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EXAMINING RENTAL PURCHASE 

AGREEMENTS AND THE POTENTIAL 

ROLE FOR FEDERAL REGULATION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS 

AND CONSUMER CREDIT 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JULY 26, 2011 

Printed for the use of the Committee on Financial Services 

Serial No. 112–49 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

SPENCER BACHUS, Alabama, Chairman 

JEB HENSARLING, Texas, Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

ROBERT HURT, Virginia 

ROBERT J. DOLD, Illinois 

DAVID SCHWEIKERT, Arizona 

MICHAEL G. GRIMM, New York 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

BARNEY FRANK, Massachusetts, Ranking 

Member 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

LARRY C. LAVENDER, Chief of Staff 

(III) 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

SHELLEY MOORE CAPITO, West Virginia, Chairman 

JAMES B. RENACCI, Ohio, Vice Chairman 

EDWARD R. ROYCE, California 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JEB HENSARLING, Texas 

PATRICK T. MCHENRY, North Carolina 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

MICHAEL G. GRIMM, New York 

STEPHEN LEE FINCHER, Tennessee 

CAROLYN B. MALONEY, New York, 

Ranking Member 

LUIS V. GUTIERREZ, Illinois 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

RUBE ́ N HINOJOSA, Texas 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

NYDIA M. VELA ́ ZQUEZ, New York 

GREGORY W. MEEKS, New York 

STEPHEN F. LYNCH, Massachusetts 

JOHN C. CARNEY, JR., Delaware 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

July 26, 2011 ..................................................................................................... 1 

Appendix: 

July 26, 2011 ..................................................................................................... 41 

WITNESSES 

TUESDAY, JULY 26, 2011 

Harwood, Charles, Deputy Director, Bureau of Consumer Protection, Federal 

Trade Commission ............................................................................................... 7 

Hawkins, Jim, Assistant Professor of Law, University of Houston Law Center 20 

Saunders, Margot Freeman, Of Counsel, National Consumer Law Center ........ 25 

Saunders, Vivian, rent-to-own customer from Lewiston Woodville, North 

Carolina ................................................................................................................ 23 

Soto, Roy Richard, owner, Premier Rental Purchase ........................................... 22 

APPENDIX 

Prepared statements: 

Hinojosa, Hon. Ruben ....................................................................................... 42 

Westmoreland, Hon. Lynn ............................................................................... 44 

Harwood, Charles ............................................................................................. 45 

Hawkins, Jim .................................................................................................... 57 

Saunders, Margot Freeman ............................................................................. 64 

Saunders, Vivian .............................................................................................. 74 

Soto, Roy Richard ............................................................................................. 78 

(1) 

EXAMINING RENTAL PURCHASE 

AGREEMENTS AND THE POTENTIAL 

ROLE FOR FEDERAL REGULATION 

Tuesday, July 26, 2011 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

AND CONSUMER CREDIT, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:05 a.m., in room 

2128, Rayburn House Office Building, Hon. Shelley Moore Capito 

[chairwoman of the subcommittee] presiding. 

Members present: Representatives Capito, Renacci, Manzullo, 

Jones, Luetkemeyer, Huizenga, Duffy, Canseco, Grimm, Fincher; 

Maloney, Watt, Baca, Miller of North Carolina, Scott, Meeks, and 

Carney. 

Also present: Representative Clay. 

Chairwoman CAPITO. This hearing will come to order. I would 

like to remind members to observe the 5 minutes provided for questions and remain within their allotted time for opening statements. 

I know that we have many members on the subcommittee who 

are interested in this issue, and in Mr. Canseco’s legislation. The 

best way to assure we accommodate all the members is to limit our 

statements and questions to the allotted time. 

The subject of today’s legislative hearing is an examination of 

rental purchase agreements and the potential need for Federal regulation of this industry. 

Mr. Canseco has put forth one proposal for Federal legislation, 

H.R. 1588, the Consumer Rental Purchase Agreement Act. This 

legislation defines rent-to-own transactions, mandates plain language disclosures, and provides for Federal regulation of rental 

purchase agreements. 

This hearing will provide an opportunity for members of the subcommittee to better understand the industry and determine the 

need for Federal regulation. The rent-to-own transaction represents 

just one of many options for consumers when deciding whether 

they are financially able to purchase a large appliance or furniture. 

Rather than purchasing a television, refrigerator, dishwasher, 

computer, or other appliance, the consumer enters into an agreement where they make weekly or monthly payments with the option of purchasing the goods outright. 

Today’s hearing will shed light on the need for Federal regulation for this industry. The States currently provide a varying deVerDate Nov 24 2008 18:39 Dec 09, 2011 Jkt 067944 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\67944.TXT TERRIE
2 

gree of regulation of rent-to-own transactions. Regardless of the 

outcome of this hearing of potential future Federal regulation, we 

must strive to ensure that consumers have access to different options when choosing the best way to obtain goods and services. 

Rent-to-own transactions represent just one of many options, and 

I look forward to learning more from our witnesses today. 

Mr. Canseco is to be commended for his leadership in introducing 

this legislation, and I would like to thank him for his hard work 

on this issue. 

I would like to now recognize the ranking minority member, the 

gentlelady from New York, Mrs. Maloney, for the purpose of making an opening statement. 

Mrs. MALONEY. Thank you, Madam Chairwoman, and I welcome 

the witnesses today. 

This issue and this bill has been before this committee in previous Congresses, and this year, it is sponsored by my good friends 

and colleagues, Mr. Canseco and Mr. Clay. 

There is no doubt that millions of Americans use rent-to-own to 

secure all types of property including televisions, home furnishings, 

computers, and other products for their homes and small businesses and offices. 

In Ms. Vivian Saunders’ prepared testimony, she wrote that rentto-own allowed her to secure things for her home that she would 

not have been able to purchase outright from a department store. 

I don’t think anyone questions that these businesses are important for our economy, especially in times of economic downturn and 

tightening credit standards, but as with any financial transaction, 

these must be done with an eye towards consumer protections. 

We must ensure proper disclosure of prices and terms and conditions so that consumers know what kind of deal they are getting 

so they can decide what is best for them. 

I know that the industry would like to see a uniform Federal 

standard, but I also want to make sure that a Federal standard 

doesn’t preempt a State’s ability to pass and enforce their own 

laws. I have gotten several letters from members of the city council 

and the State legislature of New York already staking out a desire 

to be able to have their own laws to protect consumers. 

While I think in this case, a Federal standard could be set as a 

floor, I want to make sure we aren’t inadvertently setting a ceiling 

and prohibiting States from enacting their own laws or stronger 

laws. 

Now that we have the Consumer Financial Protection Bureau up 

and running, I understand there is a question as to how much jurisdiction the FTC will retain, or whether it is possible that the 

CFPB could inherit some of the responsibilities from the FTC. 

So I hope we can explore that, Mr. Harwood, today in your testimony. I know that the FTC and the CFPB will be sharing jurisdiction over several consumer loans. 

I look forward to hearing your testimony. Thank you for coming, 

and thank you, Madam Chairwoman, for calling the hearing. 

Chairwoman CAPITO. Thank you. 

I would like to recognize Mr. Manzullo for 11⁄2 minutes for the 

purpose of making an opening statement. 

3 

Mr. MANZULLO. Thank you, Madam Chairwoman, for calling this 

important hearing on the rent-to-own industry. I want to speak in 

support of Mr. Canseco and Mr. Clay’s bill, the Consumer Rental 

Purchase Agreement Act. This bill, which has wide bipartisan support, simply defines a rent-to-own agreement as a short-term lease 

with a purchase option, not as a sale of goods on credit or installment. The bill would create uniform national disclosure standards 

for rent-to-own businesses. 

It also would allow for simple disclosures to provide clear cost information to consumers considering rental purchase agreements. 

Those disclosures would be required to be clearly included in the 

rental purchase agreement. And while this legislation creates uniform Federal regulations, it still leaves intact the rights of States 

to regulate the industry in the ways that they see fit. 

Each year, millions of Americans enter rental purchase agreements. Characterizing these agreements as leases is consistent 

with transactional features that distinguish them from credit sales. 

The bill will work to maintain conformity with the current Federal 

treatment of rent-to-own agreements as well as existing State rentto-own statutes. 

Madam Chairwoman, unfortunately, I have to leave the hearing 

at this point. I hope to come back, but I have a hearing going on 

in the manufacturing caucus at the same time, so I yield back the 

balance of my time. 

Thank you. 

Chairwoman CAPITO. The gentleman yields back. Thank you. 

I would like to recognize Mr. Scott of Georgia for 4 minutes for 

the purpose of an opening statement. 

Mr. SCOTT. Thank you very much, Madam Chairwoman. I certainly appreciate you holding this hearing today on rental purchase 

agreements, specifically, the Consumer Rental Purchase Agreement 

Act, of which I am a cosponsor along with a number of my colleagues. 

I would like to just take a moment, if we could go through the 

basic points in the bill to make sure that we understand how valuable this bill is and how much it is needed at this time. 

First of all, H.R. 1588 would define rent-to-own as a lease instead of a purchase, and it would protect consumers nationwide by 

mandating minimum disclosures. The situation is this now: Currently, 47 States, including my home State of Georgia, have now 

enacted laws redefining rent-to-own. 

So it is, indeed, necessary that Congress act to define it as well. 

It is important to note that the legislation would not, and I repeat, 

would not preclude States from adopting stronger consumer protections than are contained in the Federal safety net. 

Whichever protection is deemed stronger, that is the one that 

would prevail. Thus, if a State’s law were considered to be less 

stringent than a Federal standard in this bill, than the Federal law 

would prevail. However, if the State law were deemed stronger, the 

State law would prevail. 

With this legislation, competition will be advanced, thus improving service and payment options for the more than 3.2 million customers of rent-to-own companies. 

4 

Our bill will provide the rent-to-own industry and its more than 

50,000 employees with job security, and even allow for expansion, 

thereby creating more jobs. 

Some have argued that the rent-to-own unfairly targets the poor 

and minority communities when, in fact, rent-to-own allows customers the ability to rent or purchase goods based upon their own 

personal economic situation. 

Short-term rental agreements have gained in popularity over the 

years based on the quality of the products offered and the needs 

of the consumer and flexibility of the transaction. Rent-to-own 

transactions provide millions of customers the option of acquiring 

such items as furniture, electronics and other important and needed items in a flexible manner. 

Americans who choose to utilize the rent-to-own services may return products at any time and with no penalty. This is especially 

important in our current economic climate when many Americans 

are suffering from lengthy unemployment or job insecurity. 

So, I am pleased to offer my support for this legislation once 

again in this Congress. I have supported it before. I urge my colleagues to support it as well, and I hope we are able to swiftly 

move this beneficial legislation to the House Floor for a vital vote. 

Thank you, Madam Chairwoman. 

Chairwoman CAPITO. Thank you. 

I would like to recognize Mr. Luetkemeyer for 11⁄2 minutes for 

the purpose of an opening statement. 

Mr. LUETKEMEYER. Thank you, Madam Chairwoman. 

I am a proud cosponsor of H.R. 1588, and I want to thank the 

gentleman from Texas and the other gentleman from Missouri for 

their leadership on this issue. 

In Missouri alone, there are approximately 260 rent-to-own 

stores. Collectively, this industry employs more than 1,500 workers, provides $56 million in annual wages, pays $8.6 million in annual payroll taxes, and generates $196 million in annual revenue 

just in our State alone. 

Sixty out of 62 rent-to-own companies in Missouri are owned and 

operated by small businessmen and women. These family business 

people need a certainty of a definition of the rental purchase transaction as a terminable lease to ensure that they can continue to 

serve their customers and grow their businesses. 

Now more than ever, we should be focused on providing certainty 

to small businesses that are able to create jobs. H.R. 1588 specifies 

that these agreements are leases and not credit sales. Customers 

rent products on a weekly or monthly basis and are under no obligation to acquire ownership and may return the goods without penalty at any time. 

This is important. This bill provides a floor of consumer protections to families who rely on rental purchase for access to household necessities like refrigerators, air conditioning units, and washers and dryers. 

This bill is bipartisan. It is a commonsense solution to the uncertainty that rental purchase dealers and their customers currently 

face. I urge my colleagues to join me in support of this legislation. 

I thank the witnesses for appearing today, and I yield back the 

balance of my time, Madam Chairwoman. 

5 

Thank you. 

Chairwoman CAPITO. Thank you. 

I would like to recognize Mr. Clay for 3 minutes for an opening 

statement. 

Mr. CLAY. Thank you, Madam Chairwoman, and good morning. 

As a cosponsor of H.R. 1588, along with my colleague, Mr. Canseco, 

I am especially grateful to you for holding this hearing. 

This bill enjoyed broad bipartisan support during the last session, in the subcommittee as well as the full committee, and according to the U.S. Census Bureau and the FDIC, millions of Americans, particularly lower-income persons, are unbanked or underbanked. 

