FTC Releases Staff Report on a Survey of Rent-To-Own Customers

The Federal Trade Commission today released a staff report on a nationwide survey of rent-to-own customers. The survey found that most rent-to-own merchandise is ultimately purchased by the customer, most customers are satisfied with their rent-to-own transactions, and most customers are treated well if they are late making a payment -- although some customers are subject to possibly abusive collection practices. The report recommends that the total cost of purchasing merchandise through a rent-to-own transaction be disclosed on product labels that the consumer can see while shopping, in addition to disclosures in rental agreements and advertisements.

Rent-to-own dealers rent furniture, appliances, home electronics and jewelry, typically without a down payment or credit check. Consumers make weekly or monthly payments, and can return the merchandise at any time without further obligation. Consumers obtain ownership of the merchandise if they continue payments for a specified period of time, usually 12-24 months. The total cost of purchasing merchandise through a rent-to-own transaction is usually significantly higher than retail store prices.

FTC staff surveyed over 12,000 randomly selected U.S. households, identifying 532 rent-to-own customers who were interviewed about their experience with rent-to-own transactions.

The survey found that:

• 2.3 percent of U.S. households used rent-to-own transactions in the last year, and 4.9 percent did so in the last five years. Thirty-one percent of rent-to-own customers were African American, 79 percent were 18 to 44 years old, 73 percent had a high school education or less, 59 percent had household incomes less than $25,000 and 53 percent lived in the South.

• Seventy percent of rent-to-own merchandise was ultimately purchased by the customer. Sixty-seven percent of customers intended to purchase the merchandise when they began the rent-to-own transaction, and 87 percent of the customers who intended to purchase the merchandise actually did so.

• Seventy-five percent of rent-to-own customers were satisfied with their experience with rent-to-own transactions, and 19 percent were dissatisfied. High prices were the most common reason for dissatisfaction.

• Nearly half of all rent-to-own customers had been late making a payment. Sixty-four percent of late customers reported that the treatment they received from the store when they were late was either "very good" or "good," and another 20 percent reported that the treatment was "fair." Fifteen percent of late customers reported being treated poorly, including 11 percent who indicated possibly abusive collection practices.

The report concludes that providing information on the cost of purchasing merchandise through a rent-to-own transaction is important because most rent-to-own merchandise is ultimately purchased by the customer. Disclosure of the total cost and other key terms of purchase would allow potential customers to compare the cost of rent-to-own transactions to other alternatives, and would help ensure that consumers choosing rent-to-own transactions do so on an informed basis.

The report suggests that the best way to provide total cost information that consumers can see and use while shopping would be to provide it on product labels on all merchandise displayed in the rent-to-own store. Clear and conspicuous disclosures also should be made in rental agreements and advertisements. The report concludes that disclosures on product labels, along with disclosures in rental agreements and advertisements, would substantially benefit rent-to-own customers.

Copies of the report are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

*The report was written by staff of the Commission's Bureau of Economics. The authors are James M. Lacko, Signe-Mary McKernan, and Manoj Hastak. The views expressed in the report are those of the authors and do not necessarily represent the views of the Federal Trade Commission or any individual Commissioner.