WASHINGTON – The House approved federal restrictions on the $4.4 billion rent-to-own industry Wednesday, over opposition from consumer groups and virtually all states’ attorneys general, who said it will limit how they regulate businesses.
Supporters for the Consumer Rental Purchase Agreement Act say the new legislation will strengthen current state laws by setting minimum federal requirements for rent-to-own contracts.
“The bill would provide greater cooperation and coordination between the federal government and among the states, stronger protections for consumers and more enforcement authority,” said Rep. Roscoe Bartlett, R-Frederick, who called it “a win-win for Marylanders.”
But critics note that, while the bill lets states set tougher standards, it also specifically prohibits states from treating rent-to-own deals as credit transactions. Treating rent-to-own transactions like credit sales would let the government limit the amount of interest charged on rent-to-own merchandise and require that businesses spell out all charges and fees, as they do with credit cards and car sales.
“They don’t want to be regulated as credit sales because credit laws offer more protection,” said Ed Mierzwinski, a consumer advocate with the U.S. Public Interest Research Group.
Only four states — Vermont, Wisconsin, New Jersey and Minnesota — currently regulate rent-to-own dealings under credit laws.
Almost 15 million people turn to rent-to-own companies each year for appliances, electronics and furniture, according to a 1999 Federal Trade Commission survey. The survey also found that most renters were between the ages of 18 and 44, have little education and make less than $25,000 a year.
The bill requires that all rent-to-own agreements list the frequency and size of payments, and the total cost that will be paid if the renter buys the item.
It will not require the business to list the annual percentage rate, and forbids states from making them do so. The rate often makes the purchases two to three times their retail price.
Mierzwinski says that the rent-to-own industry is trying to deceive legislators by tucking away the pre-emption clause.
“They would have you believe that (House Resolution) 1701 is a floor and allows the states to go further. That’s the Trojan Horse of the bill,” he said.
But the Association for Progressive Rental Organizations, a coalition of rent-to-own dealers, said a credit sales designation “goes against the very heart of rent-to-own.”
“There is no obligation to the consumer when they rent that refrigerator or bed,” said Richard May, the industry group’s spokesman. “If it was a credit sale, then there would be no difference between us and a credit card.”
Critics, who include a mix of Democrats, states’-rights Republicans, labor unions and attorneys general, railed against the bill for not protecting consumers and limiting the states’ efforts to do the same.
A letter to the House Judiciary Committee from the National Association of Attorneys General said consumer protection, “including in the area of consumer credit, has historically been an appropriate matter for state regulation.” All the states’ attorneys general signed the letter except for Alabama’s.
“We do not believe that the pre-emption of state policy is a wise decision,” Maryland Attorney General Joseph Curran Jr. said in a prepared statement.
While Maryland law governing rent-to-own mirrors the federal legislation, it also goes one step further by requiring businesses to list whether the merchandise is new or used.
Maryland Democratic Reps. Ben Cardin and Elijah Cummings of Baltimore and Albert Wynn of Largo voted against bill. Rep. Steny Hoyer, D-Mechanicsville, joined Bartlett and Republicans Reps. Bob Ehrlich of Timonium, Wayne Gilchrest of Kennedyville and Connie Morella of Bethesda in support of the legislation.