In a recent report, the FDIC notes that many low- to moderateincome households do not have access to mainstream financial 

products such as bank accounts and low-cost loans. This lack of access to credit falls particularly hard on minorities. 

So, it is critical that low-income consumers have access to alternative products and services such as rent-to-own. The rent-to-own 

industry offers high-quality household and durable goods such as 

appliances, furniture, electronics, and computers for rent on a 

weekly or monthly basis. 

Rental companies do not check the credit of their customers and 

do not require downpayments or security deposits. This is a transaction easy for the consumer to enter and also easy for the consumer to exit. 

It gives working-class families opportunities to obtain decent 

household items without incurring the burden of debt, while at the 

same time allowing the consumer to build upon a history of credit 

payments. That is important to establish a credit history. 

H.R. 1588 will, for the first time, provide Federal consumer protections in the rent-to-own industry. These new Federal consumer 

protections create a strong foundation that will afford States ample 

flexibility to adopt additional standards of their own. 

State law will not be preempted. The only Federal limitation applies to the definition of the rent-to-own transaction. They are lease 

transactions not sales transactions, and States will have the ability 

to regulate them accordingly if they choose to do so. 

For instance, if a State wished to outlaw them completely, this 

legislation would not preclude that. The legislation also provides 

for comprehensive disclosure of key financial terms in advertising 

and on price cards on merchandise displayed in all rent-to-own 

stores. 

And I see that my time has expired, Madam Chairwoman, so I 

will yield back. 

Chairwoman CAPITO. I thank the gentleman. 

I would like to recognize Mr. Canseco for 21⁄2 minutes for the 

purpose of an opening statement. 

Mr. CANSECO. Thank you, Madam Chairwoman, and I appreciate 

very much your holding this hearing. I am also very grateful to my 

friend and my colleague from St. Louis, Mr. Clay, for working with 

me on this bill. 

For 4 decades, the rent-to-own industry has provided consumers 

with a vital option for obtaining everyday household goods such as 

furniture, electronics, and appliances. 

6 

Rent-to-own transactions are unique in that they give the customer the option of either returning a product after a short period 

with no penalty or taking ownership of the product after a number 

of successive payments have been made. 

This makes a rent-to-own transaction especially attractive to individuals who have an immediate need for a consumer product but 

don’t have available funds necessary to make a purchase and don’t 

have the credit to take out a loan. 

The popularity of this industry among consumers has grown exponentially throughout the years. Today, there are close to 8,200 

rent-to-own stores in the United States, and the industry serves an 

estimated 6 million customers every year. 

But, unfortunately for the industry and the consumers it serves, 

confusing and conflicting regulations from State to State have led 

to a great degree of uncertainty. That has undoubtedly hurt job 

creation. 

By removing this uncertainty, not only will it lead to new jobs, 

but we could see more stores opening that would help give underserved consumers an opportunity they are currently missing. 

To help achieve this outcome, Mr. Clay of Missouri and I have 

introduced H.R. 1588, the Consumer Rental Purchase Agreement 

Act, a bipartisan bill that includes 11 cosponsors from this subcommittee. 

Our bill would create a Federal definition of rent-to-own transactions and provide for a number of consumer protections and disclosures to be made at the consummation of a transaction. 

H.R. 1588 recognizes that rent-to-own transactions are consumer 

leases, not credit sales, and gives the FTC authority to regulate 

these transactions as such. 

This bill does not change or null State law, yet it does create a 

floor for consumer protection standards, and if a certain State has 

higher consumer protection standards than those offered by this 

bill, that State’s laws would prevail. 

These are important protections and help to provide a degree of 

regulatory certainty for the industry and its consumers. I look forward to today’s testimony, and I thank our witnesses who are here 

to testify. 

Thank you, Madam Chairwoman. 

Chairwoman CAPITO. Thank you. 

I would like to recognize Mr. Fincher for 11⁄2 minutes for the purpose of an opening statement. 

Mr. FINCHER. Thank you, Madam Chairwoman. 

I represent the largest number of rent-to-own businesses in the 

State of Tennessee. Of the 290 rent-to-own stores in the State that 

employ a total of 1,740 people, 51 stores are located in my district, 

employing 306 people and serving more than 28,000 customers. 

This is an industry of independent small businesses, which are 

part of the economic backbone of our Nation and create the most 

jobs. Just as our community banks are facing burdensome regulations because of Dodd-Frank, the rent-to-own industry is facing a 

potentially burdensome regulatory environment from the Consumer 

Financial Protection Bureau. 

Like most industries, rent-to-own businesses depend on longterm planning to make decisions such as hiring new employees, exVerDate Nov 24 2008 18:39 Dec 09, 2011 Jkt 067944 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 K:\DOCS\67944.TXT TERRIE
7 

panding store locations, and investing in new merchandise. That is 

why I am a cosponsor of the Consumer Rental Purchase Agreement 

Act to bring some regulatory clarity and certainty to this industry 

by more clearly defining the rent-to-own transaction and providing 

meaningful consumer protections. 

I look forward to today’s testimony and to further discussing this 

bill. 

Madam Chairwoman, I yield back. 

Chairwoman CAPITO. Thank you. 

I think that all opening statements have concluded, so I would 

like to welcome our first witness for the purpose of giving a 5- 

minute opening statement. 

Mr. Charles Harwood is the Deputy Director of the Bureau of 

Consumer Protection at the Federal Trade Commission. 

Welcome, Mr. Harwood. 

STATEMENT OF CHARLES HARWOOD, DEPUTY DIRECTOR, BUREAU OF CONSUMER PROTECTION, FEDERAL TRADE COMMISSION 

Mr. HARWOOD. Thank you, and good morning, Chairwoman Capito, Ranking Member Maloney, and members of the subcommittee. 

I am Charles Harwood, a Deputy Consumer Protection Director 

at the Federal Trade Commission. I would ask that my written 

statement, which was approved by the Federal Trade Commission, 

be included in the record. The following summary of that written 

statement, together with my responses to questions, are my views 

and not necessarily the views of the Commission. 

As part of its mandate to protect consumers, the Federal Trade 

Commission enforces the FTC Act, which broadly prohibits unfair 

or deceptive acts or practices in or affecting commerce. 

The Commission also enforces a number of laws specifically governing lending and leasing practices, including the Truth in Lending Act and the Consumer Leasing Act. 

These two Acts require disclosures and establish certain substantive requirements in connection with consumer credit or lease 

transactions respectively. Under these laws, the Commission has 

jurisdiction over most non-bank lenders. 

The rent-to-own, or RTO, industry consists of dealers that rent 

household goods and other items to consumers, usually on a weekly 

or monthly basis. RTO agreements typically do not require any 

downpayment or credit check, as has already been noted, thus providing consumers with immediate access to household goods. 

Generally, consumers are under no obligation to continue making 

payments beyond the current weekly or monthly period, though if 

they do, the RTO agreement renews automatically. 

RTO agreements provide consumers with the option to purchase 

the goods in most cases by either continuing to pay rent for a specified period of time, or by making early payment of some specified 

proportion of the remaining payments. 

Ten years ago, then-FTC Consumer Protection Director Howard 

Beals testified before this same subcommittee. He described a seminal report on the RTO industry prepared by the Commission’s Bureau of Economics and released in 2000. 

8 

The report, which is described more fully in my written testimony, included the following findings: First, based on RTO customers identified through a general survey of the population, the 

report found that 70 percent of the merchandise rented was ultimately purchased by these customers. 

Second, of these RTO customers, 31 percent were African American, and 59 percent had annual household incomes less than 

$25,000. At the time, the average annual median income was about 

$41,000 or $42,000. 

Third, 75 percent of these RTO customers stated they were satisfied with their experience, while 19 percent said they were dissatisfied, with most citing high prices as the reason. 

Several industry and other studies using industry-supplied store 

reporting data have been published since 2001. These studies generally concluded that the purchase rates for RTO transactions were 

lower than the rate found in the FTC Bureau of Economics Report. 

The discrepancies in the purchase rate findings may be attributable to differences in the study methodologies or other factors. 

Turning to consumer protection issues, there are several Federal 

consumer protection laws that may apply to RTOs depending on 

the circumstances, including the aforementioned Truth in Lending 

Act, the Consumer Leasing Act, and the Federal Trade Commission 

Act. 

None of these laws, however, has provisions that specifically reference RTO transactions. However, 47 States and the District of 

Columbia have laws that do specifically govern RTO transactions. 

These laws require a variety of disclosures and impose other requirements and prohibitions. 

The bill before the subcommittee, H.R. 1588, which amends the 

Consumer Credit Protection Act to specifically cover RTO transactions, includes a provision that would require disclosures to consumers of certain payment terms in RTO agreements and in advertisements and at the point of rental. 

As noted in my written testimony, the Commission has not taken 

a position on the bill. In general, however, the FTC believes that 

effective disclosures of the key terms of a transaction are central 

to protecting consumers by giving them any information they need 

to make choices, in fact, good choices. 

The watchword here is ‘‘effective.’’ Designing disclosures that 

successfully convey accurate and useful information can be challenging. Often, the success in this regard depends on the context, 

the information that is to be communicated, and the specific manner in which the disclosures are made. 

Indeed, the fact that there are different disclosure schemes in the 

various State RTO laws suggests that there may be no single right 

way to make disclosures effectively. 

However, Commission staff would be happy to provide technical 

assistance to the subcommittee in designing effective disclosure requirements. That concludes my statement. I would be pleased to 

answer questions. 

[The prepared statement of Mr. Harwood can be found on page 

45 of the appendix.] 

Chairwoman CAPITO. Thank you, Mr. Harwood. 

9 

I would like to begin by asking—and some folks made reference 

to this in their opening statements—whether or not these transactions would fall within the realm of the CFPB, and if you view 

the CFPB as a suitable fit for oversight of the rent-to-own transaction. 

Mr. HARWOOD. Sure. First of all, let me note that that we haven’t 

specifically consulted with the CFPB about this specific issue, so 

any answer I give you will be speculative, at least in part. 

But I do know that as far as we have heard, the CFPB has no 

intention, so far, of attempting to regulate in this area. As you 

know, under the current regime, the CFPB, which came into being 

on July 21st, has in many ways dual enforcement authority with 

the FTC with regard to many financial service areas. 

And, in addition, the CFPB has the primary regulatory authority 

over many of these areas including rules the FTC previously wrote. 

The CFPB is now responsible for writing those rules. 

With respect to whether the CFPB should be involved specifically 

in this, my understanding is that with respect to some of that authority, it is somewhat limited and, in fact, they might not currently have the authority they would need to regulate in this area. 

But beyond that, I really can’t comment further who should do 

it. Certainly, the FTC has experience in this area, and experience 

with this industry. 

Chairwoman CAPITO. Let me ask you a clarifying question that 

might be a little bit off topic there, but you said the FTC and the 

CFPB have dual enforcement authority in certain areas. What 

areas are those? 

Mr. HARWOOD. As far as the consumer financial services, the 

FTC and the CFPB are both responsible for enforcing laws involving mortgage scams, debt settlement schemes, a variety of scams 

in those areas, both agencies can bring law enforcement actions. 

Chairwoman CAPITO. Okay. Consumer advocates argue that the 

rent-to-own merchants should be required to disclose to consumers 

an annual percentage rate of interest on the transactions even if 

the loan is for a shorter time, and the rent-to-own area is not the 

only area that I think has this issue. 

Industry reps contend that such disclosures could be misleading. 

We have already learned that a lot of the contracts are a week, a 

month—a short period of time. What was the average? Four 

months or something of that nature. Do you have a view on whether that would be considered full disclosure if you put the annual 

percentage rate of interest? 

Mr. HARWOOD. In its testimony, the FTC takes no position on 

whether APR is the right way to make these disclosures versus 

some other means. I would note, though, that these transactions 

are a bit unique and that they are hybrid transactions. 

They have some elements of a rental and some elements of the 

purchase arrangement, possibly making it difficult to know what 

kind of scheme should actually be applied. 

In the report that the FTC did in 2000, we did note that it would 

be important to consumers to have the total purchase price disclosed to them. 

But we also noted that it might be problematic to try to apply 

an APR rate depending on a variety of issues. For example, to 

10 

apply APR, you have to begin by determining what the cost of the 

item was, and at least in some instances, we were concerned that: 

first, it would be difficult to determine the cost of the item; and second, the APR itself could be skewed based on what the merchant 

chose to set the cost at if you left it to the merchant to set the cost 

of the item. 

So, in fact, in some instances, we were concerned the APR might 

not communicate adequate information. 

Chairwoman CAPITO. The last question from me is that 47 States 

have disclosure laws and other laws over rent-to-own, and you do 

consumer protection in the FTC. This is probably in your report, 

so pardon me if I didn’t catch it when I read the report, but what 

are the top two abuses by the rent-to-own businesses of consumers, 

in your opinion? 

Mr. HARWOOD. Let me first note that the FTC receives a small 

number of complaints about the rent-to-own industry. I believe it 

was only a couple of hundred over the past year out of over 1.1 million complaints total that the FTC received. 

