Some claim 'rent-to-own' is not such a good deal

April 01, 1993|By Knight-Ridder Newspapers

WASHINGTON -- It seemed like such a good deal: just $36 a week for a new sofa, living room chair and dining room set.

Irene Muldrow, a 55-year-old, barely literate aide at a private Minneapolis bus company, figured it was an easy and less expensive way to buy the furniture she needed. She was actually renting the furniture, but, after a certain period of payments, she would own it outright.

That was five years ago. Now, after $2,600 in payments, she still doesn't own the furniture. She has sued and lost a jury trial, and she is appealing. Yesterday, she told her tale to Congress.

She found a receptive audience among members of the House Banking Committee, which is considering applying banking laws to the $3.6 billion-a-year industry. Such a move could label rent-to-own deals as loans -- subject to interest-rate limits applied to financial transactions such as bank loans and credit cards.

The problem, according to consumer groups, is that customers like Ms. Muldrow are lured into financing their purchase at costs that mount up to the equivalent of 100 percent interest rates or more. State laws limit interest rates on loans and other debts, such as credit purchases, but the rent-to-own deals are not considered debts.

The industry argues that it should not be subjected to interest-rate caps because it does not really lend money or finance purchases.

"Our customers can and frequently do return the property, and we think the rules applying to debtor-creditor relationships are inappropriate for what is fundamentally a rental transaction," said Bill Keese, executive director of the Association of Progressive Rental Organizations, an industry group.

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