‘Rent-To-Own’ Stores Lambasted For ‘Exorbitant’ Interest Rates

“Rent-to-own” stores fail to disclose average interest rates of 100 percent for appliances and other goods, often targeting poor and minority consumers without credit cards, a liberal consumer group said Thursday.

But a spokesman for the $4-billion-a-year industry insisted that its practices are fair and prices charged by rent-to-own stores are based on their cost of doing business.

Rep. Henry Gonzalez of Texas, the senior Democrat on the House Banking Committee, said he plans again to propose legislation to require rent-to-own stores to disclose annual interest rates on purchases. Two similar measures that Gonzalez had put forward in previous years failed.

The rent-to-own industry “targets low-income and minority consumers by binding them to contracts that result in payment of exorbitant sums,” Gonzalez said in a statement. He said the industry is not required to follow federal consumer protection laws such as the Truth in Lending Act and the Consumer Leasing Act.

In its report, the U.S. Public Interest Research Group found average annual interest rates of 100 percent and as high as 275 percent. The survey also found that the rates were not disclosed and that 37 percent of items in the stores were not clearly marked whether they were new or used.

Of the 124 rent-to-own stores surveyed, 59 charged annual rates of more than 100 percent - more than five times the typical rate on credit cards. The group said low-income people often turn to the stores when they do not qualify for credit cards.

Purchasing appliances, furniture, computers, jewelry or other merchandise from rent-to-own stores costs two to five times as much as buying those items at department or discount stores, the report said.

The report used the example of a $739.95 refrigerator, which would cost an additional 20 percent, or $122.64 in interest, if paid for by credit card over 18 months. But for the same refrigerator in a rent-to-own store, a consumer would pay an annual interest rate of 87 percent, or $610.05, in addition to the refrigerator’s listed price, the report found.

Better alternatives, the consumer group said, are checking classified ads for used items or buying items on layaway plans.

However, an industry spokesman disputed the findings.”Our prices are based on the cost of doing business,” said Bill Keese, president of the Association of Progressive Rental Organizations.