Rent-to-own
The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject. (February 2015) |
Rent-to-own, also known as rental purchase or rent-to-buy, is a type of legally documented transaction under which
, is leased in exchange for a weekly or monthly payment, with the option to purchase at some point during the agreement.A rent-to-own transaction differs from a traditional lease, in that the
The usage of rent-to-own transactions began in the United Kingdom and Europe,[when?] and first appeared in the United States during the 1950s and 1960s.[2] While rent-to-own terminology is most commonly associated with consumer goods transactions, the term is sometimes used in connection with real estate transactions.[3]
Furniture, electronics, and appliances
History
The concept of rent-to-own transactions first emerged in the
In response to a growing desire to share information, develop uniform practices and procedures, and cultivate a positive public image within the growing rent-to-own industry in the United States, rent-to-own dealers established a trade association, the Association of Progressive Rental Organizations (APRO), in 1980. APRO began with approximately 40 original member companies and elected an initial board of 16.[6] Today the association has approximately 350 member companies representing approximately 10,400 stores in all 50 states, Mexico and Canada. Rent-to-own serves 4.8 million customers at any given time in the year.[7]
Transaction structure
Rent-to-own agreements are based on a weekly or monthly rental term. In the structure of this type of transaction, the consumer (
According to a Federal Trade Commission (FTC) survey on the rent-to-own industry in the United States conducted in 2000, consumers reported that they chose to engage in rent-to-own transactions for a variety of reasons, including: "the lack of a credit check", "the ability to obtain merchandise they otherwise could not", and, "the convenience and flexibility of the transaction".[1] The most common reason cited for dissatisfaction within the survey was high prices. In addition, some survey respondents reported poor treatment by employees in connection with late rental payments, problems with repair services, and hidden or added costs.[1]
The cost incurred by consumers in rent-to-own transactions has been the subject of long-term debate and differing opinion. Historically, consumer advocates, some U.S. state attorneys general and some academic researchers have expressed concern that consumers entering into rent-to-own agreements may be unaware of the potentially high long-term costs of rent-to-own in comparison to traditional
Lease vis-à-vis sale
The legal controversy surrounding rent-to-own transactions has centered primarily on the question of whether the transaction should be treated as a
As of 2011, no U.S.
Collection practices
Consumer advocates and plaintiffs testifying in legal proceedings have at times alleged that rent-to-own stores routinely repossess merchandise when a consumer is close to acquiring ownership.[30] At the time of a 2000 FTC survey, individuals who engaged in rent-to-own transactions reported a "low incidence of late-term repossessions", which the FTC suggested might be due to the reinstatement rights mandated in most states,[1] as these rights allow consumers to reinstate this type of contract after repossession.[31]
Real estate
Imperfect credit scores
Tenant/buyers who have imperfect credit scores are typically drawn to rent-to-own properties[34] since the lease terms allow them to live in the home while they take the steps necessary to fix their credit and secure a mortgage. Most lease purchase agreements allow them to lock in a market rate when they sign the contract. People with poor credit find the leasing period a crucial opportunity to repair their financial profile to secure a loan. A common complaint tenant/buyers have with rent-to-own agreements, however, stems from their inability to secure a loan in time to purchase the property, whether due to insufficient downpayment or credit, at which point they are left to restructure the agreement or forced to walk away.
Transaction structure
In a rent-to-own transaction, the
Scams
Because rent-to-own real estate contracts are flexible open-source documents, there is room for scammers to take advantage of unprepared tenants.[37]
See also
- Alternative financial services
- Closed-end leasing
- Hire purchase
- Vehicle leasing
References
- ^ a b c d Lacko, James (April 2000). "Survey of Rent-to-Own Customers, April 2000" (PDF). Federal Trade Commission. Retrieved 7 April 2011.
- ^ a b c "Rent-A-Center, Inc. History". Retrieved 7 April 2011.
- ^ a b c d Marino, Vivian (4 December 2008). "The Maybe Option". The New York Times. Archived from the original on 2009-04-11. Retrieved 22 December 2021.
- ^ International Directory of Company Histories (24 ed.). St. James Press. 1999.
- ISBN 978-0-06-173321-5.
- ^ Winn, Ed. "APRO Legal Counsel". APRO. Archived from the original on 2021-12-21.
- ^ "The Rent to Own Industry: An Overview". APRO. Archived from the original on 17 December 2013. Retrieved 16 December 2013.
- ^ O'Donnell, Jayne; Michelle Walbaum (11 July 2009). "Consumers turn to rent-to-own stores in rickety economy". USA Today. Retrieved 26 May 2011.
