Rent-to-own bill clears legislature

With a few days left in the 2015 legislative session the Vermont legislature passed significant legislation to protect consumers in rent-to-own transactions.

The rent-to-own industry rents goods such as electronics, furniture and appliances to customers with little to no money down at greatly inflated prices. These services allow customers to pay top shelf prices on items, with the possibility of owning the products at the end of the payment period. These inflated prices can have a significant impact on the bottom line for rent-to-own customers, 97% of whom make less than $50,000 a year and 73% make less than $36,000. This is part of the reason that only one in four consumers actually end up owning the products that they are renting.

Vermont’s new law takes a big step in creating necessary protections for consumers involved in rent-to-own transactions. The law caps the maximum markup for all products at two times the cash price, with more restrictive caps on specified categories of goods.

These caps will reduce costs to consumers who routinely end up paying up to three times the original cost of an item before being able to take possession. The regulations also require retailers to notify customers when items have been previously used, and to reduce the price of these items by at least 10%.

Another important protection in the law allows consumers to reinstate payments up to six months after a missed payment, so they do not lose money that they have already invested in an item. This provision will protect customers who have invested a significant amount of money in an item by allowing them to continue payments towards that item, or a similar item.

The bill is now headed to Governor Peter Shumlin who is expected to sign the bill in the next couple weeks.

Photo credit: Mike Mozart, Flickr