So the information I am relying on is a very small part of the 

complaints, but the kinds of complaints we received involved problems, for example, with returning merchandise; problems with broken items that weren’t being serviced adequately. I am not sure 

those are the top two, but those are two examples in looking at the 

few complaints we did receive. 

Chairwoman CAPITO. I think it is interesting that there were so 

few complaints, and that basically, probably if you went industrywide on any industry that rents or sells anything, we will probably 

have those same types of complaints—not working correctly, or 

those kinds of things. 

I thank you very much. 

And I would like to go to the ranking member for her questions. 

Mrs. MALONEY. Thank you, and thank you for your testimony. 

In your testimony, you state that the FTC does not support preemption of State laws that are more protective of consumers in this 

area, and that States should continue to be the laboratories of democracy. 

So, can I take from that comment that you do not believe the 

Federal Government—either Congress or the FTC—should be regulating the rent-to-own industry? 

Mr. HARWOOD. Thank you, Representative Maloney. I think you 

are referring to the footnote at the end of the testimony. That footnote reflects the views of two of our five Commission members— 

Commissioner Brill and Chairman Leibowitz—who felt it was important to convey the views in the footnote. The other three members of the Commission took no position on the issue of preemption. 

Let me note, though, that with regard to preemption, there are 

a variety of factors that go into any consideration about whether 

you should preempt State laws with Federal law. Those factors include whether two regulatory regimes can coexist—a Federal and 

a State regulatory regime. They also include whether there is currently an effective State law enforcement initiative or program in 

place. They also include how burdensome two regulatory regimes 

would be on business. And also, whether there are effective Federal 

law enforcement alternatives if the States are preempted. 

11 

These are just some of the factors that, taken together, tend to 

guide policymakers in deciding whether you should preempt State 

law with Federal law. 

As I said, two of the Commissioners expressed concern about this 

preemption. The other three Commissioners took no specific position on it. 

Mrs. MALONEY. What is the role of the FTC now in regulating 

them, and what do you view as the FTC’s role? 

Mr. HARWOOD. We receive over 1.1 million complaints, including 

several hundred on the rent-to-own industry. That is only about 

three-one hundredths of 1 percent of all the complaints we received 

last year. 

Nevertheless, if we were to see complaints that suggested that 

there was a pattern of deception by a member of this industry, significant problems with deceptive debt collection practices, or other 

kinds of consumer abuses, the FTC believes it has the authority 

under the FTC Act to file lawsuits against the companies engaged 

in such deceptive or unlawful practices. 

Mrs. MALONEY. Have you filed any lawsuits for deceptive— 

Mr. HARWOOD. Not against the rent-to-own industry, no. 

Mrs. MALONEY. Not in what, 1 year or 2 years or ever? 

Mr. HARWOOD. As far as I know, not in the last 10 years, which 

is as far back as I looked. 

Mrs. MALONEY. With an overwhelming number of States already 

enacting laws on rent-to-own transactions, and the fact that the industry—of course, it is a factor of the economy, possibly—has continued to grow, despite having to contend with requirements that 

are different across State lines, is there a compelling need for Federal legislation over rent-to-own transactions? 

Mr. HARWOOD. As I indicated, I think that requires assessing a 

variety of factors, for some of which you might need to develop a 

more extensive record, and I think part of that record can be obtained by talking to the industry and by talking with consumers. 

Certainly, we haven’t seen a significant number of complaints 

about this industry filed with the FTC. On the other hand, I also 

can’t assess how much burden two regulatory schemes or the separate State schemes have posed on the industry. 

Mrs. MALONEY. But you already have the power right now, and 

for 10 years, you haven’t acted on any of the complaints? 

Mr. HARWOOD. Those are both correct statements, yes. 

Mrs. MALONEY. Pardon me? 

Mr. HARWOOD. Yes, that is correct. And as I had indicated, two 

members of our Commission felt strongly that there was no need 

to preempt. The other three didn’t take a position on it. 

Mrs. MALONEY. Do you call the States and ask them to do something, or do you just ignore it? 

Mr. HARWOOD. We are aware of State law enforcement actions. 

For example, Washington State filed a law enforcement action in 

2009 involving the rent-to-own industry. 

So we talk with the States about their law enforcement, and we 

track their law enforcement efforts. 

Mrs. MALONEY. And how does a rent-to-own customer accurately 

compare the prices of rent-to-own merchandise to products available at the traditional retail stores now? 

12 

One of the things we have been working on is fairness, access, 

transparency, consumers getting the best price because they have 

fewer dollars—they are struggling, entrepreneurs especially, small 

businesses are struggling, access to credit is difficult. 

In the current framework, is there a way to compare prices so 

that our entrepreneurs can get the best price as they struggle with 

their businesses? 

Mr. HARWOOD. We share your concern for consumers who are 

facing financial problems. The FTC has devoted significant resources to combating scams and frauds that target consumers who 

are facing financial difficulty—we call these frauds last dollar 

frauds. 

We have also been engaged in a variety of law enforcement efforts to protect small businesses, many of whom are also targeted 

by scams and fraudulent activities. 

With regard to comparing prices, this is exactly the sort of thing 

that our study looked at in 2000. We wanted to make sure consumers can adequately compare the total purchase cost of something they may choose to purchase through a rental transaction 

with the total purchase cost of something they may choose to purchase from a retailer. This is why we argue it is important to have 

the total purchase cost disclosed to consumers at the time they 

enter into a rental purchase arrangement. 

Chairwoman CAPITO. The gentlelady’s time has expired. 

Mr. Renacci for 5 minutes? 

Mr. RENACCI. Thank you, Madam Chairwoman. 

I am still confused. I am going to follow up on the ranking member’s question. I am a big advocate of rent-to-own, and I think it 

is a great industry. I think it helps those who sometimes cannot 

afford to purchase. 

But I keep hearing you say that you haven’t had that many complaints, and I am trying to determine your opinion—and I don’t 

think you answered it—in your opinion, do you believe there is a 

compelling reason to have a Federal rent-to-own standard? 

Mr. HARWOOD. As I have indicated, there are very few complaints, and for the Commission and for the Commission staff, including me, it comes down to, where do we put our limited resources? 

In the past 5 or 6 years, the Commission has filed numerous 

cases involving loan scams, involving debt relief scams, involving 

credit debt collection scams. Those were areas where we believed 

it was important to put our resources, because of the literally thousands of complaints we receive concerning those areas. 

We simply don’t have the resources to deal with every single consumer complaint we receive, as much as we might like to. So it 

really comes down, Representative Renacci, to how we use our limited resources. 

Mr. RENACCI. It also appears if there were a large number of 

complaints, and you were starting to see a trend, that this would 

be something that would go up on the radar screen and not be 

down on the lower part of the radar screen. 

Mr. HARWOOD. That is correct. If we were to see a pattern of 

fraud or deception or consumer injury with regard to the conduct 

13 

of rent-to-own industry members, we would likely choose to focus 

more of our resources on the industry. 

Mr. RENACCI. Has anybody ever done a comparison of State-byState disclosures, what the States are requiring and how similar 

they are, and how similar the State disclosures are to what this bill 

is actually going to require as disclosures to determine whether the 

States are already asking for adequate disclosures? 

Mr. HARWOOD. My understanding is that most of the State laws 

have some similar provisions, but they are not identical by any 

means. They all mandate some cost disclosures; they prohibit some 

unreasonable fees; they prohibit imposition of mandatory property 

loss insurance—a requirement that was more common in the past; 

and they give customers who miss payments, in most cases, the 

right to restate their rental under certain circumstances. 

But beyond that, there are quite a few differences including differences as to what they require to be disclosed. 

Mr. RENACCI. But do you think they meet the minimum disclosures based on your review? 

Mr. HARWOOD. Again, the disclosures vary widely. I think some 

States come relatively close to meeting the total cost disclosure— 

the kind of disclosure that the FTC said would be helpful. In other 

cases, I suspect, the disclosures are not as helpful as they could be. 

Mr. RENACCI. It is interesting, the IRS and basically they have 

a standard for lease versus purchase, and I wonder if the total disclosures would justify—there are four standards. If you are leasing 

something for 75 percent of the useful life, if there is a transfer of 

ownership, if there is an option to purchase at bargain price, and 

if there is a present value of the lease payments exceeds 90 percent—that is what I am used to, because I am from—being a 

CPA—a standard of whether you are leasing or purchasing. 

I wonder if those disclosures, if significant enough, wouldn’t actually transfer some of these into consideration of being a purchase 

versus a lease. If the lease payment is—I will give you an example: 

If you buy a refrigerator, and it is a $1,000 refrigerator, and you 

are paying $100 a month for 15 months, you are literally paying 

$1,500 for a $1,000 refrigerator, and I am using extreme—that becomes, in many cases, by an IRS standard, a purchase in the business world versus the consumer world. 

I am just trying to get a feel for where the Federal Government 

would step in on those kind of transactions and determine whether 

it really was a lease or a purchase. 

Mr. HARWOOD. I think the Federal Government currently would 

not step in. In the consumer protection arena, not in the IRS 

arena, but in the consumer protection arena, the Federal Government would not step in and determine whether it is a lease or a 

purchase. 

In my opinion, interpretation would rely on the language in the 

contract or in the rental agreement that presumably would specify 

what kind of a transaction the consumer entered into. For example, 

does the consumer have the right to return the product? How is the 

consumer paying for it? Who retains ownership of the product during the time that it is being leased or purchased? Those sorts of 

considerations. 

Mr. RENACCI. Okay. I yield back. 

14 

Chairwoman CAPITO. Thank you. The gentleman yields back. 

Mr. Watt, for 5 minutes for questions? 

Mr. WATT. Thank you, Madam Chairwoman, and I thank the 

Chair for convening the hearing. I think it is important for us to 

understand this bill. 

Let me say at the outset, I am neither an advocate for nor an 

adversary of the rent-to-own business industry. I do have pretty 

strong feelings sometimes to the right of my Tea Party colleagues 

about what is appropriately under Federal jurisdiction and what is 

appropriately under State jurisdiction, and it has always been that 

concern that I have expressed about this bill in its prior forms and 

which I continue to have concerns about in its current form, because it seems to me that the exception in section 1018 of this proposed bill, to the preemption, eats up the rule. 

So let me ask you, Mr. Harwood, did your study that you referred to determine what percent of rent-to-own transactions were 

in interstate commerce—that is, I am a customer, and I go into another State and enter into an agreement, as opposed to what percent of the transactions were in intrastate commerce? 

Mr. HARWOOD. Actually, the study did not look at that specific 

issue. I suspect— 

Mr. WATT. Okay. 

Mr. HARWOOD. —most of the transactions are actually local between the consumer and the rental shop owner. 

Mr. WATT. Okay. I thought that might be the case. This strikes 

me as pretty much the same debate I have in this committee and 

in the Judiciary Committee with my colleagues who feel like we 

ought to have a Federal standard for medical negligence. 

I have never seen an operation or a medical procedure take place 

across a State line. It generally takes place inside a particular 

State, and my experience with rent-to-own transactions is that is 

also the case. 

I am not sure how some of my colleagues who say that they want 

to downsize the role of the Federal Government—how they reconcile that with giving the Federal Government more and more 

and more jurisdiction over more and more and more things. 

But I will let them—I won’t ask you that question, Mr. Harwood, 

I am sure you couldn’t reconcile that. I haven’t been able to get 

them to reconcile it in the 19 or 20 years I have been here in Congress. 

Have you looked closely, Mr. Harwood, at the exception to what 

is preempted under section 1018(b) of the proposed legislation? Did 

you have a chance to look at that, or should I just wait and ask 

the second panel? I am sure there are people on the second panel 

who looked pretty closely at that definition? 

Mr. HARWOOD. I have it front of me now, though I don’t claim 

any particular expertise with regard to what the language means. 

Mr. WATT. So if I am a customer, and I walk into a rent-to-own 

store in North Carolina—I am in North Carolina—I walk into a 

North Carolina store, do you think it would be reasonable for the 

Federal law to tell me how to regulate—whether to regulate this 

as a rental purchase agreement, as a security interest, a credit 

sale, a retail installment sale, a conditional sale, or other form of 

consumer credit? 

15 

Why should the Federal Government be telling me what form of 

consumer credit this is if this whole transaction is within the 

State? 

Mr. HARWOOD. I am not sure I can really answer that question. 

I will note that there are Federal laws that currently apply to 

things like credit disclosures and lease disclosures even at the level 

of consumer to business transaction. So, it is not an unprecedented 

concept. 

Whether that should be extended to this kind of thing is harder 

for me to answer. 

Mr. WATT. I yield back, Madam Chairwoman. 

Chairwoman CAPITO. Thank you. 

Mr. WATT. I think I have made the point I want to make. 

Chairwoman CAPITO. I would like to recognize Mr. Luetkemeyer 

for 5 minutes for questions. 

Mr. LUETKEMEYER. Thank you, Madam Chairwoman. 

