Provides for greater protections to consumers in rental purchase agreements

Title of bill

An act to amend the personal property law, in relation to providing consumers with greater protection in rental purchase agreements

Purpose of bill

Strengthen the law governing "rent-to-own" agreements.

Summary of specific provisions

The bill would:

Establish a standard for the "cash price" of merchandise, which must be a representative price of merchandise offered within the trade area;

* Define the "lease charge" as the equivalent of the financing charge, or interest, which is to be paid by the consumer as the cost of entering into a rental-purchase agreement; * Exempt Saturdays, Sundays, and federally recognized holidays from the three day and seven day periods used to determine late charges or reinstatement fees under these agreements; * Prohibit lease charges in excess of 25%; * Provide notification upon repossession of the consumers right to reinstatement; * Clarify the disclosures required under a rental-purchase agreement, to be closer to those required under federal Regulation M; and * Require clear disclosure of the lease charge.

Justification

The rent-to-own industry is a four billion dollar industry, serving almost 3 million consumers annually. Approximately 7,500 stores, offer appliances, furniture, computers and other goods for rent with an option to buy. Consumers make weekly or monthly payments on these agreements. If the payments under the agreement are completed, the consumer attains ownership of the merchandise.

The Public Interest Research Group conducted a survey in states on these businesses in the spring of 1997. They found that R TO stores charge an average financing charge of 100 percent (although not calculated as an annual percentage rate, the cost of purchasing works out to be this much on average). Also among the survey's major findings was that the "cash prices" being charged were significantly above those charged at other retail establishments. Because of these findings, and numerous other consumer complaints regarding this industry, the need for additional regulation is apparent. Targeting mostly poor people who have little other choice, RTO stores rent and repossess the same items over and over again. Many people may have "bought" the same appliance. only to have it repossessed and resold. If a consumer is able to make all the payments, they typically have paid double the normal cost of the item. or more. This bill clarifies existing statutes and provides additional protection to consumers entering into these contracts.

Fiscal implications

None to the State.

Effective date

90 days after enactment.