RENT-TO-OWN IS AN EXPENSIVE WAY TO BUY

Consumers should realize that buying merchandise in rent-to-own arrangements is very expensive, Attorney General J. Joseph Curran, Jr. says in the latest issue of his Consumer's Edge newsletter. The Attorney General urges consumers to consider less costly ways to get the items they need or want for their homes.

Consumers who need a television, major appliance or furniture but who don't have the immediate cash or credit to buy it outright may be tempted to get it from a rent-to-own store. The store lets the consumer take the item home immediately by agreeing to make a weekly or monthly payment. While this is convenient, a consumer who makes all the payments in order to purchase the item will usually end up paying double the retail price of the item. and far more than if he or she had paid on layaway or on an installment plan.

"The consumer may be focusing on the weekly payment, but not multiplying it by the number of weeks necessary to own the item," Curran said. "If you do the math you can see that you are paying two or three times the value of the item."

For example, a consumer might pay $13 a week for a washing machine in a 18-month rent-to-own agreement. When all the payments were made the consumer would have paid $1,000 for the washer, which only cost $400 new. The same $400 washing machine purchased new on a 18-month installment plan at the maximum allowable interest (24%) would only cost the consumer $480.

Maryland law does not place any limits on the finance charges or interest rent-to-own dealers can charge. The dealers are also not required to disclose as an annual percentage rate (APR) the finance charge or interest consumers end up paying to own the product. If rent-to-own dealers did have to disclose an APR, consumers would see that the rates are often as high as 120% to 150%.

"Rent-to-own stores market to people who may think they have no other options, because of low income or bad credit. But there may be less-expensive alternatives," Curran said.

Those alternatives include:

• Doing without the item until you have saved enough money to pay cash.
• Buying the item on a layaway plan. You may only need a small down payment.
• Buying the item on an installment plan at a retail store. With an installment plan you can take the item home immediately, as with rent-to-own. The law limits the amount of interest that can be charged on installment plans (maximum 24%), so these plans are less costly than rent-to-own agreements.
• Possibly getting a short-term loan from a lending institution such as a bank or credit union to purchase the item.
• Finding a used item through the classified ads, a yard sale or second-hand store.

Curran says that Maryland law does provide some protections for rent-to-own customers. Rent-to-own contracts must disclose whether the item is new or used, how much the item would cost if you paid cash, how many rental payments you must make to own the item, how much each payment will be, and how much you'll have to pay in total to own the item.

Curran's Consumer's Edge newsletter has more information about rent-to-own agreements, including early purchase options, the consumer's right to reinstate after late payments or repossession, and who is responsible for maintenance or damage to the merchandise. Consumers can request a copy by calling (410) 576-6500 or read it online at www.oag.state.md.us/Consumer/edge109.htm.

Consumers with problems with rent-to-own transactions can contact the Attorney General's Consumer Protection Division at 410-528-8662.

#