“I understand that you’ll threaten my in-laws and try to kick my door in…But, I need tires” Why you should NOT Rent-to-Own ANYTHING

Last week, NPR ran a report on how more and more people are using Rent-to-Own (RTO) stores to get new tires.  The parting quote was a consumer saying “I understand that I’ll probably end up paying a lot.  But right now, I need the tires.”  This might not be the worst idea anybody has ever had.  But, it’s within earshot of the worst idea, I can tell you that.  

There’s a great scene at the beginning of the movie ‘Ghostbusters’ where Bill Murray’s character is conducting an experiment on college students, where he is “testing the effects of negative reinforcement on ESP”.  When one of the students is finally fed up and threatens to quit, he barks “You volunteered for this.” The student responds “Yeah, but I didn’t know you were going to be giving me electric shocks!”  That’s what this reminds me of.  I don’t think that people who do business with a Rent-to-Own place have any earthly idea what they’re in store for.

A little Background

The Rent-to-Own industry rents household items (TVs, appliances, etc.) to consumers.  The customers believe that they will eventually own some new household item, even if they are paying ‘a little more.’ Unfortunately, you end up paying 5 times the retail price for something that might be used.   If you can’t make all of the payments…..I don’t want to ruin the suspense.  But, let’s just say it doesn’t end well.  In 2009, the RTO industry (also called the ‘Lease-Purchase’ industry) generated $7 Billion in revenues.     The typical customer for a RTO transaction is in a minority group, uneducated and poor.  And, just like the PayDay industry, these companies put their storefronts up around military bases to take advantage of those folks too.   

What can the person who uses a Rent-to-Own store look forward to?

Since the statutes that govern the RTO industry have only minimal Consumer Protections (if any) RTO customers are at the mercy of the stores.  As we will see, if you are lookin’ for mercy from the RTO staff, you’ve come to the wrong place: 

    • No limits on prices – Most state statutes (including Ohio’s) have no limits on the amount of the rental charges; very few restrictions on the amount of fees they can add; and NO protections that limit the amount of abuse they can heap on you, if you stop making the payments; 
    • Bogus Fees – in Ohio they can charge any late fee they want; a fee if they have to repossess; and a ‘delivery charge’ (if you reinstate your contract after the item was repossessed);
    • Abusive Collection tactics – RTO stores are not covered by the Fair Debt Collection Practices Act (FDCPA).  Stories about how despicable RTO collectors can get are the stuff of legend.  Want some proof?  Check out the section on Collection tactics below; 
    • What do you mean you brought me a USED couch? – You are just as likely to get something that has been rented and repossessed at least once.  If it’s a couch, be careful where you sit!; 
    • Repossession – This is by-far the biggest problem with RTOs.  If you don’t pay your credit card bill, they’ll only sue you.  If you don’t pay the RTO bill, they will come to your house and yank that fancy Flat-screen out of the wall  (“They come to your house?”)

How do they collect/try to repossess?

A lawsuit the Washington State Attorney General brought against Rent-A-Center, is a good insight into what is in store for the customer who misses a payment.  The accounts of what goes on are simply chilling.  Here is just a sample of what you can expect to come to your front door, when you do business with a Rent-to-own place:

    • Repeated harassing calls to your work;
    • Calling the friends you listed as references on your application ’30 or 40 times’ (and their parents!) AFTER they are told to stop;
    • Threatening arrest;
    • Leaving profane messages;
    • Trying to kick your door in and having the manager say “That’s what you get for not paying”;
    • Harassing & scaring your baby-sitter;
    • Telling neighbors your private financial information; 
    • Showing up at your door at night with the police; 
    • Putting their foot in the door and preventing you from shutting them out of the house;
    • Threatening that the police will ‘take [your] children away’;

There was even a statement from a woman who (after she moved) had the new store manager show up at her door and say that ‘Because the payments on the old contract were too low, she needed to sign a new contract’ !  All of these examples were taken from sworn Consumer statements that were filed with the Court by the Washington State Attorney General.    Not only is this truly sickening, but it makes you wonder what happens to the thousands of people who have endured this abuse, but weren’t able to have the State Attorney General sue on their behalf.

IS RTO really that expensive?  

Wisconsin Public Interest Research Group released a study this year, where they compare the prices that RTO victims (er…..customers) wind up paying, if they pay long enough to ‘purchase’ the item.   The results are startling.   One of the tables in the report compares what the rental items cost somewhere else with the store’s own ‘Cash price’ (the ‘Cash Price’ at an RTO store is their own made-up ‘Buy-it-now’ price.  It serves as their basis for how much the weekly rental payments will be)   It is no surprise that the markups range from 146 % to nearly 300% . 

The second table is a little more helpful.  It shows how much you would save if you used a credit card with an 18% interest rate. (18% is close to the rate for most Department store credit cards.)  The typical savings is about a thousand dollars.  (A 21 Cubic foot refrigerator will cost about $1,800.00 more by using the RTO.  The Apple Macbook will cost you around $1,900.00 more) 

The second table is entitled – Table 2: Total RTO Cost vs. Purchasing Same Product with 18% APR Credit Card at Other Retailers. 

Author’s confession: I can’t put the actual tables into the article, because I can’t figure out how to do it without totally wrecking the format.  And, for some reason, Table 2 doesn’t even want to be hyperlinked.  And after all, this is called ‘Consumer Courage’ not ‘Website Courage’.  But, I digress………

Which leads us back to our NPR story about people using an RTO store to get their tires.  If you use an RTO store to get tires, the good news is that you will get tires.  The bad news?  You’ll be paying way too much (see above); you will be on the business end of some incredibly nasty and abusive efforts to get you to pay (also above) and if you can’t pay – when you wake up to go to work, those tires will look an awful lot like milk crates.  Do you really wanna do this?  

Perhaps they need a new marketing tool   

Knowing what we now know about the RTO industry, I think that the misunderstanding is in the name, itself.  If we give Rent-to-own (or Lease-purchase) a new name, maybe people will have a better understanding of what they are getting into.  Instead of RTO – let’s call it: The “PEMPUYPWMTIW (BBCIYSPTWCYWADASOOHTTGYTP)” industry.  What does that stand for?

The Pay Exorbitant Monthly Payments Until You Pay Way More Than It’s Worth (But Be Careful. If You Stop Paying, They Will Call Your Work And Do All Sorts Of Other Harassing Things To Get You To Pay) Industry

It’ll catch on, give it a while.  

Posted by Mark Wiseman (who still thinks “He….slimed…..me” is one of the all-time-great movie lines)