Rent-A-Center allegedly violated California law by charging lease-to-own customers a significant mark-up over retailer prices.
California Attorney General Rob Bonta has announced that Rent-A-Center has agreed to pay $15.5 million to settle allegations that it engaged in unlawful business practices by overcharging consumers and failing to inform them of their rights to recourse.
According to The Los Angeles Times, the settlement provides $13.5 million in restitution to thousands of Rent-A-Center customers as well as an additional $2 million in punitive damages.
“Furnishing a home is expensive, and consumers often hope rent-to-own agreements will lessen the cost,” Bonta said in a press release.
“Rent-A-Center repeatedly relied on deceptive and unlawful tactics to pad its bottom line,” Bonta said. “We won’t stand by when a company like Rent-A-Center overcharges these hardworking Californians, taking money that is needed for rent, food, or other essential expenses.”
The Times reports that the lawsuit was filed by Bonta last August.
In his complaint, Bonta alleged that Rent-A-Center began imposing “an unlawful 15% markup” on products purchased with case as early as 2014.
Bonta thus claims that Rent-A-Center, a rent-to-buy retailer, effectively gouged consumers participating in its “Preferred Lease” program.
The program, says the Los Angeles Times, involved kiosks set up inside brick-and-mortar retailers, including Ashley Furniture.
The “Preferred Lease” program allowed customers who could not afford to pay for their furniture in cash to enter into a rent-to-own agreement with Rent-A-Center.
These agreements, adds the Times, allowed consumers to “lease” a variety of products, including couches, television sets, and other common household goods.
If the customer was approved, Rent-A-Center would purchase the products from the retailer and then lease them to the consumer. The customer would then make monthly payments with the option to eventually purchase the funded item at a “case price.”
However, Rent-A-Center’s so-called “cash price” was actually 15% higher than that of the retailer’s—a violation of California’s Karnette Rental-Purchase Act.
”Practically, the fact that traditional retailers allow Preferred Lease to operate on their sales floors for the limited purpose of serving customers who cannot pay cash up front (or who cannot obtain financing) means the only price available to a cash-paying customer at the inception of the agreement is the retailer’s price,” Bonta wrote in the lawsuit.
Additionally, Rent-A-Center did not inform its customers of their rights, including their right to return products.
According to Bonta’s office, customers who rented merchandise through in-store Rent-A-Center kiosks will be eligible for restitution and should receive notice of the settlement to their last known mailing address.
The judgment, adds The Dallas Morning News, bars Rent-A-Center from charging a cash mark-up or limiting returns. It also requires the company to inform consumers of their rights.