(RNN) - The investigation of Rent-A-Center was built by consumer complaints, federal lawsuits, the company’s own pricing data and dozens of interviews with customers and former employees.
Raycom Media filed public record requests with attorneys general in 19 states for complaints lodged against the country’s largest rent-to-own company. It received data and/or documents from 15 states in which nearly 500 complaints had been made against the Plano, TX-based company.
The news organization also filed a Freedom of Information Act request with the Federal Trade Commission and received more than 2,700 complaints made during an 18-month period beginning Jan. 1, 2016.
The complaints were analyzed by the nature of the consumers’ issues: debt collection, arrest threats, problems with payment histories or credit reports, the costs of the rentals, and harassment for a rental people didn’t make.
Raycom Media’s reporting partner, NerdWallet, collected prices for 40 items from Rent-A-Center's website that were for rent in each state in August and in October. It then pulled prices for the same item advertised online from typical retailers during those same time frames.
Those retailers were: AJ Madison, Alliance Furnishings, Amazon, Ashley Homestore, B&H Photo, Best Buy, Canon, Coleman Furniture, Furniture Cart, GameStop, Goedeker's, Home Gallery Stores, JCPenney, Microsoft, Sam's Club (non-member, Samsung, Sears, Target, The Home Depot, and Wal-mart.
Each of Rent-A-Center's product prices were compared to two typical retailers' prices.
The analysis examined Rent-A-Center's cash price, which is the cost of paying off the item within the first 90 days, against traditional retailers' prices.
It also looked at the cost of a full rental, when customers pay weekly, bi-weekly or monthly over years to acquire ownership, and compared that price to typical retailers. The total rental prices, however, didn't include extras like an optional loss-damage waiver, which can run as much as 10 percent of the total weekly or monthly rental fee, processing fees or sales taxes.
The publicly-traded company repeatedly refused requests for on-camera, in-person or on-the-phone interviews. Below is the timeline of the communications.
Question: Part of your company’s mission is to improve the quality of life for customers. Can you please describe how you have delivered on that mission in the past year and the ways you measure your progress in fulfilling that mission?
Answer: “Our mission is to improve our customers’ quality of life, providing access to durable goods for cash- and credit-constrained consumers and serving as a welcome hand up amid a sea of thumbs down. Rent-A-Center began as a company that helped good people caught in a tight spot, and we continue to serve those customers today. Our rental agreements do not require long-term commitments. We don’t review credit. In fact, we recently rolled out a new mission statement: To replace credit with trust. We believe in empowering those striving to enjoy the American dream, individuals and families that have damaged, limited or no credit, to get the big-ticket items they need, when they want and with the payment plans specifically designed to meet their budget requirements. We do this by offering big brands and small payments, as well as by working with the communities we serve on non-retail fronts, like our corporate giving program, sweepstakes, giveaways and contests.”
Question: Can you please explain your business model and what value you add in the marketplace?
Answer: “Our business provides cash- and credit-constrained consumers the opportunity to obtain necessary household items – beds, sofas, washers and dryers, refrigerators and televisions – with affordable payment options. Our model can’t be compared to standard, traditional retailers, who cannot and do not serve those customers with limited means living paycheck-to-paycheck. Our prices reflect the costs associated with providing delivery, set up and service if something goes wrong with the item. Also, if the product requires service outside of our customers’ homes, we provide temporary replacement items, so there is no disruption in their daily routines. Most importantly, Rent-A-Center customers can return the products at any time without penalty or financial obligation, and when their needs change, they can pick up where they left off, without any dings to their credit.”
Question: What is your biggest challenge in customer service?
Answer: “Our biggest customer service challenge is that we have to win our customers’ business with every weekly or monthly payment. Because our rent-to-own transaction is terminable at any time, our customers have the option to continue doing business with Rent-A-Center every time they make a payment. We must consistently deliver a quality customer experience in order to retain our customers over the long-term.”
Question: What percentage of overall Rent-A-Center customers carry a lease to full term and obtain ownership of the items they rented?
Answer: “Ownership rates vary and are affected by a number of factors, including the type of product being rented, the location of the store, the desire, intent and wherewithal of our customers, and so forth. Additionally, because many of our customers take advantage of the right to return their items, then reinstate those agreements and acquire ownership under those subsequent transactions, ownership percentages as measured by customers is significant, and ranges from 25 percent to approximately 75 percent.”
Question: The annual report to investors says that “on average, items are rented by three different customers before a customer obtains ownership.” Why is that?
Answer: “The primary consumer segment we choose to serve often faces challenges in making recurring payments as other financial obligations arise. Because our transactions provide those customers with the flexibility to return the product at any time and then reinstate those agreements when their circumstances improve, our products are often re-rented several times. Additionally, we serve a significant rent-to-rent customer segment that comes to us to address short- or limited-term needs.”