- ^ Feran, Tim (14 February 2010). "Rent-to-own Stores Prosper During Difficult Times". The Columbus Dispatch. Retrieved 9 August 2021.
- ^ Hinds, Michael DeCourcy (4 June 1988). "Rent-and-Own Plans: Handy but Costly". The New York Times. Archived from the original on 2013-01-30. Retrieved 9 August 2021.
- ^ Gordon, Marcy (13 June 1997). "Group alleges stores gouge". The Associated Press. Retrieved 27 May 2011.
- ^ Epstein, Jonathan D. (9 August 2010). "Rent-to-own law worries consumer advocates". The Buffalo News (New York). Retrieved 27 May 2011.
- SSRN 1003784.
- ^ "Rent-to-Own Stores Becoming a Consumer Issue". The New York Times. 15 February 1993. Retrieved 25 May 2011.
- ^ Anderson, Michael; Jackson, Raymond. "A Reconsideration of Rent-to-Own". Journal of Consumer Affairs (Winter 2001). Archived from the original on 2012-06-26. Retrieved 9 August 2021.
- ^ Abrams, Jim (19 September 2002). "House Passes Bill to Protect Consumers who Rent to Own". Wilmington Morning Star. AP. Retrieved 25 May 2011.
- ^ a b "Silva v. Rent-A-Center, Inc., 454 Mass. 667 (2009)". Retrieved 7 April 2011.
- ^ "Crumley v. Berry, 766 S.W.2d 7 (1989)". Archived from the original on 25 January 2013. Retrieved 7 April 2011.
- ^ "Hawkes Television, Inc. v. Maine Bureau of Consumer Credit Protection, 462 A. 2d 1167 (1983)". Retrieved 7 April 2011.
- ^ "Perez v. Rent-A-Center, Inc., 892 A.2d 1255 (2006)". Retrieved 7 April 2011.
- ^ "Rent to Own". Rent to Own. July 2018. Retrieved 16 July 2018.
- ^ "Miller v. Colortyme, 518 N.W.2d 544 (1994)". Retrieved 7 April 2011.
- ^ "Burney v. Thorn Americas, Inc., 944 F.Supp. 762 (ED. Wis. 1996)". Retrieved 7 April 2011.
- ^ "Ortiz v. Rental Management, Inc., 65 F.3d 335 (3rd Cir. 1995)". Retrieved 7 April 2011.
- ^ "In re : Hanley, 135 B.R. 311 (C.D. Ill. 1990)". Retrieved 7 April 2011.
- ^ "In re: Martin, 64 B.R. 1 (Bankr. S.D. Ga. 1984)". Retrieved 7 April 2011.
- ^ "Department of Defense Report on Predatory Lending Practices Directed at Members of the Armed Forces and Their Dependents (August 9, 2006)" (PDF). Archived from the original (PDF) on 2011-10-18. Retrieved 7 April 2011.
- ^ "DOD's Predatory Lending Report Addressed Mandated Issues, but Support Is Limited for Some Findings and Recommendations, August 31, 2007" (PDF). Retrieved 2 July 2021.
- ^ "32 CFR Part 232 Limitations on Terms of Consumer Credit Extended to Service Members and Dependents; Final Rule (August 31, 2007" (PDF). Retrieved 7 April 2011.
- ^ "Survey of Rent-to-Own Customers: Executive Summary". April 2000. Retrieved 7 April 2011.
- ^ "New Hampshire Consumer Source Book, Rent-To-Own". Archived from the original on 13 July 2010. Retrieved 7 April 2011.
- ^ Rosenblum, Gail (22 November 2008). "In a down market, rent-to-own option becoming popular". The Providence Journal. Retrieved 7 April 2011.
- ^ LII Staff (16 November 2012). "Dodd-Frank: Title XIV - Mortgage Reform and Anti-Predatory Lending Act".
- ^ Plaehn, Tim. "How Rent-to-Own Works". Weekand.
- ^ a b Brigda, Carolyn (9 March 2008). "Lease-to-own homes enter in down market". Chicago Tribune. Archived from the original on 2013-01-19. Retrieved 5 December 2021.
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: CS1 maint: unfit URL (link) - ^ "Archived copy" (PDF). www.justrenttoown.com. Archived from the original (PDF) on 6 October 2014. Retrieved 12 January 2022.
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: CS1 maint: archived copy as title (link) - ^ "Is Rent To Own A Scam?". realtor.com. Archived from the original on 2014-10-03. Retrieved 5 December 2021.
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