Consumer Protection Issues
People concerned about the impact of the rent to own industry have spoken out on many issues. They are concerned about the price that consumers end up paying for the items, the collection practices used by companies to either collect their rents or repossess their merchandise, and the disclosures to customers about the quality of the items being purchased. In short, most consumer advocates want better disclosures to the customers and hope that the customers will understand why these transactions are so expensive.
No Federal Regulation
Currently, there is no federal regulation over this industry at present to protect consumers. Neither of the two basic federal consumer protection statutes (the Truth-in-Lending Act and the Consumer Leasing Act) apply to these transactions. Lobbyists for consumer groups and federal legislators have proposed federal regulations and statutes many times, but none have successfully passed into law.
State Regulations Exist
While the federal government does not regulate these transactions, the states do. Currently forty-six states regulate rent-to-own transactions as leases and mandate a variety of disclosures. The other four states through court interpretation apply laws related to credit to the transactions.
Consumer advocates would prefer that these transactions be treated as credit sales so that the rent-to-own seller would be required to disclose the overall purchase price. The industry would prefer that these transactions be treated as leases so that credit regulations do not apply to them.
Lease or Credit Purchase
Thus, the question is whether these transactions are a lease or a credit purchase. The key to answering this question is whether or not the consumers generally purchase the items that they rent or not. The industry has consistently argued that only 25 to 30 percent of the items were eventually purchased. But according to a 2000 survey by the Federal Trade Commission, this is untrue. In fact, around 70% of the items are eventually purchased. This suggests that treating these transactions as credit transactions is more appropriate.
For consumer protection, it really should not matter. Instead, the consumer should be educated about the cost of the good and be given sufficient information to make an informed decision.