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Some things have changed in the rent-to-own business, but a $175 million proposed settlement with Progressive Leasing reminds companies that bedrock consumer protection principles apply, especially the fundamental proposition that deceiving people about cost strikes at the heart of the FTC Act. Not in the rent-to-own industry? Not so fast. The case offers compliance pointers for your company, too.

Progressive Leasing is a major player in the rent-to-own business – Aaron’s, Inc., is its parent company – but there’s something different about Progressive: It doesn’t have its own brick-and-mortar stores. Instead, Progressive provides virtual rent-to-own services at more than 24,000 retail locations from coast to coast – stores that sell things like furniture, appliances, jewelry, cell phones, and other high-ticket items.

According to the complaint, Progressive has induced consumers to enter into rent-to-own payment plans by misrepresenting that buyers will pay only the advertised retail, cash, or “same as cash” price to buy merchandise. In fact, in most cases, Progressive charges consumers substantially more than retail. How much more? A lot. The complaint alleges that if consumers make the initial payment and all scheduled recurring payments, they’ll typically pay twice the retail price.

A walk through a typical transaction explains how the FTC alleges consumers are deceived.

Let’s say a consumer’s mattress has sprung a spring, so they stop by a store to shop for a new one. They aren’t specifically looking for a rent-to-own transaction, so they focus on the in-store retail price of the item.

While at the retailer, the consumer sees ads touting various in-store credit deals, including ones that offer no interest or 0% interest for 12 months. The consumer also may see ads for Progressive’s “No Credit Needed” offer or may hear a spiel from a Progressive-trained sales person using phrases like “no interest” or “90 Days Same as Cash.” The FTC alleges many of the pitches convey that people who use Progressive will pay only the retail price with no extra fees, charges, or costs.

When the consumer is ready to make a purchase, the transaction shifts to a proprietary online application that offers multiple payment options. After submitting an application to buy the item on credit, the consumer is taken to a “Results” page. If their application has been denied, they’re told, “Congratulations! You’ve been pre-approved for the Progressive Leasing option!” (In many instances, that sentence appears above the much smaller print telling them they’ve been denied.)

After inputting their checking account and credit card numbers and other information, the consumer is taken to a “Customer cart review” screen that includes a description of the item, the “Cash Price” – in other words, the retail price – the amount of each recurring payment, and the initial payment amount. You’ll want to read the complaint for a detailed explanation of what Progressive tells the consumer – and what the FTC says Progressive doesn’t clearly disclose. But the gist of the complaint allegations is that what follows is a flurry of confusing screens, inconspicuous hyperlinks and scroll bars, and fine-print “disclosures” that don’t clearly explain what the purchase is going to cost the consumer.

So how much do consumers wind up paying? Despite that prominent retail price, consumers who make the initial payment and all of the scheduled recurring payments typically pay double the retail amount. Even people who pay off early still pay more than retail.

According to the complaint, once consumers realized they had been misled about the cost, tens of thousands of them complained to Progressive. For example, in one 15-month period, Progressive received more than 15,000 complaints. And yet despite the outpouring of consumer dissatisfaction, the FTC says Progressive continued to use the same tactics to lure unsuspecting buyers in with retail prices that bore no resemblance to the higher amounts Progressive customers had to pay.

In addition to the $175 million financial settlement, the proposed order prohibits Progressive from – among other things – misrepresenting the total cost and other terms of its payment plans. Progressive also has to get consumers’ express, informed consent to charges before billing them – meaning an unambiguous affirmative act demonstrating the consumer has agreed to be charged.

Even if you’re not in the rent-to-own business, the case underscores important principles about price.

If you advertise “same as cash” or “no interest” offers, the details of the deal must be clear. In fliers, on websites, and through in-store promotions, consumers are inundated with enticing pitches. If your company chooses to promote offers like that, you also take on the legal obligation to explain them clearly. What’s more, if those offers are available only in certain circumstances, that’s another fact you need to explain up front.

Money is material. Consumers need accurate information about payment options and cost before they sign on the dotted line or click its digital equivalent. Companies should clearly disclose the total cost under the payment plan in which the consumer is enrolled.

View a transaction through your customers’ eyes. Obscure hyperlinks, fine-print text, and subtle scroll bars reduce comprehension and intensify the ire of deceived customers. Similarly, if consumers are auto-scrolled past important disclosures, they may not be given all of the information they need to make an informed decision. Take another look at your online transactions with consumer perception in mind. Read .com Disclosures for practical advice.


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