January 16, 2003
Sean Caine, 410-576-6357
IS AN EXPENSIVE WAY TO BUY
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.
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.
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."
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.
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%.
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.
Doing without the item until you have saved enough money to pay
Buying the item on a layaway plan. You may only need a small
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.
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
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.
with problems with rent-to-own transactions can contact the Attorney
General's Consumer Protection Division at 410-528-8662.