Microsoft Word - RAC rebutal.doc abow

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Specifications	Microsoft Word - RAC rebutal.doc abow
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Rebuttal from Rent-A-Center Generally, the Rent-A-Center letter claims are the following: that the rent-to-own industry is no

Specifications	Microsoft Word - RAC rebutal.doc abow
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Content	Rebuttal from Rent-A-Center Generally, the Rent-A-Center letter claims are the following: that the rent-to-own industry is not predatory, that rent–to-own contracts are not loans, and even that the department over-stepped its bounds by studying rent-to-own at all. We find that the academic literature on predatory lending practices includes rent-to-own stores in its coverage. We also find that while a majority of states have enacted safe- harbor legislation favorable to the industry’s view that its contracts are leases, that the Congress has not, and that in several states, rent-to-own is regulated under state Retail Installment Sales Acts. We also find that rent-to-own contracts include numerous characteristics of high cost predatory loans: the consumer pays much more for the goods than he or she would if purchased with cash; in jurisdictions where the contracts are treated as loans they are subject to usury ceilings or APR disclosure or both; the contracts often include costly add-ons such as loss damage waiver insurance and are subject to potential abusive collection techniques (again, characteristics of predatory loans); the consumer pays for the goods over time and can acquire ownership; and finally, the vast majority of consumers, according to the Federal Trade Committee, anticipate and seek ownership. Discussion: Are rent-to-own contracts predatory? The department believes that the overwhelming academic evidence supports this statement. Since the pioneering 1963 book by Professor Caplovitz, The Poor Pay More,1 which placed great emphasis on the high-costs associated with furniture buying by the poor on installment plans, academics have characterized rent-to-own as a predatory, high- cost practice.2 The literature has described the growth of what has variously been called a “fringe banking” or “alternative financial services” industry – including check cashers, payday lenders, predatory mortgage lenders, rent-to-own providers, and pawn brokers – that targets low- and moderate-income workers who do not have access to traditional sources of money, credit, or banking services. 1 Caplovitz, David, “The Poor Pay More: Consumer Practices of Low-Income Families- The Costs of Paying Later, The Installment Plan and the Poor Consumer,” A Report of the Bureau of Applied Social Research, Columbia University, New York, The Free Press of Glencoe (Collier-MacMillan) 1963. 2 See variously studies and books by Professors Peterson (University of Florida) and Karger (university of Houston). Christopher L. Peterson, “Taming the Sharks: Towards a Cure for the High-Cost Credit Market,” University of Akron Press, 2005. Also see Howard Karger, “Shortchanged: Life and Debt in the Fringe Economy,” Berrett-Koehler Publishers, San Francisco, 2005. Howard Karger is Professor of Social Policy at the University of Houston. As Karger explains: “For instance, we’ve all passed the throngs of pawnshops, check cashers, payday lenders, rent-to-own stores, tax refund lenders, and buy here, pay here car lots that are increasingly populating America’s cities and towns….Behind this seediness are economic transactions marked by desperation and exploitation. It’s a hidden world where a customer’s economic fate is sealed with a handshake, a smile, and fine- print documents that would befuddle many attorneys.” And see John Caskey “Fringe Banking: Check-Cashing Outlets, Pawnshops, and the Poor,” (New York: Russell Sage Foundation, 1994). While Professor Caskey’s book focuses on pawn shops and check cashers, he briefly reviews high-cost rent-to-own practices.
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