocates for low-income Vermonters say that stores like Rent-A-Center are profiting too heavily from the desperate circumstances of poor people. This script from a television commercial for Rent-A-Center is designed to get people in the door: “Red hot deals are here at Rent-A-Center. Right now you can make the hottest brands yours for as low as $17.99 per week … Choose a red hot deal on a new 50” Toshiba LED Smart TV, only $19.99 per week.” And East Montpelier resident Brenda Brown says it works. “That’s where it gets you. That’s where people go in and, like, OK yeah, we can rent, you know, hey, I can afford that or $12 a month,” Brown says. Brown speaks from experience. And she shared her story with the Senate Committee on Economic Development, Housing and General Affairs Wednesday morning. Brown has long since returned most of her rented goods, having learned she’d end up paying three or four times their retail price if she ever wanted to own them. But she says her low-income peers – Brown lives exclusively on disability payments – aren’t as wise to the marketing ploys of places like Rent-A-Center, or Aaron’s, the two companies that dominate the rent-to-own sector in Vermont. “If you don’t have the money, yes, it’s there, but in the long run they’re getting you one way or another,” Brown says. People who can least afford premium prices on retail goods are those most attracted to rent-to-own deals, advocates say. Credit history is a non-issue. And for very little money down, they can outfit their apartments with a washer and dryer, bedroom set, or flat screen television – items they might never be able to afford in a store. But Tory Emery, a social worker at Upper Valley Haven in White River Junction, says stores aren’t doing enough to make sure low-income, and often financially illiterate consumers, know about the above-market prices they’re actually paying. “People in poverty are vulnerable,” Emery says. “They’re vulnerable to seeing a shiny carrot placed in front of them that they can have what other people have.” Senate lawmakers are considering legislation that would require rent-to-own stores to spell out more clearly for customers the all-in price of retail goods, by totaling the aggregate price of all the weekly payments that would be needed to own the item. They also want to cap the “interest rate” stores can earn on a sale. The magazine Consumer Reports found in 2011 that rent-to-own agreements feature weekly payments that can result in consumers paying the equivalent of more than 300 percent interest on retail purchases. Lawmakers think the number should be capped at 24 percent.
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