Mr. Harwood? Just from the testimony this morning and reading 

some of the information with regards to this industry, it would appear that—and having been around the financial services industry 

for many years and looking at their complaints to transaction ratio, 

this would be an outstanding complaint-to-transaction ratio when 

you received 200 complaints for 1.2 million transactions. 

That is phenomenal. It would tell me that, I guess, the industry 

has been around for so many years that they have worked out the 

problems. The States have been regulating it to the point where 

they have the industry to a point where it provides the service in 

a way that consumers can operate with it in a fair fashion, get good 

service, get good product for the dollar, good value for the dollar, 

and the bad players are apparently out of the industry. Would that 

be a fair statement? 

Mr. HARWOOD. I hope that is accurate, Representative. 

Mr. LUETKEMEYER. It would seem with 200 complaints out of 1.2 

million transactions, that would be a pretty good assumption from 

the standpoint of looking at other industries that are not necessarily similar to it, but in the financial services industry, anyway, this would be a phenomenal ratio. 

Mr. HARWOOD. It may also reflect that complaints are primarily 

going to the States, which have more enforcement in this area, but 

probably a little of each, to be honest. 

Mr. LUETKEMEYER. Okay. Very good. Fair enough. Would you 

characterize this bill as—because of that then, the industry would 

appear to be pretty satisfied with what is going on within its industry with the State regulation. Would you characterize this bill as 

a preemptive move to protect the industry from Federal oversight 

and regulation? 

Mr. HARWOOD. I wouldn’t try to characterize it, to be honest. My 

understanding is that it tracks many of the current State laws. 

Most of the State laws that currently exist, it is similar to them. 

So whether that constitutes an effort to take over the area, I really 

couldn’t say. 

Mr. LUETKEMEYER. I would think that if you look at the regulatory scene today—and when I talk to consumers, the first question is always about jobs, the economy, and the debt and everyVerDate Nov 24 2008 18:39 Dec 09, 2011 Jkt 067944 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\67944.TXT TERRIE
16 

thing that is going on, and the second question is always about the 

regulatory environment. 

So it would seem to me that they are concerned with the sticky 

fingers of government trying to get in their industry and trying to 

regulate in perhaps a negative way. And this may be a preemptive 

way of being able to get themselves into a position to protect your 

industry as well as improve it from a standpoint of Federal regulation. Would that be a fair statement? 

Mr. HARWOOD. My understanding is that the legislation is intended to accomplish the goal of protecting consumers by providing 

adequate disclosures and providing them on a national basis. 

Mr. LUETKEMEYER. Okay. In previous testimony, you have made 

the statement with regard to the annual percentage rate, that it 

does not necessarily fit in this rent-to-own transaction since consumers can stop the transaction at any time. 

And in my discussion with some of my rent-to-own business 

folks, they indicated that—at least one of them did, and it is probably—I assume it is probably industry-wide—maybe off a little bit, 

but that the average product is returned 3 times before it is actually purchased. 

So, I think they make a very good case that it is not something 

that is a true ownership type of scenario where I am going to purchase it over time—a time sensitive contract of some sort. Whenever you have that kind of return on those products, it would certainly not lend itself to an APR transaction. Do you still agree with 

that? 

Mr. HARWOOD. I don’t have the data you have about the average 

product being returned 3 times, but when you have used and new 

products, and you are renting them both, that does raise questions 

about how you set the purchase price of the product, which is part 

of what has to go into calculating APR, and demonstrates why it 

may be challenging to determine and compare APRs in this area. 

Mr. LUETKEMEYER. What is the average length of the transactions? Do you know offhand? 

Mr. HARWOOD. I am afraid I don’t know that. 

Mr. LUETKEMEYER. Okay. If you were looking at this piece of legislation, what do you see in it that would raise concerns for you? 

Mr. HARWOOD. As I had indicated, for the FTC, a main concern 

for us is how you go about disclosing, in a meaningful way, the information you want consumers to have. 

You need the disclosure to be effective. You need to make sure 

they are getting all the information they need. 

Mr. LUETKEMEYER. Are they not getting it now? 

Mr. HARWOOD. The legislation leaves open how disclosures are to 

be done. I think it gives the Federal Reserve Board the authority 

to promulgate regulations for disclosures. 

Our concern would be that disclosures need to be effective and 

meaningful to consumers. 

Mr. LUETKEMEYER. The States have—are they pretty well in line 

with a lot of disclosure requirements? 

Mr. HARWOOD. I think some of the disclosure requirements that 

are included in the legislation are currently being made in the 

States. I think in some instances States have different disclosure 

requirements. Some are more extensive, some are less extensive. 

17 

Mr. LUETKEMEYER. Okay, I see my time is up. Thank you, 

Madam Chairwoman. 

Chairwoman CAPITO. Thank you. 

I would like to recognize Mr. Clay for 5 minutes for questions. 

Mr. CLAY. Thank you, Madam Chairwoman. 

Mr. Harwood, the FTC’s most recent rent-to-own survey is more 

than a decade old, and we have experienced significant turmoil in 

the financial industry during the last few years. Do you think a 

more recent examination into the experiences of rent-to-own customers, and wider rent-to-own industry is warranted before Federal 

regulation or rent-to-own transactions should be considered? 

Mr. HARWOOD. Representative, I actually asked our economists 

who worked on the 2000 study what their view was of it, and they 

tell me they stand by the results of the 2000 study, and continue 

to believe it is—the findings are valid and useful findings. 

I should note that the economic disruptions that you are describing and problems you are describing are exactly the same economic 

disruptions that the FTC has been focusing on. Those kinds of 

issues have caused us to feel like we need to focus our resources 

on those issues rather than conducting additional studies in areas 

such as rent-to-own. 

I will note that, third, when we did this study in 2000, it was 

done at a time when there was a great deal of concern, not just 

about the disclosure regime associated with rent-to-own, but also 

there were complaints about debt collection issues and other issues 

associated with the rent-to-own industry. 

The study found those problems did not seem to be as substantial or as widespread as was thought at the time. We did the study 

suggesting that at least in that area, there was little that needed 

to be further studied. 

Mr. CLAY. Thank you for that response. If there is well-settled 

law regarding rent-to-own transactions in most, if not all, States, 

is there a need to expand any consumer protections to rent-to-own 

transactions or should the States continue to decide how to treat 

these transactions? 

Mr. HARWOOD. The complaints and the law enforcement actions 

I am aware of have all involved State actions. The ones I have 

looked at recently involved a variety of deceptive and abusive practices in the rent-to-own industry, and from what I can tell, the 

States effectively and aggressively took care of the problems. 

Mr. CLAY. Thank you for that response. In accordance with FTC 

recommendations, we have provided additional protection for consumers through H.R. 1588, and that will include a new price tag 

requirement, new tag information must disclose whether an item 

is new or used, the case price for the item, the amount of each 

rental payment, the total number of payments required to obtain 

the property, and the full rental purchase price. 

Do you think these new additions are sufficient to satisfy FTC 

recommendations? 

Mr. HARWOOD. The kinds of disclosures that are required in 1588 

are the kind that the FTC urged be considered in our 2000 report 

in this area. All of those disclosures go to helping consumers understand the components of what they are purchasing—the price components of what they are purchasing. 

18 

They make the pricing information more transparent and easier 

for the consumers to understand. Whether those are all of the provisions—all of the things you would want to see disclosed or whether there might be additional disclosures that would be helpful, it 

is hard for me to get into specifics, but all of those things are important to consumers. 

Mr. CLAY. Thank you so much for your response. 

And, Madam Chairwoman, I yield back the balance of my time. 

Chairwoman CAPITO. Thank you. 

I would like to recognize Mr. Canseco for 5 minutes for questions. 

Mr. CANSECO. Thank you, Madam Chairwoman. 

Mr. Harwood? In order to follow up on what Mr. Clay was asking 

with regard to the 2001 hearing that was held, shortly thereafter, 

a year after, a bill similar to H.R. 1588 was passed in the House. 

A focus of that hearing was the 2000 FTC survey of the industry 

you described. Has the view or perception of the FTC towards the 

industry materially changed since then? 

Mr. HARWOOD. Recognizing that we have different Commissioners now than the Commissioners at the time of the 2001 hearing and different senior management, there hasn’t been any significant change in the way the FTC has perceived the industry. 

We haven’t been involved in law enforcement actions concerning 

the industry since then. 

Mr. CANSECO. So would your answer be— 

Mr. HARWOOD. I think the answer would be the views are relatively similar, if not identical, to the— 

Mr. CANSECO. Okay, thank you. How well do the protections of 

H.R. 1588 address some of the FTC’s concerns over consumer protection, in your opinion? 

Mr. HARWOOD. As I had indicated, the disclosures that are required under H.R. 1588 are of the kind that we urged consumers 

should receive in our 2000 study. They help make the pricing more 

transparent for consumers. They help them understand the total 

purchase price of these items, and it allows them to compare the 

purchase price through the rental process or leasing process with 

just buying an item off the store shelf. 

We believe those things are helpful to consumers. Whether all of 

the disclosures are necessary or whether there might be additional 

disclosures, we haven’t analyzed the bill that closely. 

Mr. CANSECO. And does the FTC view the bill as providing a 

floor for consumer protections in relation to State laws? 

Mr. HARWOOD. My understanding is that it varies depending on 

which part of the bill we are talking about. 

In many parts of the bill, as I understand it, for example under 

section 1018(a) it makes clear that the bill allows consistent laws 

and even laws that provide greater consumer protection to coexist. 

Under 1018(b), there is a provision that preempts laws that require 

APR disclosure. 

So the answer is yes, in some ways it does— 

Mr. CANSECO. Okay. So in your opinion, the bill could enhance 

consumer protection in a number of States whose laws regarding 

rent-to-own could be viewed as inadequate? 

19 

Mr. HARWOOD. Yes, and I am confident there are undoubtedly 

States in which it would provide greater consumer protections then 

currently exist. 

Mr. CANSECO. And thus serve as an example to those States that 

have inadequate laws in order to rectify those inadequacies? 

Mr. HARWOOD. I would think that the bill gives the FTC and the 

States the authority to enforce this law if it is enacted. So in those 

States, the State consumer protection authority would also have 

the authority to enforce this law. 

Mr. CANSECO. Right. To follow up on Mrs. Maloney’s inference to 

that, the FTC has chosen not to act. H.R. 1588 gives them specific 

authority to pursue penalties. 

If a merchant is found to be in continual violation of the provisions of Title X, the Federal Trade Commission or a relevant State 

Attorney General can issue an order to cease and desist or pursue 

a civil penalty. Is that correct? 

Mr. HARWOOD. Yes, that is correct. That is my understanding of 

the legislation as well. 

Mr. CANSECO. Okay. Thank you—just to clarify that. And you 

mentioned, at the end of your testimony, that the rent-to-own market would only function properly if its business practices are transparent, fair and honest. Does the FTC believe that H.R. 1588 goes 

a long way towards meeting these criteria? 

Mr. HARWOOD. The FTC believes that the goals of 1588, in fact, 

would help consumers better understand the purchase transactions 

and would provide the kind of transparency we are urging. 

Mr. CANSECO. And in your testimony, you say that the FTC is 

not aware of a determination by the CFPB regarding their authority over rent-to-own transactions, but in your opinion, does the 

Dodd-Frank statute even give the CFPB authority over the rent-toown business? 

Mr. HARWOOD. I am told that at least one provision in DoddFrank raises questions as to whether the CFPB would have jurisdiction. But my expertise concerning Dodd-Frank is somewhat limited. 

Mr. CANSECO. Thank you for your candor. 

The rent-to-own industry predates the Truth in Lending Act and 

the Consumer Leasing Act. Are you of the belief that the industry’s 

omission from those Acts was intentional? 

Mr. HARWOOD. I honestly don’t know the answer to that, Representative Canseco. I presume the Congress knew the industries 

were out there at the time they passed that legislation, but beyond 

that, I can’t say. 

Mr. CANSECO. Okay. My time has expired. I thank you, very 

much, for your candor. 

Thank you, Madam Chairwoman. 

Chairwoman CAPITO. Thank you, Mr. Canseco. 

And with no further questioners, I dismiss the first panel and 

thank Mr. Harwood for his answering the questions and his conciseness in answering them too. I appreciate that. 

I will now call up the second panel. 

Thank you. At this time, I would like to call up our second panel 

of witnesses. Thank you all for coming. I will introduce them individually. 

20 

Mr. Canseco will be introducing Mr. Soto after we hear from Mr. 

Hawkins, if that is alright. 

And our first witness is Mr. Jim Hawkins who is assistant professor of law at the University of Houston Law Center. 

Welcome, Mr. Hawkins. 

STATEMENT OF JIM HAWKINS, ASSISTANT PROFESSOR OF 

LAW, UNIVERSITY OF HOUSTON LAW CENTER 

Mr. HAWKINS. Thank you so much for inviting me to testify on 

this important bill. 

