Consumer Protection for the Rent-to-Own Shed Consumer
Barn and shed companies that offer rent-to-own on sheds, gazebos, and other backyard products are commonplace in many communities. Most of these businesses offer low monthly payments and the option to purchase the product at the end of the contract or after some other specified time. Other incentives may include immediate delivery, no down payments, and no credit check.
Because rent-to-own is not “credit” in a technical, legal sense, credit applications, and credit checks are not necessary. Rent-to-own is a reasonable alternative for consumers who find it difficult to qualify for installment credit due to their poor credit rating, low earnings, or sporadic income.
Most of these businesses are small and medium-sized, family-owned enterprises where honesty, integrity, and personal service makes for a satisfying consumer experience. Stellar service and courtesy are simply part of who the business owners are. They advertise and market their products simply and without hype. The golden rule has been the law.
But time has a way of changing things. New business regulations to protect consumers from unfair, misleading, or aggressive selling practices have come into effect in recent years. Since then, hundreds of cases have been brought under consumer protection laws, including some like these:
- A man sued a department store that didn’t give him a rain check for an advertised waffle iron that was out of stock, violating the consumer protection law in his state.
- A homeowner sued a roofing contractor that falsely advertised it could arrange financing for roof repairs.
Few businesses, if any, would intentionally leave a false impression through their advertising or marketing. However, it is not enough to assume that the customer understands what is in the RTO contract.
Under consumer protection law, a business is unfair if it fails to meet the standard of “professional diligence” (the standard of skill and care that would reasonably be expected of a business in its field of activity) and if it materially impairs an average consumer’s ability to make an informed decision, causing him to make a decision he would not otherwise have made.
In most states (except for Minnesota, New Jersey, and Wisconsin), a rent-to-own contract is NOT a credit agreement but a rental contract and does not come under the federal Truth-in-Lending Act’s interest rates and finance charge disclosure requirements. This has made it difficult for consumers to accurately compare the costs of a rent-to-own transaction with traditional credit financing or retail sales agreements. As a result, many states now have laws to help consumers who enter into rent-to-own transactions.
Companies who offer rent-to-own contracts are required to disclose certain information to a consumer before the agreement is signed:
- The exact dollar amount of each payment, when the payment is due (monthly), the total number of payments, and the total dollar amount necessary to own the goods under the contract.
- A statement of the consumer’s liability for the shed under the contract if the product is lost or damaged prior to ownership.
- A brief and accurate description of the product covered by the contract (and identification number if applicable), including whether the product is new or used.
- A statement that the consumer cannot own the product until the consumer has made the required total payments.
- A statement of the cash price of the product (the price at which the product would have been sold for cash on the contract date).
- Disclosure of the amount of any advance payment or security deposit, which must be made either before the agreement is signed or when the product is delivered.
- A statement that the disclosure of the total payments does not include other charges, such as late fees, default fees, pickup, and/or reinstatement fees.
- A statement that both describes the consumer’s option to purchase (including a statement that the consumer has the right to exercise an early purchase option) and indicates the price, formula, or method for determining the price at which the product can be purchased.
- Identification of whether the consumer or the dealer is responsible for maintaining or servicing the product while it is being rented, a description of the extent of the responsibility, and what part of the responsibility is covered by a manufacturer’s warranty.
- Clear identification of the dealer and the consumer, as well as the date of the agreement.
- A statement explaining that the consumer can terminate the agreement without a penalty by voluntarily returning the product in good repair (reasonable wear-and-tear excepted) at the end of the rental term along with any past-due payments.
- The two most common failures of businesses in this area are deceptive advertising and deceptive pricing. Being aware of the following laws will help keep you from unintentionally violating them.
Under both federal and state law, an ad is unlawful if it tends to mislead or deceive. It doesn’t matter whether or not you intended to mislead the customer or whether or not any customers were actually deceived. Your ad is still illegal if the overall impression created by the ad or contract is deemed to be deceptive. The technical truthfulness of the individual parts is not what matters.
Making incorrect price comparisons with other merchants or with your own “regular” prices will get you into trouble. Another no-no is offering a “free” product or service that in fact has a cost. When offering a reduced price, the former price must be the actual price at which you had offered the article, and not an exaggerated price that never existed.