Tens of thousands ofCalifornians who entered into Preferred Lease agreements with Rent-A-Center willreceiverestitution
OAKLAND– California Attorney General Rob Bonta today announced a $15.5 million settlementagainst Rent-A-Center, one of the nation’s largest rent-to-own companies, for violations ofstateconsumer protection lawsrelating to unlawfulleasing practices and deceptivemarketing. An investigation intoRent-A-Center’s “kiosk” business that operates out of traditional retail storesfound that the companyusedan inflated “cash price” for products that was 15% higher than the retailprice, potentiallycostingconsumers hundreds of extra dollars, among other violations. As part of thestipulatedjudgmentresolving the Attorney General’sinvestigation, Rent-A-Center will be required to comply with significant injunctive terms to deter future misconduct, pay $13.5 million in restitution to California consumers, and pay $2 million incivilpenalties.
“Rent-A-Center repeatedly relied on deceptive and unlawful tactics to pad its bottom line,”said Attorney General Bonta.“Furnishing a home is expensive, and consumers often hope rent-to-own agreements will lessen the cost, not realizing the total price they pay will end up being much higher. We won't stand by when a company like Rent-A-Center overcharges these hardworking Californians, taking money that is needed for rent, food, or other essential expenses. Today’s judgment will provide critical relief to tens of thousands of Californians — and, importantly, prevent Rent-A-Center from continuing this conduct in the future.”
The rent-to-own industry consists of dealers that rent household goods, such as furniture andappliances, at extremely high prices to low- or moderate-income consumers. The contracts arestructured as leases with an option to buy the leased goods. In a typical rent-to-owntransaction, a consumer wouldpay on a weekly or monthly basis for the use of theproduct. With each new payment, the rental agreement automatically renews for another weekor month. Upon fulfillment of the rental terms — usually one-to-three years of periodicpayments — the title passes from the rent-to-own dealer to the consumer with the subset of consumers who do ultimately obtainownership paying a large premium to do so.
In a complaint filed with the judgment,Attorney General Bontaalleges that Rent-A-Center violated California’srent-to-own lawinoperatingits business line known as Preferred Lease(formerly known as AcceptanceNOW),through which Rent-A-Center offers a rent-to-own option to customers inside of traditional retail stores.Among other violations,Attorney General Bontaalleges thatRent-A-Centeroverchargedconsumers by inflating the cash price in its Preferred Lease contractby 15% over the true retail price.Attorney General Bontaalso alleges that Rent-A-Center misledconsumersabout the most fundamental aspects of the Preferred Lease product, such as the right to return merchandise at any time with no penalty.
Today’s judgment will substantially reformRent-A-Center’sPreferred Leasebusiness model and deter future misconductwith extensive injunctive terms, including:
- Cash Price Markup:Rent-A-Center is prohibited from charging a cash-price markup. The cash price must match the price advertised to the customer by the retailer;
- Returns:Rent-A-Center is prohibited from preventing or limiting customer returns in any way;
- Marketing:Rent-A-Center must clearly and conspicuously disclose that its Preferred Lease program is a rental-purchase transaction. Rent-A-Center must also provide each customer with a “Know Your Rights” document informing consumers about various key terms of their rental-purchase agreement;
- Employee Training:Rent-A-Center must train employees regarding the Karnette Act generally as well as the specific injunctive terms in the settlement;
- Monitoring and Reporting:Rent-A-Center will be required to prepare annual reports for the Attorney General describing its efforts to comply with the settlement for three years; and
- $15.5 Million Payment:Rent-A-Center must provide $13.5 million in restitution tothe tens of thousands ofCalifornians who entered into contracts containing the 15% upcharge. Rent-A-Center must also pay $2 million incivilpenalties.
Customers who rented merchandise from Rent-A-Center through its “kiosk” business located inside traditional retailers are eligible for restitution.Eligibleindividuals will receive a notice at their last known mailing address.
Consumers who have questions about the settlement, or who would like to provide an updated address, may contact the settlement administrator online athttps://www.californiarentacentersettlement.comor by calling 1-833-472-1709.
A copy of thecomplaint is available here. A copy of the stipulated judgment is available here.