I want to be clear from the start that my statements are only my 

own. I am not here on behalf of any consumer groups or industry 

groups or my employer, and I would ask that you would include my 

written statement in the record. 

Chairwoman CAPITO. Without objection, it is so ordered. 

Mr. HAWKINS. I want to make two quick points today. First, I 

want to talk about how this bill will protect consumers in many different States in important ways. And second, I want to talk about 

its relationship to State law. 

First, I think this bill has the potential to provide a baseline of 

important consumer protection provisions for consumers in many 

States that have laws that are less strict. And I want to talk about 

two important ways that it protects consumers. 

The first is by requiring that the disclosures of important terms 

are segregated at the start of the contract as opposed to being later 

in the contract or not all in one place. The reason this is important 

is because we all know that people don’t always read their full contracts. 

So, it is important that we get the essential terms upfront where 

it is most recognizable for people. And if you look at the State rentto-own laws, I haven’t found a single State that has this requirement that fees and information be segregated at the start of the 

agreement. 

I am not saying there are no States with this requirement, but 

I haven’t seen them yet. And so, I think this is a real way that the 

Federal bill under discussion could add consumer protections. 

More importantly, however, is the second item I wanted to mention, and that is the reinstatement rights that this bill gives consumers. The thing that I think is very concerning about rent-toown is that you could have a customer pay week after week and 

then, after paying for 70 weeks on a 78-week contract, run into car 

trouble, not be able to pay their rental payment, and lose the good 

and not be able to purchase it after all. 

This bill provides protection for all consumers to allow them to 

reinstate and, depending on how long they have paid into the contract, gives them different lengths of period. So the people I am 

most concerned about are people who have paid in for more than 

50 percent of the rental payments. 

For those people, if you have returned the goods and paid half 

the contract, you have 120 days to reinstate the agreement if you 

have to return the goods. And again, I haven’t seen other States 

with this protective of laws. 

Some States, like Massachusetts, don’t have any reinstatement 

rights whatsoever. So in Massachusetts, you could literally pay for 

21 

77 weeks and miss one payment and not be able to obtain that 

good you have invested in. And so, I think this law for these provisions and other reasons can help consumers. 

I wanted to talk briefly about its relationship to State laws. Like 

other Federal consumer protection laws, this bill really does provide just the base, so if States think that there should be greater 

restrictions on rent-to-own, they are free to introduce those. 

The only two things that they are not allowed to do under the 

Act are to treat rent-to-own transactions as credit and to require 

APR disclosures. For me, neither of these really protects consumers 

in States, in my view. 

I think it is a poor regulatory strategy to try to pigeonhole this 

product into existing credit laws, because it is different. I can’t 

think of another credit product that you can walk away from as 

soon as you don’t want to pay any more on it. And, yet, that is 

what rent-to-own allows you to do. 

The other consumer protection provision of APRs also provides 

minimal protection to consumers. And I want to clarify—my written statement said that Vermont, by statute, requires APR, and it 

is actually just by rule from the attorney general. So, I apologize 

for the inaccuracy. 

But I don’t think that this is an important disclosure for people 

to have. The most important reason for my conclusion is that it is 

inaccurate for almost everyone. As the FTC survey said, 30 percent 

of the people who use rent-to-own don’t actually purchase the 

agreement. So, an implied APR has no meaning to those people. 

And to create the implied APR, you would have to compare the 

total cost of renting versus the cash price. But almost no one acquiring ownership through rent-to-own makes the total payments. 

The FTC survey found that 47 percent of people purchase their 

good within a year. 

So, they didn’t pay the total payments. They, sometime within 

that year, paid a discounted amount off of the total price. People 

in the industry say that only 2 percent of people make the total 

payments. So for everyone except those 2 percent, APR is misleading. 

I thank you and look forward to your questions. 

[The prepared statement of Professor Hawkins can be found on 

page 57 of the appendix.] 

Chairwoman CAPITO. Thank you. 

Mr. Canseco? 

Mr. CANSECO. Thank you, Madam Chairwoman. I would like to 

welcome to the hearing today, Mr. Roy Soto from San Antonio. 

While working for a large rent-to-own chain, Mr. Soto and his two 

business partners, 10 years ago decided to take a risk and open 

their own store, Premier Rental Purchases in San Antonio, Texas. 

Today, their business has expanded to 5 stores, and they employ 

40 people while providing a valuable option to residents of San Antonio, Texas. His is a true success story, and I am very pleased he 

is here to testify today. 

Thank you, Mr. Soto, for being here. 

Chairwoman CAPITO. Thank you. 

Mr. Soto is recognized for 5 minutes. 

22 

STATEMENT OF ROY RICHARD SOTO, OWNER, PREMIER 

RENTAL PURCHASE 

Mr. SOTO. Madam Chairwoman and members of the subcommittee, thank you for inviting me to testify today in support of 

H.R. 1588. My name is Roy Richard Soto. 

I would ask that the Chair put my written statement in its entirety in the record. 

Our company operates five rental stores in San Antonio, Texas. 

I have two equal partners, Trinidad Rubio and Brian Clussman. 

Our business name is Premier Rental Purchase. 

My partners and I have been in the rental business for 20 years. 

Early on, we knew that we wanted to own and run our own stores. 

We each had a vision for our own company, in a business culture, 

we could create drawing from all of our experience and knowledge 

of the business. 

In 2001, we came up with a business plan for our own rent-toown business. Over the course of the next 4 years, we showed the 

business plan to 12 different banks, explaining our vision and how 

the rent-to-own business works. All 12 listened politely and then 

turned our loan application down flat. We were finally able to get 

an SBA loan as a franchise in the Premier organization, and we 

opened our first store. 

Today, our four Premier stores in San Antonio, as was previously mentioned, employ 40 employees with an annual payroll of $1.2 

million. At Premier, we rent high-end quality TVs, computers, furniture and appliances—the convenience of modern 21st Century 

life—to consumers on a weekly, bi-weekly, semi-monthly, and 

monthly basis. 

The customer chooses the product he or she wants—perhaps a 

washer and dryer to avoid carting children and laundry to the 

aundromat every Saturday. A customer is never obligated to make 

the next payment. The customer never goes into debt. 

Ours is a no-obligation rental transaction. If the customer completes the full term of the agreement or exercises an early purchase 

option, ownership transfers along with any unexpired manufacturer’s warranty. 

We also provide free delivery and installation of our products, a 

90-day same-as-cash option, and full service including repair or replacement of the product during the entire rental term. We provide 

the use of a loaner item if we have to pick up the item and bring 

it back to the store for repairs. 

Our company also offers lifetime reinstatement. That means that 

if some unexpected financial emergency arises, customers can simply return the unit to us. If their situation changes in a week, 6 

weeks, a year, or 6 years, they can come back into the store and 

pick up the agreement right where it left off. 

We will redeliver the same unit if we still have it, or we will deliver a unit with comparable quality and condition. Rent-to-own is 

an attractive choice for a wide variety of consumers, because the 

customer never goes into debt with us, and we do not run a credit 

check on our customers before we rent to them. 

If a customer tells us the truth about who they are and where 

they live and where they work, we are happy to do business with 

them without ever having to delve into their financial history. FurVerDate Nov 24 2008 18:39 Dec 09, 2011 Jkt 067944 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 K:\DOCS\67944.TXT TERRIE
23 

thermore, we do not report our customers to credit reporting agencies. 

Rent-to-own is attractive to young people who are new to the 

marketplace and may not have established a credit history. The 

transaction is attractive to many Americans who have blemished 

credit. Rent-to-own is also attractive to those who want to try it before they buy it. 

And, lastly, rent-to-own is attractive to many of our military 

service folks, because they often are in transition with their residence, and we often are able to serve them. 

We call it rent-to-own or rental purchase even though in our 

company, the percentage of customers who complete their chosen 

rental term or exercise the early purchase option averages about 35 

percent. Our customers often do not purchase the goods that they 

are renting because their plans change, their tastes change, their 

needs change, financial emergencies arise, or people move. 

And because there is no obligation ever to make that next payment, people just change their minds. This is the business we are 

in. 

That means we make a lot of deliveries out of our stores to our 

customers’ homes. We also spend a lot of time picking up merchandise when customers choose to end their rental agreements. Then, 

we have to refurbish that unit if it comes back in rentable condition—and occasionally it does not—and then find another rental 

customer and make another delivery. 

We lower the rental rate on previously rented items. A piece of 

rental inventory might get rented 3 or 4 times before anyone owns 

it or we have to take disposition steps to move the product from 

inventory. 

Chairwoman CAPITO. Mr. Soto? If you could wrap up on your 

statement. Sorry. Your 5 minutes—give us a conclusion quickly, 

and— 

Mr. SOTO. I will be happy to answer any of your questions. 

[The prepared statement of Mr. Soto can be found on page 78 of 

the appendix.] 

Chairwoman CAPITO. Thank you. 

Our third witness is Ms. Vivian Saunders, a rent-to-own customer from Lewiston Woodville—did I get that right?—North Carolina. That is a long name for a town. Welcome. 

STATEMENT OF VIVIAN SAUNDERS, RENT-TO-OWN CUSTOMER 

FROM LEWISTON WOODVILLE, NORTH CAROLINA 

Ms. VIVIAN SAUNDERS. Thank you, and good morning, Chairwoman Capito, Ranking Member Maloney, and members of the 

subcommittee. Thank you for inviting me to speak this morning. 

My name is Vivian Saunders, and I am a longtime and proud 

rent-to-own customer from Lewiston Woodville, North Carolina. I 

first used rent-to-own in 1991 when my son was a toddler. 

He was allergic to disposable diapers, so we had to use cloth diapers, and we had to clean those cloth diapers. It seemed like if I 

wasn’t sitting at the laundromat, I was driving to and from the 

laundromat. It was time-consuming and expensive. 

I couldn’t afford my own washer and dryer, and none of the local 

stores would give me credit. Then, a neighbor told me I could rentVerDate Nov 24 2008 18:39 Dec 09, 2011 Jkt 067944 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 K:\DOCS\67944.TXT TERRIE
24 

to-own a washer and dryer. Before long, I was doing laundry at 

home, saving on gas, and spending more time with my family. And 

I wasn’t tossing change into a washing machine I would never own. 

The rent-to-own folks didn’t care about my credit status. They 

worked with me and had faith in my intentions to pay. When we 

had trouble paying, they gave us the time we needed. No other 

store in my community would do that. 

Over time, through rent-to-own, we made our house a home. Just 

as we were proud to have our own washer and dryer, we took 

pleasure in the nice furniture we added to our home. Our kids 

didn’t have to feel embarrassed, as they grew up, to bring people 

to our home. Later, in the 1990s when we hit financial hard times 

when my husband lost his job, we were able to return a microwave 

we were renting. That helped us get through those times by lowering our bills. 

Because it was a rent-to-own agreement, we could stop paying 

without causing negative repercussions like a default on our already bad credit. On another occasion, I rented a big screen television for a short time because a community group I was working 

with needed it to view videos related to our cause. 

When we were done, we returned it with no obligation to pay 

anymore. I liked the television so much that later, I got it for myself. Rent-to-own gives people a way to improve their lives even if 

they don’t have much to start with. 

You see, our family lives in one of the poorest counties in America, North Carolina’s Bertie County. Day in and day out, I see firsthand how kids are picked on and demoralized because of their living situation. They are outcasts for being poor. 

Having a home with nice furniture and a nice refrigerator empowers people. Rent-to-own empowers them by giving them the 

ability to furnish their homes with things most people take for 

granted day-to-day. And I know a little bit about how self-worth 

impacts people. 

I used to run an alternative school and now run an afterschool 

program for some of the poorest kids in our county. The student 

enrollment in this program is 6th to 12th grade boys. They have 

been expelled from the public school system and few believe that 

investing in these boys’ future would yield any positive outcome. 

We brought technology, computers, and challenging curriculum 

to what many refer to as discarded boys. But the best computers 

and latest technology mean little without respect for these students 

and the belief that they can achieve anything. 

It is that powerful combination that is helping these students to 

improve their educational outcomes and grow into caring young 

men who also want to help others in their community. 

It was not simply owning things like new furniture and a refrigerator but the fact that I felt worthy of ownership, felt valued as 

a customer. What I have learned living and working in Bertie 

County is the best way to get things accomplished is to be honest 

and respectful. 

If this experience has taught me anything, it is the value of dignity and self-esteem in the lives of today’s kids. I have also learned 

that out of practical day-to-day lives, you need to have plenty of refrigerators and freezers on hand to prepare meals for these kids. 

25 

And today, I am fortunate to be in a position to have donated some 

of my old refrigerators and freezers, which I acquired through rentto-own, to the schools that I run. 

I am also fortunate to have been unharmed in a string of tornadoes which tore apart my community on April 17th. Ten families 

I know lost their entire homes. Others I know had to move because 

of damage to their homes. While their homes were being repaired 

and rebuilt, those families needed ways to manage their day-to-day 

lives. 

