Relates to rental-purchase agreement forms

Title of bill

An act to amend the personal property law, in relation to rental-purchase agreement forms

Purpose

To improve protections afforded to consumers in rental purchase agreements.

Summary of provisions

Section 1 titles this act as the "rent to own fair practices act."

Section 2 amends section 501 to increase font size on disclosures and removes weekends and holidays from counting toward nonpayment time frame.

Justification

In 2010, the state of New York amended the laws relating to rental purchase agreements in an effort to provide for reasonable price controls in order to ensure that consumers pay reasonable prices, while allowing the rent-to-own industry to continue to offer its unique product in New York state. Unfortunately, the changes failed to fully correct the definition.

In his approval message then-Governor Paterson warned that the "the pricing provisions in the bill will not provide an adequate shield against the predatory practices that they purportedly seek to address." Specifically he was concerned that "the price ceiling ... is woefully inadequate, as the legislation allows for sizeable markups above the cost of acquisition, and will permit merchants to demand payments many times the value of the item rented before equity passes to the consumer." With the passage of time this statement has been proven correct.

As rental purchase agreements do not transfer ownership until the final payment of all payments in the agreement this means that 75% of the people who enter a rental purchase agreement end the agreement having paid large sums of money toward a product that they do not possess.

A study by Wisconsin PIRG of the products of an Illinois merchant found that consumers are being asked to rent those obsolete technologies and pay a price 300% or more than the original market value of the product.

Wisconsin PIRG also found that buying the product with a credit card with an 18% APR and paying it off over 18-24 months would be less expensive than a rent a center deal. According to Empire Justice Center, this type of mark up happens under New York law as well.

Indeed, consumers are entering into contracts that provide for price mark ups that are three times the retail price found in a big box retailer. This high price results in a very strange economic outcome for a contracts relating to goods, a 75% failure rate. According to one of the largest rent to own merchants in its public disclosure documents required on federal securities law, only 25% of the rental purchase agreements that the company rent to own enters is completed to term.

Legislative history

A new bill.

Fiscal implications

None to the state

Local fiscal implications

None.

Effective date

This act shall take effect on the ninetieth day after it shall become law.