Rochester Member Exposes 'Rent-To-Own' Scam

Merchants of misery pocket millions from poor and uninformed

Buying on credit has become a fact of life. Few of us can purchase high-ticket items with cash. But many who find it difficult to obtain credit or financing have found themselves caught in the “rent-to-own” trap.

Rent-to-own companies (RTOs) lease new and used basic household goods to consumers on a weekly or monthly basis until the consumers have fulfilled the terms of the contract, which gives them ownership of the goods.

Unlike all other sales contracts, however, the RTO company retains legal title to all the rented items until the consumer makes the final payment.  This means that the consumer does not own or obtain any equity in the rented item until he or she has paid the very last installment.

The RTO industry is one of the fastest growing in the nation with 8,300 stores serving 2.7 million customers. It generates $6.6 billion in revenues. RTO also is one of the most predatory, routinely charging its customers up to three times the retail price of its products.

"They came to my house.
They broke my screen door.
They called me on the telephone.
They stopped me on the street."

In 2005, one 1199SEIU member, Kelly McNair, then a CNA at Rochester’s Strong Memorial Hospital, challenged a Rochester-area RTO, Rent Way, from which she had rented a TV set and stereo system.

After making weekly payments totaling $1,000 for the TV and $2,000 for the stereo, McNair was unjustly fired from Strong and fell behind in her payments.

“After I stopped paying, the rent-to-own store harassed me to get their money,” she says. “They came to my house. They broke my screen door. 

They called me on the telephone. They stopped me on the street.”

Rent Way sued her to make back payments or return the merchandise. McNair sought the help of the Empire Justice Center and one of its attorneys, Peter Dellinger. McNair says she was flabbergasted to learn that her stereo, which was used, could have been bought outright for $450. Her TV could have been bought for less than $400.

She countersued, charging that she had been overcharged. Rent Way backed off. It agreed to let her keep the TV and stereo and paid her $4,000 plus her legal fees.

“I believe the company settled because it didn’t want its practices challenged in court,” Dellinger says. “By their own admission, these companies are really in the business of ‘pay to borrow,’ renting the item again and again to multiple low-income consumers. It is not unusual

for a family to enter an agreement for a bedroom set and pay upwards of $2,700 toward the total $3,200 of the agreement. If they miss one payment they lose everything.”

But these practices are being challenged in Washington. In May, N.Y. Sen. Charles Schumer announced that he was introducing the Rent To Own Reform Act of 2007, which calls for tougher enforcement regulations, fuller disclosure for customers, and the application of state usury laws to all RTOs.

Sen. Schumer singled out Buffalo’s Rent-A-Center chain, which operates 13 stores almost exclusively in the city’s working-class neighborhoods.

Said Sen. Schumer, “For too many years, the rent-to-own industry in Buffalo has used smoke and mirrors to prey on uninformed customers.”