So they went to local rent-to-own stores and rented beds and furniture to tide them over until they could move back into their 

homes. Rent-to-own has helped me in so many ways for so many 

years, and helps others in my community. Their help goes beyond 

just getting nice things for my home. 

The pride it gave me to be able to provide for my family has 

played at least a small part in helping me get where I am today, 

to be able to help others. I am proud to say I am a rent-to-own customer. I hope my testimony has given some perspective on why 

rent-to-own works well for so many people, including my son, 

whose diapers introduced me to rent-to-own 20 years ago. 

We are just two of the millions of customers who have relied 

upon and appreciated rent-to-own over the years. 

Thank you for allowing me to give my testimony. 

[The prepared statement of Ms. Vivian Saunders can be found on 

page 74 of the appendix.] 

Chairwoman CAPITO. Thank you. Very good. I appreciate it. 

And our final witness is Ms. Margo Freeman Saunders, of counsel, National Consumer Law Center. Welcome. 

STATEMENT OF MARGOT FREEMAN SAUNDERS, OF COUNSEL, 

NATIONAL CONSUMER LAW CENTER 

Ms. MARGOT SAUNDERS. Thank you, Madam Chairwoman, Ranking Member Maloney, and members of the subcommittee. 

The National Consumer Law Center thanks you for inviting me 

to testify today. I offer my testimony on behalf of our low-income 

clients as well as the Consumer Federation of America Consumer’s 

Union and the U.S. Public Interest Research Group. 

On behalf of the millions of consumers that we collectively represent, we urge you to reject H.R. 1588. This bill will not help consumers. It will only hurt them. 

Consumers need protections from the exorbitant prices that rentto-own dealers often charge consumers. They need protections from 

the high fees. They need assurances that they can reinstate their 

contracts with reasonable fees and under reasonable conditions 

after they have spent considerable sums trying to purchase the 

items. 

While we believe that even the most precise disclosures would 

not adequately protect consumers in these transactions, the disclosures required by this bill provide misleading and deceptive information. The topic today is whether there is a potential role for Federal regulation of rent-to-own transactions, and we think there is. 

Unfortunately, this bill does not provide it. 

The intention of this bill is to preempt the laws of four States: 

Minnesota; Wisconsin; New Jersey; and Vermont. In those States, 

26 

the courts have held that the rent-to-own transactions are consumer credit sales, and thus are governed by the interest rate caps 

required of consumer credit sales. 

As we know, most rent-to-own consumers enter transactions with 

the expectation of buying, and most contracts do not result in the 

purchase, but most from the FTC and the APRO, the Association 

of Progressive Rental Organizations information we also know that 

most consumers who intended to buy succeed in buying over several contracts. 

So, the rental cost on a periodic basis is the critical factor to 

those customers. I have reviewed every State law, and I can tell 

you that most of the information required in the contract disclosures that is in H.R. 1588 is already required in most State laws. 

Almost all, but not Massachusetts—Mr. Hawkins is correct— 

State laws do already require reinstatement rights. But this bill is 

new in that it does require disclosures of cash price. What the FTC 

had recommended were price tag disclosures. The FTC recommended disclosures on the item itself. This bill does not require 

price tag disclosures. It simply requires information to be somewhere in a catalog on the floor. 

Moreover, when you look at the information that is required on 

those price tag disclosures—if you look at page seven of my testimony, I have done an analysis of the information that would be required on the point of rental or price tag disclosures, and the actual 

cost to purchase the items, you will see that there is a significant 

difference. 

The price tag disclosures would show that the rental purchase 

price is $37 for this sample television, but the actual cost would be 

closer to $45. The price tag disclosure would show the total rental 

purchase price would be $3,900, whereas the total cost would be 

over almost $4,700. 

The information in the disclosures would not be helpful if they 

are deceptive. Moreover, unlike every other Federal consumer protection law, like the Truth in Lending or Electronic Funds Transfer 

Acts, the Board is not provided with adjustment authority. 

The Board would not have the authority to adapt the disclosures 

and make them appropriate. There are no meaningful penalties in 

this bill, and the penalties in this bill are identical to the penalties 

in almost every State law. 

And there is no assignee liability for anything other than violations that are apparent on the face of the document. So we do believe that there are disclosure and substantive protections that 

Federal law could provide to this industry. 

We agree that people like my seat mate, Mrs. Saunders, have 

benefited from this industry. We are not trying to shut down the 

industry. But we think there are substantial ways that the disclosures and the substantive provisions could be improved. 

I would be happy to answer any questions. 

[The prepared statement of Ms. Margot Saunders can be found 

on page 64 of the appendix.] 

Chairwoman CAPITO. Thank you. 

I want to begin by thanking you all for your statements, and asking Ms. Vivian Saunders, you have heard Ms. Margot Saunders 

27 

state that in her research showing that some of the disclosures 

were—she disputes some of the disclosures. 

When you first went for the washer and dryer, did you feel as 

though you were presented with information that accurately portrayed what your obligation was going to be, what your purchase 

price could be, and how do you feel about the first transaction that 

you made? 

I understand it gave you a way to do something that was extremely important to you as a family. 

Ms. VIVIAN SAUNDERS. Yes, ma’am. When I first went to rent-toown, it was completely—they go through the contract that you are 

in step-by-step. They let you know that you have a choice. It is a 

conscious decision whether you want to make that choice to go 

through with that contract or not. 

They were very transparent with what they told me I would have 

to do. They were very transparent with my obligations, and they 

also told me that if I ran into difficult times to let them know— 

don’t avoid the store, just call them, because they had measures in 

place that would help me, and if I couldn’t follow through on the 

payment, that I could return it at any time. 

Chairwoman CAPITO. Did you return those—the washer and 

dryer? 

Ms. VIVIAN SAUNDERS. No, ma’am. I never returned the washer 

and dryer. 

Chairwoman CAPITO. So, you ended up fulfilling your payment 

agreement and they became yours? 

Ms. VIVIAN SAUNDERS. Yes, ma’am. I fulfilled my payment agreement— 

Chairwoman CAPITO. Okay. 

Ms. VIVIAN SAUNDERS. —with the washer and dryer. 

Chairwoman CAPITO. Mr. Soto? I have learned that in these 

agreements, there are no credit checks. 

Mr. SOTO. Yes, ma’am. 

Chairwoman CAPITO. What kind of a—we have heard so many 

different arenas here before the committee where everybody has a 

credit score and you meet certain obligations and credit card, mortgages, etc., etc. 

Obviously, this is a business model that works for your industry. 

What has been your—I guess, you don’t have a—do you have a default rate, or people who just walk away or—can you tell me how 

not doing any kind of credit check or anything is good for your 

business? 

Mr. SOTO. If we did a credit check, we probably would find that 

the folks who are coming into our stores wouldn’t qualify. 

Chairwoman CAPITO. Right. 

Mr. SOTO. So that is not even part of our program. What we look 

at is we have them fill out an agreement that asks for information 

on their residence, information on their employment. We ask for a 

few references, and based on that, we will rent to an individual. 

So it is very, very simple. If the information you have given is 

true, then we will do business with you. 

Chairwoman CAPITO. Thank you for that. In terms of the information, Ms. Saunders of the National Consumer Law Center, your 

28 

opposition is that there could be better disclosures, more upfront 

disclosures. 

In light of what you have heard from the two witnesses—I am 

sure you have heard this before—and then our previous witness 

saying that there have been a very small amount of consumer complaints concerning this industry. Does that change your opinion at 

all or reform it or? 

Ms. MARGOT SAUNDERS. At the National Consumer Law Center, 

we receive a lot of complaints about rent-to-own from the lawyers 

around the country who represent these clients. 

Chairwoman CAPITO. Generally, what are the top two complaints? 

Ms. MARGOT SAUNDERS. Pardon me? I didn’t— 

Chairwoman CAPITO. The general top two complaints—that it 

doesn’t work or they feel like they are getting ripped off or— 

Ms. MARGOT SAUNDERS. Price and the refusal to reinstate. Most 

consumers of rent-to-own would be more likely to complain, if they 

are going to complain to anyone, to a local legal services or to an 

attorney general. 

These are among the most unsophisticated and least financially 

proficient consumers in the country, and they are unlikely to think 

to complain to the FTC. 

But I do have to congratulate the industry that in the last 20 

years, we have seen a substantial reduction in the types of repossession and unfair tactics that we used to see. And I myself rentedto-own from a dealer in West Virginia and was very satisfied. 

I think this industry is very successful in the way that it treats 

its customers. I think they treat their customers very well, and our 

complaint with the bill is not, again, that we want to get rid of the 

industry, but to mandate on a Federal level more appropriate and 

less deceptive disclosures and actually deal with the price, which 

is the real problem that we have with the industry. 

Chairwoman CAPITO. Thank you. 

And quickly, Mr. Soto, I am curious, has your business changed 

at all over the last 2 or 3 years in light of the financial situation 

in the country and the higher unemployment? You have to be brief, 

though, so I don’t violate my time. 

Mr. SOTO. I am sorry, with regard to— 

Chairwoman CAPITO. With regard to more people coming in. Is 

your business bigger, better? Are you seeing people renting more 

utilitarian items as opposed to fluff items—what would be considered fluff items? 

Mr. SOTO. I can tell you that our business is doing well. And certainly, when the economy changes, there are different groups of 

people who will come into this type of transaction. 

So we are not only finding the consumer who we place in that 

category of being the less—the one that is less financially prepared, 

but we find folks of all means coming in and doing business with 

us. 

Chairwoman CAPITO. Thank you. 

Mrs. Maloney for 5 minutes? 

Mrs. MALONEY. I thank all of the panelists for your testimony 

today, and I would like to first ask Ms. Margot Saunders, as many 

people testified that most States, including my State, New York, 

29 

treat rent-to-own contracts as leases as this bill would do—the Federal proposed bill would do. Why then shouldn’t we just adopt the 

standards that most States have set? 

Why, in your opinion, is it better to treat these as credit sales? 

Ms. MARGOT SAUNDERS. Mrs. Maloney, I have been fighting rentto-own legislation for almost 30 years, and I did, indeed, start out 

pushing for these transactions to be dealt with as credit sales, but 

we are no longer taking that position. 

We recognize that rent-to-own transactions are different than 

credit sales. We are simply—in this testimony—defending the 

rights of four States to treat these transactions as credit sales as 

those States have chosen. 

And in those States, the transactions are much—the costs of the 

transactions are required to be much lower, and that seems to me 

to be a matter of States’ rights protecting consumers that it is my 

job to defend. But if I were to write a Federal bill that dealt with 

rent-to-own, I wouldn’t insist that they be treated as credit sales. 

Mrs. MALONEY. One of the items that they pointed out in testimony is that the consumer will be able to return the merchandise 

at absolutely any time. Does that change your mind a bit that the 

consumer will have this new right under the bill? 

Ms. MARGOT SAUNDERS. The consumer has that right under 

every State law that governs rent-to-own, and in the five States 

which are slightly different, including North Carolina, and 

Vermont, they have that right. 

In New Jersey, Minnesota, and Wisconsin, which has no rent-toown applicable legislation, nobody is stopping them from returning 

it. So, I don’t think this bill adds that aspect in any way to—it 

doesn’t protect consumers in that way. 

Mrs. MALONEY. I think, Professor Hawkins testified, in a sense, 

that this was a new protection, but— 

Ms. MARGOT SAUNDERS. The right of reinstatement in this bill is 

new and would apply to Massachusetts alone. Every other State, 

so far as I am aware, that has a rent-to-own transaction bill, already has a right of reinstatement. 

Mrs. MALONEY. And in his prepared testimony, he cites protections that he believes that the bill will provide in terms of disclosures, the right to reinstate, as I said, and other protections. 

Do you think that these protections are sufficient that he testified to? 

Ms. MARGOT SAUNDERS. No, ma’am. I think the problem, as I described in my written testimony and my oral testimony, is that the 

disclosures required in this bill are downright deceptive, and that 

the board—if they were the regulatory authority under the bill 

wouldn’t even have the authority to fix those disclosures, unlike 

every other Federal consumer protection law. 

Mrs. MALONEY. But I believe he testified that it would not preempt any of the State laws that exist. 

Ms. MARGOT SAUNDERS. It would preempt five State laws, actually—four State laws, specifically, and also have a preemptive effect on North Carolina with no real downside there. 

Mrs. MALONEY. Only the States that defined it as credit, correct? 

Ms. MARGOT SAUNDERS. Yes. 

30 

Mrs. MALONEY. Okay. In your view, does the law create a true 

Federal floor for consumer protections for these transactions? 

Ms. MARGOT SAUNDERS. To the extent that the four States—New 

Jersey, Minnesota, Wisconsin and Vermont—State laws would be 

preempted, and those State laws are better than this law. This is 

not a floor. It is a ceiling. 

