No credit check, low weekly payments and carry it home today? If you think the deals offered by rent-to-own stores are too good to be true, you are right. They are a ripoff according to a new investigation by Consumer Reports.
Consumers are paying the equivalent of up to 311% interest on items like big-screen televisions and other home appliances from rent-to-own stores, including Rent-A-Center (RCII) and Aaron's (AAN). As a result, rent-to-own merchants that advertise price-chopped deals with weekly or monthly payment plans end up charging consumers far more than buying those products outright at a traditional retailer.
The Consumer Reports investigation found deals where a $600 computer cost nearly $1,900 after less than year's worth of payments, and a washer-dryer combo with an original price tag of $1,000 cost $2,700 after two-and-a-half years with an interest rate of 100%.
It is not the first time Rent-A-Center has come under scrutiny. In 2009, Washington state's attorney general lodged complaints that the discount store harassed and threatened customers who were late on payments, and in 2007 the company settled a class-action lawsuit in New Jersey for $109 million for charging excessive interest.
In spite of dubious business practices by some companies in the industry, the $7 billion rent-to-own industry grew from 2.7 million customers in 2005 to 4.1 million in 2009, according to Association of Progressive Rental Organizations. With low sticker prices and tempting lay-away plans for big-ticket items, the stores appeal primarily to low-income families who are unable to afford appliances and electronics from traditional retailers.
Rent-to-Own Deals Are a Massive Ripoff, Consumer Reports Finds