Question: What role do references play in lease agreements? And what is the company policy for contacting them if a renter has fallen behind on payments?
Answer: “Personal references serve two primary purposes. Because we do not use credit bureau information, we verify some of the information provided by our customers during the application process with the references provided. In addition, our company policy regarding contacting references after a customer is past due is clear: “Contacting references when a customer is past due is only for the purpose of obtaining location information and coworkers may only contact a reference once, unless the store manager has reason to believe the reference has new information about the customer’s location. After initial contact with a reference, you are not permitted to call a reference a second time solely because a customer has not returned your calls.”
Question: How do you set the base prices of merchandise?
Answer: “Rent-A-Center’s pricing is determined by the cost of providing high-quality durable goods under flexible rental-purchase agreements. This transaction allows customers to return those products at any time without penalty, and our experience in this business demonstrates that many customers take advantage of that unique flexibility. In addition, Rent-A-Center provides delivery, set-up, service (including substitute products if necessary), and a variety of purchase options from which to choose. As a result of the ongoing, relationship nature of the rent-to-own business, Rent-A-Center and its competitors in the rent-to-own industry incur costs that retail companies do not.”
Question: If customers want to find out what they owe at different points in their contract (i.e., a quarter of the way through, halfway through, etc.), how can they find out?
Answer: “To be clear, Rent-A-Center customers do not incur debt; consequently, they do not “owe” the company anything other than their current rental payment and fee amounts. With that said, the receipts provided to customers when payments are made include the remaining rent necessary to acquire ownership as well as the early purchase amount should our customers elect to take that option.”
Question: What is the company’s policy for dealing with customers who have fallen behind on payments?
Answer: “Our general procedure for managing delinquent accounts is to contact customers by phone once they fall behind on their payments. It becomes increasingly difficult for our customers to keep the rented property and to acquire ownership if they fall too far behind. Consequently, our contacts are primarily designed to help determine what the issue is and how we can help our customers work through their challenges. Oftentimes that results in partial or deferred payment arrangements, and sometimes in return of the property, in which case Rent-A-Center’s lifetime reinstatement policy protects the amounts already paid by our customers.”
Question: What is the company’s policy to recover leased merchandise from a customer who hasn’t paid?
Answer: “Each situation is different, but generally speaking, if our customers are unable to continue making rental payments, we arrange a convenient time to meet them at their homes to recover the merchandise. Picking up merchandise is the last resort, however, as we want our customers to acquire ownership if that is their desire. And again, with our lifetime reinstatement program all amounts that our customers have paid is protected for future rentals.”
Question: What is the company’s policy for pursuing criminal charges against delinquent customers? How is that policy communicated to stores?
Answer: “We try every possible way to contact, visit and work with our customers and view filing charges as a last resort. We take this action in extremely limited circumstances, only when the intent to commit theft is apparent, e.g. the individual is trying to pawn our merchandise or refuses to make additional rental payments or refuses to return the merchandise after only one or two payments. These restrictions are clearly communicated in our training materials, as is the process for internal review of accounts prior to any action being initiated.”
Raycom Media and NerdWallet have examined thousands of consumer complaints filed against the company with state and federal regulators. Our research includes interviewing scores of former customers and employees, including the names we shared with you.
Korst: “Please provide more specifics and details. Our most recent check with the federal consumer complaint portal shows zero outstanding contacts. This is consistent with every periodic check of that database that we have made over the past 18 months. In addition, our experience at the state level is the same as or similar to the federal agencies. We strive to provide the highest level of customer service and when we fall short of that expectation, we work equally hard to resolve those issues.”
Raycom Media and Nerdwallet found that many former customers say Rent-A-Center's employees were overly aggressive in collecting on payments, pounding on their doors and windows and harassing them at work. Some customers say they were arrested or jailed after falling behind on payments.
Korst: did not respond.
Raycom Media and NerdWallet have collected and analyzed advertisements and contracts from all 50 states. We found that customers can pay up to 10 times the manufacturer's suggested retail price for products purchased under your contracts. Ohio Attorney General Mike DeWine says your company is ‘a rip off" and is calling for a crackdown and new laws restricting your methods. As DeWine and many others point out, Rent-A-Center operates with little government oversight. Lawsuits, consumer complaints and customer records show that Rent-A-Center has lobbied heavily to ensure that it does not have to follow laws that protect consumers in credit transactions.
Korst: “The rent-to-own transaction is comprehensively regulated under 47 state consumer protection statutes. Those regulations, consistent with federal law on this question, recognize that the rent-to-own transaction is not a credit sale and should be regulated separately from existing credit sales laws. At the same time, those state laws provide comprehensive, substantive consumer protections that in many instances go far beyond those provided to credit consumers. Finally, all of those statutes provide consumers with robust remedies in the event of violations, and confer enforcement jurisdiction to the states’ attorneys general.”
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