The rent-to-own industry is a multi-billion dollar company with millions of customers, yet it isn’t legislated at the national level. Rent-to-own is a purchase method which allows clients to lease furniture, appliances and electronics with an choice to purchase at the end of the lease period. It attracts tenants and homeowners who want to furnish their homes but don’t have enough money or credit to purchase. On the surface, rent-to-own may make sense if you are beginning a new home, but you may want to believe twice before you pick up that king-sizekitchen or plasma TV. According to a poll of rent-to-own clients by the Federal Trade Commission, the final price of land bought through rent-to-own methods could be three to four times higher than retail prices, and occasionally more. A debate is ongoing between consumer protection agencies and the rent-to-own industry over laws. The most important issue is whether rent-to-own trades should be regulated as a lease or as a credit line. Regulating rent-to-own trades as credit revenue would induce the staffing business to comply with the same principles that apply to the lending industry: large interest caps, APR disclosure and other consumer protection provisions.
There are no national laws that specifically regulate the rent-to-own industry. There are, however, two proposed laws awaiting approval by Congress: the Rent to Own Protection Act and the Consumer Rental Purchase Agreement Act. The Rent to Own Protection Act would regulate rent-to-own as credit sales. This would mean national laws like the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act and the Fair Credit Reporting Act would also apply to federal transactions. The rent-to-own industry is lobbying against the Consumer Rental Purchase Agreement Act which defines extra-curricular operations as a lease. This would override current laws in countries with stricter consumer protection laws for rent-to-own transactions.
Condition Rent-to-Own Legislation
From the United States 47 countries have state laws regulating rent-to-own transactions. These laws require that companies must disclose to clients the principles rent-to-own contracts must follow. California, for instance, has the Karnette Rental-Purchase Act. This Act defines the terms of rent-to-own arrangements and offers consumer protection provisions. By way of example, it’s illegal for rent-to-own companies to enter agreements where the total of”payments” toward an item is higher than 2.25 times its money price.
States Without RTO Legislation
Just four countries don’t possess functioning rent-to-own laws: Minnesota, New Jersey, North Carolina and Wisconsin. Minnesota does have rent-to-own laws, but the Minnesota Supreme Court has dominated that federal arrangements are, in addition, a credit sale and so confined to an 8 percent annual rate of interest. Similar rulings have occurred in New Jersey, North Carolina and Wisconsin. According to the Association of Progressive Rental Organizations, the absence of laws and adverse judicial rulings have severely restricted the increase of rent-to-own companies, also in the event of Minnesota, done away with all the industry altogether.