Mrs. MALONEY. Oh, you see it as a ceiling. He testified it was a 

floor, and he also testified, I believe, that it would not in any way 

weaken State laws, and you— 

Ms. MARGOT SAUNDERS. Mrs. Maloney, I have been a consumer 

law lawyer for over 30 years. I have published numerous books. I 

have testified before this committee and the Senate Banking Committee over 30 times. I have published numerous law review articles, and I am here today to tell you that I disagree with Mr. Hawkins. 

Mrs. MALONEY. And would you testify on how the rent-to-own 

customer can compare costs with others, say merchandise that is 

available, possibly traditional—my time has expired. 

Chairwoman CAPITO. Thank you, Mrs. Maloney. 

Mr. Luetkemeyer for 5 minutes for questions? 

Mr. LUETKEMEYER. Thank you, Madam Chairwoman. 

Ms. Vivian Saunders? 

Thank you very much for your testimony today. It was very well 

done. I think one of the key points in your testimony that you 

didn’t say—you skipped over—is that by being able to go to the 

rent-to-own store, you were able then to establish a credit history. 

Ms. VIVIAN SAUNDERS. Yes, sir. 

Mr. LUETKEMEYER. And as a result, you were then able to purchase other things later on as a result of the credit history you established. I think it is a really key point that it allows people who 

may have no credit history at all or a bad credit history to be able 

to go back and start over and establish adequate credit history. 

And one of the—I think, it is a key point that I appreciate that 

you made in your testimony today. 

Ms. Margot Saunders? 

You were talking about the disclosure being deceptive. Can you 

explain why it is deceptive? 

Ms. MARGOT SAUNDERS. Yes, sir. If you take a look at the definition of rental payment in section 1001, subsection 12, you will 

see—and that is the definition—that is the information that has to 

be included in the point of rental disclosures as required in section 

1010, and you compare that to the periodic payment that is in section 1001, subsection 10, which— 

Mr. LUETKEMEYER. I am talking about—you said there is something deceptive in the disclosure to the consumer? You are talking 

about the bill. 

Ms. MARGOT SAUNDERS. There is something—the bill would require disclosures that would actually be deceptive, because the 

point of rental disclosures that would be required were actually different than the real cost. 

In other words, the rent-to-own merchant would be required 

under this bill to disclose $37, for example, as a point of rental disclosure. So the catalog or the disclosures hanging from the teleVerDate Nov 24 2008 18:39 Dec 09, 2011 Jkt 067944 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 K:\DOCS\67944.TXT TERRIE
31 

vision would say $37, when actually the consumer would have to 

make a weekly payment of $44. 

Mr. LUETKEMEYER. Okay. 

Mr. Hawkins? 

Would you like to elaborate on that a little bit? What do you 

think about that? 

Mr. HAWKINS. I think we have read the law differently in two 

important ways. In one way, just about whether or not you have 

to disclose things on the price tag. 

Ms. Saunders said that you don’t. You could just do it in a catalog. But I read 1010(b)(1) differently. That is the one that says a 

merchant can make the disclosure in a catalog. It says, ‘‘If the merchandise is not displayed on the merchant showroom or if displaying a card tag would be impractical due to the size of the merchandise.’’ 

So I think it is in—I think—from the way I have read the law, 

it is inaccurate to say that you could just put it in a catalog. You 

could only do that if you didn’t actually have that good on the floor. 

And I have no idea what it means that it is impractical due to the 

size of the merchandise. I don’t know if that means merchandise 

is really, really huge or really, really small, but it is hard for me 

to imagine a situation where that could occur. 

So I don’t think it is deceptive for that reason. And in terms of 

the total cost, even the price tag disclosures require you put the 

rental purchase cost, which is in section 101(15), which that rental 

purchase cost is very similar to a finance charge in the Truth in 

Lending Act, in 15 U.S.C. 1605. 

The same sorts of fees that are not included, like life insurance 

that you don’t have to take and you signed away saying, I don’t 

have to take this life insurance. That is not included when you calculate a finance charge under the Truth in Lending Act. 

And I think that the example that Ms. Saunders uses of someone 

having to pay a delivery fee and that not being a fee that is disclosed under this rental purchase cost is simply inaccurate. 

I haven’t talked to every single rent-to-own firm in America, but 

most and the biggest don’t charge for deliveries as Mr. Soto testified himself. And so, to me, adding that as a cost is a bit of a red 

herring in saying that it is deceptive for that reason, but it could 

be that we are just—I have read the law wrong, but that is how 

I interpret the provisions. 

Mr. LUETKEMEYER. Okay. I see my time is about up, so I will just 

yield back. 

Thank you, Madam Chairwoman. 

Chairwoman CAPITO. The gentleman yields back. 

Mr. Watt for 5 minutes? 

Mr. WATT. Thank you, Madam Chairwoman. 

Let me start by welcoming my friend, Ms. Vivian Saunders, and 

my friend, Ms. Margot Saunders, both of whom have spent a substantial amount of time in North Carolina or are residents of North 

Carolina. I am always happy to have folks here from North Carolina, even if they seem to be on opposite sides of this issue. I am 

not sure they are, to be honest with you. 

So let me make sure that I am clear about whether they are or 

not. 

32 

Ms. Vivian Saunders? 

I assume that whatever dealings you had were all within the 

State of North Carolina? 

Ms. VIVIAN SAUNDERS. Yes, sir. 

Mr. WATT. Okay. So none of it was across any State lines or anything? 

Mr. Soto? 

Mr. SOTO. Yes, sir. 

Mr. WATT. What percent of your business is in the State of Texas 

as opposed to with customers who can take your—first of all, what 

percent of your business is—what percent of the contracts are actually entered in the State of Texas? 

Mr. SOTO. One hundred percent. 

Mr. WATT. Okay. And if somebody takes one of your televisions 

across a State line, what rules apply? 

Mr. SOTO. We typically try to find a solution that makes sense 

for the consumer and for us. If the consumer wants to keep the 

product, we will work out an arrangement. 

Mr. WATT. But your assumption is that your deal is going to be 

inside the State of Texas. Isn’t that right? 

Mr. SOTO. That is typically how it works. 

Mr. WATT. Okay. 

Mr. SOTO. We do service a certain community, and most of our 

customers are from within a 3- to 5-mile radius. 

Mr. WATT. And Ms. Vivian Saunders, again, even you referred to 

your rent-to-own store as your local rent-to-own store. I noted that. 

Now, the question I have is, I guess you don’t really have any 

complaint or dog in the fight, lets—as we would say in North Carolina—about whether we are raising or lowering the standards for 

the State of Vermont, or do you have any opinion about what we 

ought to be doing about Minnesota, Wisconsin, New Jersey, and 

Vermont? 

Ms. VIVIAN SAUNDERS. I feel like if the Federal—if it is approved 

by you guys that it will be across-the-board, you know. 

Mr. WATT. But even if it is lowering the standard in those States, 

or changing the standard—your State is a local—your transactions 

are local. Why would you think the Federal Government ought to 

be dictating the standards in this case? 

Ms. VIVIAN SAUNDERS. I think, without—and this is just my 

opinion as Vivian—without even the intervention of anybody, this 

industry has improved so much— 

Mr. WATT. I think we all have conceded that. 

Ms. VIVIAN SAUNDERS. But I think also that if you guys being the 

body that governs everybody in the United States, if you intervene 

that, out of respect, for your body, you are stepping in, it makes 

a statement to everyone. 

Mr. WATT. You would preempt all the State laws under that theory. That is a fair way to look at things. 

Ms. VIVIAN SAUNDERS. Yes, sir. 

Mr. WATT. But these transactions don’t—as Mr. Soto has indicated—take place across State lines. And I can’t figure out why 

even my most—I just can’t figure out why somebody wants to apply 

Federal law to something that, historically, has been taken care of 

33 

within the States, and even Ms. Saunders—Vivian Saunders, that 

is—in your experience, all of your experiences have been good. 

That is why I started my original questions of the prior panelist 

by saying I am neither an advocate for, nor an adversary of, the 

rent-to-own industry. The question is, where should they be regulated? 

And that is the question I still haven’t quite figured out. I have 

figured it out for my own purposes. I can’t figure out why some of 

my colleagues, who tend to be States’ rights advocates on most 

issues, feel like all of a sudden, this ought to be a Federal issue. 

But I am still trying to figure that out. And I am going to keep 

working at it. I appreciate you all being here, and— 

Mr. SOTO. Mr. Watts? May I respond to that? 

Mr. WATT. Yes, sir. You may if the chairwoman will allow you 

to. 

Chairwoman CAPITO. We will give you 30 seconds to respond, Mr. 

Soto. 

Mr. WATT. I am fine with it, but I am out of time. 

Mr. SOTO. I just wanted to mention that when we were looking 

to secure a loan to open our business, we were dealing with many 

national banks, and we found that, because there was uncertainty 

in the definition of rent-to-own, it made it difficult for us to be able 

to secure a loan. 

We visited 12 banks, and each one of them turned us down. So 

it— 

Chairwoman CAPITO. Thank you. 

Mr. SOTO. Thank you, ma’am. 

Chairwoman CAPITO. Mr. Canseco for 5 minutes for questions? 

Mr. CANSECO. Thank you, Madam Chairwoman. 

Mr. Hawkins? 

Let me ask you something. Ms. Margot Saunders stated that this 

bill does not provide a floor, that it provides a ceiling. Do you find 

that to be true? 

Mr. HAWKINS. I do not. It is like every other Federal consumer 

protection law—like the Fair Debt Collection Practices Act that 

says if States provide greater consumer rights, which courts uniformly read as a one-way ratchet. If they restrict businesses, then 

they are not inconsistent. 

There are only two distinct ways that it prevents States from acting, and I don’t think those are things that actually protect consumers, one of which—Ms. Saunders has said that she no longer 

thinks it is important to treat it as a credit sale. So really, APR 

is the only possible restriction this is making on the States that 

seems to matter. 

Mr. CANSECO. So, in other words, if the State has a more stringent rule or regulation on its books, it defaults to the State. 

Mr. HAWKINS. Right. 

Mr. CANSECO. Okay. But all it does is just provide a floor of minimum standards for any State that is under that floor? 

Mr. HAWKINS. That is my understanding. 

Mr. CANSECO. Thank you, sir. 

Mr. Soto, please describe the typical customer who walks into 

your store: age; income level; family status. 

34 

Mr. SOTO. We are finding that is changing with the economic situation being what it is. We typically find, I guess, that our customer will range anywhere from early 20s to late 40s and 50s. We 

find that individuals are renting for different reasons. Some come 

in wanting to rent-to-own. Some come in to rent just for a specific 

period of time. 

Some want to try it; they are not sure whether they want to own 

it. Sometimes, there is a loss of income in the household and they 

are uncertain about their creditworthiness. They are not comfortable with entering into additional credit, so they want to do 

something that if they have to exit out of it quickly, they can. 

So it is an ever-changing customer. 

Mr. CANSECO. What would they do if these customers did not 

have the option of a rent-to-own industry? 

Mr. SOTO. If they didn’t have an option? 

Mr. CANSECO. Yes. 

Mr. SOTO. The other options that are available to them are 

things like craigslist online, maybe furniture stores that sell used 

product, maybe pawn shops. But what you find in those environments are products that have pretty much lived their life. You find 

that people are selling items after they have had them for, maybe 

10 years. 

Within our system, the product will typically liquidate inside of 

2 years. So, customers know if they are getting something that has 

been previously rented, obviously, that merchandise is reduced 

down based on perceived value. 

The customer knows that they are getting a true value. And not 

just the product, but they also are getting many other benefits that 

come with it. 

Mr. CANSECO. Like a guarantee. 

Mr. SOTO. Absolutely. 

Mr. CANSECO. And repair. 

Mr. SOTO. I can tell you that our customers have a money-back 

guarantee, the satisfaction guarantee. I can tell you we have lifetime reinstatement. I can tell you that we service our product 100 

percent. We provide a loaner if we have to bring their product in. 

So, there are numerous benefits that we offer. 

A customer doesn’t have to pay extra for deliveries. We set it up. 

There is a lot of value that is built into a rental agreement. 

Mr. CANSECO. You have recently expanded your business to a 

total of five stores within the San Antonio area. 

Mr. SOTO. Yes, sir. 

Mr. CANSECO. Do you have an estimate as to how many people 

you have employed in these stores over the past years? 

Mr. SOTO. How many people we have employed? 

Mr. CANSECO. You have employed, yes. 

Mr. SOTO. I can tell you that we—each time that we open a new 

location, we are employing six, seven, eight individuals, depending 

on the growth of the store. 

And each year, we have been adding a new store. So, we are excited about the opportunities to expand, but again, that uncertainty 

of the definition of our transaction—it makes it difficult when you 

are talking to bankers who don’t always understand the transaction. 

35 

Mr. CANSECO. One final question before my time is up. Would 

the bill that Mr. Clay and I are introducing provide certainty to the 

industry and, in turn, boost store owners’ ability to expand and create more jobs? 

Mr. SOTO. Absolutely. And, again, it is balanced in that it provides that safety net for the consumer, and it also provides that 

certainty for us so that individuals—so that everyone knows the 

difference between a lease and sale. And that is basically what this 

is. It is just defining who we are and how we operate. 

