Yours, For a Price

By David Abel
Globe Staff

No credit? No checks or savings? No cash for delivery?

No problem at Rent-a-Center.

If you're like Juanda Mwanza, and you want to furnish your home with anything from wide-screen high-definition TVs to plush, if used, sofas, all you need are a few dollars to cover weekly or monthly payments. If the money runs out, the goods go back to the store. No obligations, no credit problems.

"It's the best way out there for me to buy," said Mwanza, 38, a software engineer from Dorchester who spent time on a recent morning at the Uphams Corner Rent-a-Center, eyeing a Whirlpool washer and dryer set for $8.99 a week.

But what seems like a good deal to Mwanza strikes others, particularly consumer advocates, as extortion. Rent-to-own businesses like Rent-a-Center, they say, prey on the poor, millions of whom end up paying as much as three times a product's typical retail price in exchange for a low, commitment-free weekly or monthly fee.

Now, with the economy struggling, rent-to-own businesses are booming - and they're seeking to protect their multibillion-dollar gains. As consumer advocates bring pressure on Congress to regulate the rental business, the industry has put forth its own legislation that is expected to be considered in the next few weeks.

The nation's 8,300 rent-to-own stores, which last year took in more than $5 billion, already have a head start: In a mainly partisan vote last September, the Republican-controlled House passed their bill. The Senate never voted on it.

The industry also is seeking to expand its traditional base of customers, most of whom live in households with incomes below $25,000, according to a survey by the Federal Trade Commission. With debt and unemployment squeezing the middle class, rent-to-own businesses are increasingly targeting clients with more upscale tastes, prominently featuring everything from the latest brand-name DVD players to desktop computers.

"This started off as a mom-and-pop industry, and now we're a presence on Wall Street," said Richard May, a spokesman for the Association of Progressive Rental Organizations, the industry's trade group. "The ultimate point of our efforts now is to legitimize the rent-to-own industry, to broaden our demographics, and to give our stores more security [against litigation]."

The bill before Congress, which would supercede state laws now regulating the industry, requires all transactions to clearly disclose the ultimate price of the product, explain buy-out procedures, list whether the item is new or used, and, among other things, provide clear rules about the rights of customers who default on their payments.

The problem with the bill, consumer advocates argue, is that it doesn't treat rent-to-own transactions as credit sales, which are governed by federal and state laws. Courts in states including Wisconsin, Minnesota, and New Jersey have ruled that rent-to-own transactions are credit sales, and Vermont now requires all the industry's stores to disclose effective interest rates.

"Their entire marketing strategy is to sell the poor the notion of ownership, yet the industry wants to be treated under the rental laws," said Edmund Mierzwinski, a consumer advocate at the Massachusetts Public Interest Research Group, noting government studies show 70 percent of customers end up buying what they rent. "The customers think this is the best deal they can qualify for. But it isn't. They're not getting the cost of the finance charge, or the cost of buying over time."

Without a credit card or enough savings to pay in full, many customers see rent-to-own as their most convenient, affordable way to make purchases. In one of its brochures, the National Consumer Law Center describes a typical transaction: A customer is told that for just $16 a week, over a year, they can become the owner of a 19-inch TV. What they're not told is that, in the end, they're paying $832 for a TV that usually sells for about $300 - at an annual interest rate of 254 percent.

"What it comes down to is that this is undoubtedly a predatory industry, taking advantage of people who perceive they have few choices and they're charging them the maximum," said Margot Saunders, managing attorney of the National Consumer Law Center's Washington office. "A legitimate bill would include limits on price and protections from usury."

The controversial nature of the business was too much for John Madden. The popular football commentator, who for the past few years has served as a very visible spokesman for Rent-a-Center, decided this month he no longer wants to be affiliated with the company, ending his commercial appearances.

"We just didn't want to be involved in too much controversy," said Sandy Montag, Madden's agent. "Whether we agree with Rent-a-Center or not, if there are issues, you don't want to endorse it."

It wasn't because of its finances. In the past five years, Rent-a-Center, which dominates the industry with 2,500 stores, has seen it stock soar, its annual sales more than double to $2 billion, and its net income balloon from $25 million to more than $172 million last year.

The booming business also has produced an increase in customer complaints. Rent-to-own customers have long complained about everything from hidden fees to having their merchandise forcefully, and abruptly, repossessed.

Last year in Massachusetts, which now has 50 Rent-a-Center stores, 19 customers complained to the state attorney general's office. Two years before, when there were 37 stores, only three people complained.

But 3 million people patronize rent-to-own businesses annually. About 75 percent of the industry's customers say they're satisfied with their transactions, according to the Federal Trade Commission's 2000 survey.

Moreover, some academics argue that even if rent-to-own stores charge exorbitant fees, their success demonstrates they're filling a need in society.

Too much regulation of the industry would be counterproductive, two University of Massachusetts at Dartmouth professors argued in a paper published two years ago. It would "deny or limit immediate access to goods that are the basics of (the) modern household," Michael Anderson and Raymond Jackson wrote.

Mwanza, one of about 250 customers at the recently opened Rent-a-Center in Uphams Corner, values the convenience. If she gets something and doesn't like it, or it breaks, she can return it or have it replaced. She doesn't lose anything.

Now, for $600 a month, she gets two big-screen TVs, two reclining chairs, a bedroom set, and a dinette set. Though she knows she would pay less if she bought the items at another store, she thinks renting to own is a good deal. And soon, after she gets her tax refund, she plans to start renting the washer and dryer, which will cost more than $800 when she finishes paying.

"I trust the people here," she said. "They treat you right."

David Abel can be reached at Follow him on Twitter @davabel.

Copyright, The Boston Globe