Consumer Law

Beware of Rent-to-Own Contracts

Renting furniture, appliances and electronics can be an attractive option for individuals who need the merchandise immediately but have neither the cash to purchase it nor the ability to finance it. Rent-to-own (RTO) stores allow you to take the merchandise immediately in exchange for weekly payments. Usually, these arrangements don't involve a credit check. However, they do require entering into an agreement (contract) with the merchant. If you don't make an installment payment, you could lose the property.

You'll Pay Much More

Rent-to-own contracts require relatively small weekly payments stretched out over a period of time, usually from nine months to two years. After you make all the payments, you own whatever product you've been renting. The payments usually don't include interest. However, if you add up all the payments over the term of the contract, you'll often find that you're paying much more for the item than if you had purchased it outright from a regular retail establishment instead. For example, you might rent a $900 refrigerator for $22 a week. If you have an 18-month contract, you'll end up spending $1,716 for the refrigerator.

Additional Charges

Your contract with an RTO merchant may include other fees in addition to the weekly rental payment. If you're late with a payment, most RTO contracts will allow you to pay a reinstatement fee to keep the property and continue with your contract. Your contract might also include extra fees for delivery, installation, and excessive damage if the RTO merchant takes the property back and it's not in good condition. There may even be fees for "processing" your RTO contract.

You Can Cancel Early

You can usually break RTO contracts with no financial penalty. If you decide you don't want the merchandise, you can simply return it to the store. If you do this, you lose only the weekly payments you've made so far. You don't have to make any future payments toward the product, even if there is still time remaining on your contract.

State Laws Regulate RTO Merchants

State laws regulate RTO merchants, and these laws can differ from state to state. However, most laws restrict merchants from extremely excessive fees. In some states, for example, the basic purchase price of the merchandise (what the merchant would charge you for it if you purchased it outright rather than over a period of months) can't exceed a certain percentage of increase over what the merchant paid for it wholesale. Laws also set limits on how much the total rental payments can exceed the merchant's purchase-now price, although this can be as much as two and a half times more.

A Consumer Law Attorney Can Help

The law surrounding rent-to-own contracts is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a consumer law attorney.

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