rent to own

Rent to own (RTO) is a means of acquiring ownership over time without taking on debt. RTO companies rent items, most typically furniture, appliances and electronics, with the condition that the item will be owned by the renter if the term of rent is completed. Since rent to own stores do not require a credit check or down payment, they are popular with sub-prime-credit consumers; those with damaged or no credit history. RTO is also popular with corporate travelers on temporary assignment as there is no long term commitment involved; An item can be rented and returned at any time without penalty.

The RTO industry alleges that RTO is a lease, as opposed to a credit sale, and argues that no interest is charged. This issue is in dispute, as advocates for low income consumers have successfully defeated attempts by the RTO industry to change the laws of New Jersey, Minnesota and Wisconsin, for example, to become industry-friendly. Recently, the RTO industry lost a major lawsuit in the New Jersey Supreme Court, (available here http://www.uspirg.org/consumer/archives/perez_opinion.pdf). The court held that its practices are subject to the state's 30% criminal usury ceiling.

Industry-wide, 75% of all RTO transactions are weekly; the consumer agrees to pay a weekly amount for leasing property. The remaining 25% of agreements are biweekly and monthly. RTO agreements are generally written for a 12, 18, or 24 month term. If the consumer rents the merchandise for the full term, ownership is acquired. Most RTO transactions include an early buyout clause that allows the consumer to purchase the merchandise at any time during the term for 50% of the remaining rental payments.

A consumer may return a rental item at any time without penalty. Most companies have a lifetime reinstatement clause, allowing the consumer to re-rent a returned item (or similar item) and receive full credit for all previous rental payments made.

The top 3 RTO companies in North America are;

• Rent-A-Center (Recently acquired Rent Way)
• Aaron's Sales and Lease Ownership
• easyhome (Canada)

The national, nonprofit trade association website for the Rent to Own industry is the Association of Progressive Rental Organizations found at: http://www.rtohq.org - the Rent to Own Headquarters

You can find more detailed information criticizing the industry for exorbitant triple-digit interest rates and other allegedly unfair practices archived [here]http://www.pirg.org/consumer/rtoloan.htm at the national consumer group U.S. PIRG and [here]http://www.clnj.org/index.htm at the Consumers League of New Jersey.