On May 15, the Pennsylvania Attorney General Attorney General Michelle Henry announced a $11 million settlement with a rent-to-own lender and its subsidiaries accused of engaging in predatory financing practices. Among other claims, the AG alleged that the company and its subsidiaries disguised the nature of financing products it offered, concealed outstanding balances, engaged in deceptive collection practices, and used a web portal that allowed retailers to sign consumers up for financing without their knowledge. In particular, the lender disguised one-year rent-to-own agreements as "100-Day Cash Payoffs" and then concealed the balances owed. In its initial complaint, the AG alleged that these actions violated Pennsylvania's Unfair Trade Practices and Consumer Protection Law, Rental-Purchase Agreement Act, Goods and Services Installment Sales Act, and Fair Credit Extension Uniformity Act. The company did not admit to any of the Attorney General's allegations and continues to expressly deny any wrongdoing in the case.
The settlement requires the lender to pay $7.3 million in restitution that will be distributed to affected consumers, $200,000 in civil penalties, and $750,000 in costs to be paid to the AG to be used for public protection and education purposes. In addition, the lender is required to charge off the balances of delinquent lease-to-own accounts signed in a one-year period from 2019 to 2020 ($3.15 million in aggregate). The lender has also agreed to, among other things, avoid advertising using the terms "finance" or "financing" without conspicuously disclosing that the contracts are actually leases, rent-to-own agreements, or lease-to-own agreements. The lender may also not represent or imply that nonpayment of any debt owed will result in the seizure, attachment, or sale of any leased property unless such action is lawful and the company intends to take such action.
Putting It Into Practice: This settlement demonstrates the focus states are placing on the rent-to-own industry, which follows in the wake of intense federal scrutiny over the past few years. Consistent with prior enforcement actions, this settlement highlight requirements related to, among other things, pricing and fees, disclosures, advertising materials, and collection practices. Rent- and lease-to-own companies, along with others providing point-of-sale financing, should also be mindful of the ongoing federal scrutiny.
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