I can tell you that we exceed everything that is in that bill. 

Those are not things that shouldn’t exist out there. And for it to 

be consistent throughout the country, that would strengthen the industry. 

Mr. CANSECO. Thank you, Mr. Soto. 

And thank you, all panel members, for coming here today. My 

time has expired. 

Chairwoman CAPITO. Thank you. 

Mr. Meeks for 5 minutes for questions? 

Mr. MEEKS. Thank you. One of the things of being close to last 

is all the questions have been asked. They just haven’t been asked 

by me. So first, to Ms. Vivian Saunders, let me just also—as well 

as all the panelists, thank you for your testimony. 

And I can relate to what you have testified to, Ms. Saunders, because I did the same thing. I can recall when I grew up in public 

housing, and when I went to college—in fact, here in Washington, 

D.C.,—my dad came down, and he didn’t have much money left, 

and he saw that I was sleeping on a beach chair, because I couldn’t 

afford anything else. 

And he said, I can’t have you sleeping on a beach chair—I was 

going to law school at the time—we have to get something for you 

to sleep on. And, going to the stores, we couldn’t afford it. 

So the choice was sleeping on a beach chair, or we went to a 

Rent-A-Center and I was able to rent furniture for the apartment 

that we were in so that I could sleep on a bed and—a lot of folks 

don’t understand, sometimes when you don’t have a lot of money— 

when your option is something or nothing. 

And times when—if you go to a Sears or some other department 

store, and if you don’t have the good credit, you can’t get it, so your 

option would be nothing. Or even there, you find that, in trying to 

buy it, the interest rates are 30 percent, 29 percent, 28 percent 

anyway, and you don’t have the right to return it when you are 

done with it if you need to return it. So, it is only a temporary 

piece. 

I could really relate to your testimony before us today. And I 

have been fortunate enough to also have had the opportunity to see 

that point of view but also now understand Mr. Soto’s point of view 

as a business owner and why that is important for you to be able 

to expand and have businesses in the community. 

It is good business for you. We want you to do that, and we want 

you to make some money, because if you are making some money, 

that will also create some jobs for local individuals in the community, because in my district where we have Rent-A-Centers—and I 

walk in there, I see that they have hired individuals who live in 

36 

the community who otherwise would have been without a job and 

income. 

And that helps them. So it is from both ends of the spectrum 

that I see that this is good, and from the testimony that I hear, 

even from Ms. Margot Saunders that she has had the opportunity 

that she had to rent. So I think that she wants to preserve the industry and, though, there are issues and questions that we all 

want to tighten up and try to make sure that we work it. 

So with that, my quick question, I guess, first, to Professor Hawkins is, do you think that the CFPB will have the authority or not 

have the authority to regulate rental-to-purchase agreements? 

Mr. HAWKINS. I think it is very unlikely under the Dodd-Frank 

Act that they have that authority, because they are given the authority over financial products or services, and there is a long list 

of things that qualify for that, none of which seem to match the 

rent-to-own transaction. 

The definition of ‘‘credit’’ involves deferring debt or deferring payment to purchase, and neither of those, as you have heard today, 

are involved in a rent-to-own transaction, and the CFPB can regulate leases but only if they are for greater than 90 days. 

There are no rent-to-own leases that I know of that are longer 

than 90 days. So I think it is very unlikely that, even if they wanted to regulate the industry, they would legally have the power to 

do so. 

Mr. MEEKS. Ms. Saunders? 

Do you agree? 

Ms. MARGOT SAUNDERS. Yes, I do. 

Mr. MEEKS. Okay. 

Mr. Hawkins? 

Do you believe rent-to-own customers are better off with or without the point of rental disclosure in section 1010 of H.R. 1588? 

Mr. HAWKINS. I think they are better off with them. And I wanted to just make a point. Earlier, Ms. Saunders had mentioned that 

she had looked at every rent-to-own law and said that the disclosures in those laws were all better. And I just wanted to clarify, 

I was not disputing that fact at all. What I am disputing is that 

I don’t think there are any existing rent-to-own laws that require 

you to segregate all of that important information and put it at the 

front of the contract. 

Because, as everyone in here knows, most of us don’t read all 10 

pages. We just read that first page. And so, to me, that is the major 

advance that this bill provides, not that it provides better definitions of rental costs or requiring you to say this is a used or new 

good. 

Mr. MEEKS. Thank you, and I think I am out of time. 

Chairwoman CAPITO. I would like to thank the gentleman. 

And, Mr. Jones, for 5 minutes? 

Mr. JONES. Madam Chairwoman, thank you very much. And I sit 

here in great appreciation. I think this bill started maybe in the 

105th Congress, and I introduced it in the 107th Congress with a 

cosponsor from the Democratic side, and we actually got it to the 

House Floor and through the House, and it died in the Senate. 

But I believe sincerely that—and Ms. Vivian Saunders, I want to 

thank you. You have done so much wonderful work with young 

37 

people who would never have had a chance in life if it had not been 

for your love, and I know God has blessed you in many, many 

ways. 

And, Margot Saunders, I believe we had some legislative issues 

when we were in the general assembly, and you were there at that 

time. It is good to see you again, as well. 

Ms. MARGOT SAUNDERS. Thank you. 

Mr. JONES. And, I guess, my interest in this—I have three military bases in my district—Camp Lejeune, Cherry Point Marine Air 

Station, and the Seymour Johnson Air Force Base—and I think 

about the young soldiers, the young marines, who many times are 

married—too soon, but they are married. And I realize something 

that Ms. Vivian Saunders said that is so true, and that is, not everybody is as fortunate as other people who are fortunate. 

And if it were not for rent-to-own businesses, I don’t think that 

a lot of young people, as was mentioned earlier, as well as young 

families, would have that opportunity. And in this very difficult 

economy, if there is any time that I think that legislation light has 

been introduced to create a floor for consumers and give them an 

opportunity to have something nice that is reasonable, I think now 

is the time. 

I don’t think this country is going to get any better economically 

in the near future at all. And that is why I very much support this 

legislation and think that the need is greater now than maybe it 

was when I introduced the bill in 2007 and the Congress before 

that, that the time has come for Federal legislation that will protect the consumer and create a better understanding of the contract. 

And, Ms. Saunders, that is where I would go back to you—Margot Saunders and then maybe let Ms. Vivian Saunders answer as 

well—you have distinguished yourself in working for the consumer, 

and I again want to compliment you on that, but if I understood 

from your statement that, maybe if the disclosures part of this bill 

was a little stronger, that—you didn’t say you would support it, let 

me make that clear, but it might be a better piece of legislation for 

the consumer. 

If you had to make one suggestion, and I know that is difficult, 

but one suggestion to improve the disclosure section of this bill, 

what would it be? 

Ms. MARGOT SAUNDERS. Within those very limited constraints, I 

would make the point of sale disclosures tighter and more consistent with the actual cost to be required of the consumer. 

I would like to make a few other changes to the bill as well, but 

you didn’t ask about that. 

Mr. JONES. Professor, what would be your reaction to what Ms. 

Saunders just said as acceptable or not acceptable and, if not, why? 

Mr. HAWKINS. Obviously, I have expressed disagreement with 

some of how she has read the law, but I definitely think you can 

always work to make the language clearer, and so—her objections 

to the disclosures don’t seem to be things to me that would—if you 

could work them to make the disclosures more accurate, I think 

that would be an important move. 

Mr. SOTO. Mr. Jones? 

Mr. JONES. Yes, sir? 

38 

Mr. SOTO. When it speaks to pricing in a catalog, I think what 

it means is that you have limited space in a showroom. So if a customer wants an item that you currently do not have, you still can 

provide the prices for that. And if your showroom floor is only so 

big, you might have product in the backroom that is being staged 

to replace the product that is in your showroom. 

So, again, it is very difficult for you to set up a stand, possibly, 

with the pricing. But I believe that is what that means. But it certainly is calling for full disclosure on each item that is being displayed that a customer would like. 

Mr. JONES. Madam Chairwoman, thank you. And I do, again, 

support this legislation. Thank you. 

Chairwoman CAPITO. Thank you, Mr. Jones. 

Mr. Miller has said that he does not have any further questions, 

so I will go to Mr. Clay for questioning for 5 minutes. 

Mr. CLAY. Thank you, Madam Chairwoman, and I will be as 

brief as possible. 

Let me ask Ms. Margot Saunders, what type of reinstatement 

provisions would provide both adequate repossession rights for the 

rent-to-own merchant while at the same time ensuring sufficient 

ownership rights for the rent-to-own consumer? 

Ms. MARGOT SAUNDERS. Mr. Clay, I am in the uncomfortable position of not being able to give you an answer that I feel very comfortable with. 

I like what Mr. Soto provides, which he says is a lifetime reinstatement provision—promise, and if the bill were to have that, I 

think that would be wonderful. I am uncomfortable saying that is 

what we would require, because I need to hear whether that is— 

just how unlikely and how unreasonable that is, but if Mr. Soto can 

provide it, I don’t know why we wouldn’t require it of everyone. 

That would be a very valuable consumer protection that you 

would actually raise the floor for consumers around the country. 

That is a real concern of people who—notice that in the reinstatement rights in the bill, it is only 7 days that you have to reinstate, 

and a lot of people are not sure that—they may not have been able 

to act appropriately within 7 days. 

Mr. CLAY. I see. Thank you for that response. How does a rentto-own customer accurately compare the prices of rent-to-own merchandise to products available at traditional retail stores now, and 

how can Federal legislation improve the capacity of rent-to-own 

customers to compare the cost of purchasing rent-to-own merchandise over buying the merchandise with cash or credit? 

Ms. MARGOT SAUNDERS. Is that for me? 

Mr. CLAY. That is for you, yes, ma’am. 

Ms. MARGOT SAUNDERS. I think that there are imperfect solutions, but what the FTC witness was referring to as a difficulty 

with providing with an APR, he was saying—he was describing, I 

think, the problem with the starting price. 

An annual percentage rate is the comparison of the financing 

based on the original cost and the total cost. So the problem with 

rent-to-own transactions is that the original cost is often much 

greater in rent-to-own dealers, the cash price cost is much greater 

than it is at an equivalent merchant so that the APR that you get 

is not even truly reflective. That is one problem. 

39 

Another problem is that, as Mrs. Capito pointed out, most contracts don’t go through to fruition—through termination—through 

the end of the contract so that the cash price—so that the annual 

percentage rate may be actually too low, because they haven’t completed the purchase in one term. 

But the APR remains, probably, the best measurement that we 

have, as imperfect as it is, and there are ways of providing that information that may not be as objectionable to the industry. Mr. 

Gonzalez, many years ago, the chairman of the House committee, 

had introduced a bill which had a comparison that was not based 

on APR but looked somewhat like APR that allowed that comparison. 

Mr. CLAY. Okay. 

Ms. MARGOT SAUNDERS. And there are still some other options. 

Mr. CLAY. Thank you so much for that response. 

Ms. Vivian Saunders? 

Over the last couple of years of introducing this legislation, a lot 

of consumer advocates have decided that this arrangement is not 

good for consumers. Some of us have taken criticism for being advocates of this legislation. In your own words, can you explain what 

would a consumer like you or people that you know would have experienced had their not been the option of other—the rent-to-own 

industry? 

Ms. VIVIAN SAUNDERS. In my opinion, it is giving people an option so many times, and now, people like to take the options from 

impoverished people. They try to tell us when to eat, where to live, 

what we have to do, but we are getting tired of folks taking our 

options away. 

If you have bad credit, you don’t have too many options. They are 

giving us a chance to have our children and our homes be as equal 

and a level playing field. When you empower young folks, and you 

give them respect, and they have respect in where they live, it 

gives them the mindset that they can do anything. 

We don’t have a lot of options in a poor community. So, this gives 

us an option. 

Mr. CLAY. Thank you, Madam Chairwoman, and I yield back. 

Chairwoman CAPITO. Thank you. 

Mr. HAWKINS. Madam Chairwoman? May I add something to 

Congressman Clay’s question about reinstatement, briefly? 

Chairwoman CAPITO. Yes. I will give you 20 seconds. 

Mr. HAWKINS. Twenty seconds, okay. I think that, again, Ms. 

Saunders and I have read the bill differently. I read the bill as giving people 120 days if they have paid more than 50 percent of the 

rental payments. And to me, that is a significant improvement over 

many States’ laws. 

Many States only give those people 21 days. So if on day 24, they 

have enough money, in many States they would be excluded from 

reinstating, but the Federal bill would allow them. 

Chairwoman CAPITO. I want to thank the members, and I want 

to thank the panel for their insightful testimony. 

The Chair notes that some members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 30 days 

40 

for members to submit written questions to these witnesses and to 

place their responses in the record. 

This hearing is adjourned. 

[Whereupon, at 12:12 p.m., the hearing was adjourned.] 

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A P P E N D I X 

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