UPDATE: thanks to Reps. Keith Ellison (MN) and Gwen Moore (WI), both of states harmed by the proposed rent to own bill — for offering an amendment to strike preemption from the proposed bill. Thanks to Mel Watt (NC) for offering a related amendment to limit preemptive effect of the bill. Unfortunately, both ameliorating amendments failed and HR 1588, the bill to eliminate strong consumer laws against predatory rent to own practices passed the House Financial Services Committee. The full vote roster and language of amendments and the bill is here. The correct vote on final passage is NAY; the correct public interest, pro-consumer (and federalist, too) vote on Moore-Ellison and Watt is Aye.
ORIGINAL: This morning the House Financial Services Committee will likely approve HR 1588, PIRG and Americans for Financial Reform-opposed legislation designed solely to allow the rent-to-own industry (“for only 104 weekly payments of $10.99, you too can own this TV/computer/couch” for 3 or 4 times its total retail price) to preempt or override the laws of the several states that protect its consumers from predatory financial practices. Is that the role of the Congress?
Consumer advocates belive that when consumers buy something over time, they should be protected by laws that govern credit purchases because the difference between the cash price and the total price of a product includes a finance charge, which implies interest. The RTO industry has convinced 46 states otherwise. Even though they are selling something and masking the true cost of the purchase, they claim consumers should only have weak protections based on short-term rent-to-rent leasing law. But the industry’s branding (rent-to-own!) is entirely around the promise of ownership while its 104 week or 24 month contracts are difficult to satisfactorily complete, so many consumers ride and fall off and climb back on a rent to own merry-go-round, never actually grabbing the brass ring of ownership, but trying and trying again. While the industry has succeeded in convincing 46 states to pass its favored legislation that says no credit laws or APR disclosures or usury ceilings may apply, several states have not.
Versions of the legislation have been around since 1992. Its sole purpose is to prevent states from treating the rent to own purchase over time as a purchase over time. Wisconsin, Minnesota and New Jersey have never passed a rent to own industry-favored law. These states treat the purchase as a credit sale subject to all credit laws including, in New Jersey, a 30% APR usury ceiling. Pesky Vermont has an industry-like law, but has also passed regulations that the RTO industry does not like, which require an APR disclosure. They say none of the extra payment on top of the retail cash price is a finance charge, so how can there be a interest rate disclosure? We say, if it isn’t a finance charge differentiating between the cash price of buying at retail from the higher price of ownership over time, what is it?
Many predatory lenders claim to be different and therefore deserve their own laws, laws they wrote themselves– see payday lending. We disagree. We also believe Congress shouldn’t jump whenever special-interest lobbyists tell it to, but it often does. We also believe that federal law should always serve as a floor of protection, not a ceiling against better protections. But today, part of Congress will jump. We’ll need to stop the rest of Congress from asserting that it is an important role of our national leaders to take away the rights of states to make local decisions on how best to protect their citizens from predatory practices.
Senior Director, Federal Consumer Program, PIRG
Ed oversees U.S. PIRG’s federal consumer program, helping to lead national efforts to improve consumer credit reporting laws, identity theft protections, product safety regulations and more. Ed is co-founder and continuing leader of the coalition, Americans For Financial Reform, which fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including as its centerpiece the Consumer Financial Protection Bureau. He was awarded the Consumer Federation of America's Esther Peterson Consumer Service Award in 2006, Privacy International's Brandeis Award in 2003, and numerous annual "Top Lobbyist" awards from The Hill and other outlets. Ed lives in Virginia, and on weekends he enjoys biking with friends on the many local bicycle trails.