Concerned that unwary consumers are vulnerable to what he claimed were "scams" in the rent-to-own industry, Sen. Charles Schumer, D-NY, called Wednesday for federal action.
However, a spokesman for a national firm that includes a local operation said the allegations are a distortion of company practices and he encouraged the Federal Trade Commission to study the situation again if necessary.
With the current economic downturn, the industry is booming not just in urban areas, said Schumer, in a telephone press conference. "It is becoming a problem in suburban and rural areas across New York state," he said.
"They are targeting local consumers who lack the disposable income and access to credit cards to purchase basic household goods at competitive retail prices," he said.
He urged action on federal legislation to reform sales and disclosure practices in the retail industry. Such federal laws as the Truth In Lending Act and the Equal Opportunity Credit Act should be applied to provide greater oversight and accountability, he said.
All fees should be considered interest and not leasing charges, to make sure that state laws on usury are not evaded, he said.
In an example of deceptive practices, Schumer cited the cost of a Toshiba 37-inch television that sells for $849 at Best Buy, but has a cash price of $1,663 at a Rent-A-Center in New York. This is intended to "skirt the spirit" of a 1986 state regulatory law.
Manager Mark Rhodes at Rent-A-Center, one of three such stores in Oneonta, referred questions to the corporate office, which directed calls to Richard May, public affairs director for an industry organization based in Texas.
He said the pricing examples that Schumer cited used extremes for a two-year transaction "to paint the entire industry." Schumer's statistics do not account for the fact that "consumers are in control of the transaction" and have a choice on how to structure payments, he said.
Managers at two other Oneonta rent-to-own stores, Aaron's and easyhome, refused to give their last names and referred calls to national offices. Calls there were not returned Wednesday afternoon.
May said because of "well-intentioned" laws in New York, that price is set to make sure store owners comply with regulations to cap the final rent-to-own price at 200 percent above the cash price.
He said in states that don't have such laws, the cash price is close to retail.
But Schumer said that because of "deceitful lease agreements," New York consumers are forced to pay "astronomical prices" for televisions, air conditioners and computers that are nearly 300-percent higher than recommended retail price.
Federal Trade Commission spokesman Frank Dorman said it's not the policy of the commission to discuss whether or not it is conducting any investigation or whether a request had been received.
But if it had been, he said, "we would take it very seriously."
In a report issued in 2000, the FTC found that 70 percent of rent-to-own merchandise was eventually purchased by the customer. Seventy-five percent were satisfied with rent-to-own transactions. High prices were the most common reason for dissatisfaction.
