TO: Rhonda Ward
FROM: Team 59
DATE: April 14, 2008
SUBJECT: Rent to Own Industry
Critical Issues
Rent-to-Own centers have a tremendous appeal for low income customers. The chain gives them immediate use of brand name merchandise without future obligations. The poor and nearly poor make up the vast majority of RTO customer, 80 per cent of the stores’ customers live within a three to five mile radius of the store. The main critical issues that we found regarding RTO business practices are: taking advantage of low income people, no credit checks, overcharging- 100 per cent to 300 per cent interest rates, high pressure sales, repossession tactics, and government regulations of the industry.
Taking advantage of lower income consumers - RTO centers take advantage of lower income people, despite the extreme profits (100% - 300%) made in renters fulfilling contracts. For example, Rent-A-Center (largest RTO firm) makes big money in repossessions. Three out of four Rent-A-Center customers have items repossessed. There have been times where a $179 VCR brought in over $5,000 in a five year period. To make that much of a profit from one item seems too greedy, therefore unethical.
No Credit Checks - promotes an own now pay later policy with no strings attached. The business model sounds very appealing to those with an economic disadvantaged or poor credit. RTO targets the lower middle class, all the way to unemployed individuals and even those in government assistance. They know a customer can not afford it but they will rent to them anyway, anticipating ...