No matter where you live, from Miami-Dade to Duval, Orlando to Okaloosa, and whether you rent or own your residence, eventually you will be faced with the need to purchase new appliances, electronics, or furniture. Some of these items are an expense that simply are not in the budget for one single, full payment. As a consumer, you may be asking, “What are my options?” In this blog, I want to address one of those options in particular: the Rent-to-Own retailer.
In Florida, a rent-to-own transaction occurs when a consumer pays rent on an item to secure its immediate use and the option of continuing to pay rent to gain ownership of the property. When such an agreement contains an initial term of four (4) months or less, Florida's Rental-Purchase Agreement Act, governs the transaction. Breaking this down, let's assume you rent a new washing machine worth $1000. If you sign a rental-purchase agreement, you may pay $100.00 per month for a minimum term of four (4) months. After that time, you can return the refrigerator without penalty or choose to pay continued rent payments each month until the contract price is fully paid. If you complete all payments, the refrigerator is yours. You could choose to make payments more quickly, in which case you'd own the refrigerator sooner.
You may be asking what's the catch? If you do not qualify for traditional credit, a Rent-to-Own arrangement may seem like blessing in disguise. Businesses such as Aaron's, Rent-A-Center, and Rent King have been providing these arrangements for years, and there are even online providers now such as Snap Finance, Acima, and Progressive Leasing. The Federal Trade Commission (FTC) shed some light on the hidden dangers of these transactions in a past consumer memorandum (https://www.consumer.ftc.gov/articles/rent-own-lease-own-layaway-and-buying-over-time):
Stores that offer rent-to-own plans often promote what they think are the benefits: no credit check, fast approval, little documentation, and a contract length to meet your monthly budget. But that convenience – getting to use the washing machine while you're paying it off – can mean that you pay for it two to three times over.
The National Consumer Law Center provided further example in a recent review of these financial arrangements: (National Consumer Law Center, Consumer Credit Regulation Ch. 13 (3d ed. 2020), updated at www.nclc.org/library).
Under most RTO [rent-to-own] contracts, the customer will pay between $1,000 and $2,400 for a television, stereo, or other major appliance worth as little as $200 retail, if used, and seldom more than $600, if new. This means that a low-income RTO customer may pay 1.5 to 12 times what a cash customer would pay in a traditional retail store for the same appliance.
While there may be laws in place to protect consumers against deceptive disclosures and high interest rates, some of those laws do not apply to rent-to-own transactions. In fact, while Florida does require certain itemizations and disclosures on the contract, including the cash price of the rental property, Florida does not require payments be presented in terms of a standard APR or interest rate at all.
This brings us back to our original question – Is the cost of a rent-to-own agreement worth the benefit? Sometimes, having the ability to terminate the agreement and walk away at the end of the lease term can provide a financial peace of mind where an item is a necessity, and your income is unpredictable. However, your minimum rent must be paid each month. If you retain possession of the property without paying, the lessor can repossess the property, and you could find your account in collections and headed towards a lawsuit. If your goal is to own the property outright, you are likely better off looking into other arrangements. If you can wait a few months, saving to pay for an item outright, or using a layaway option, will likely save you money in the long run. While a layaway option may still have some fees attached, they are extremely unlikely to result in tripling the final price you will pay. Regardless of the option you choose, make sure you review the terms carefully and save a written copy of the agreement to protect your legal rights in the future.
If you have found yourself in a situation where a rent-to-own agreement or repossession is affecting your financial circumstances, please reach out to our office. Holland Law Group has seen these agreements in collections and small claims court throughout Florida with increasing frequency, and our attorneys can review your options and assist you in overcoming your hardship. Whether you live in Hillsborough, Pinellas, Manatee, or any of the other counties in Florida, we are always available to talk to you about defending you from collections. Give us a call today to find out what we can do for you!