State Senator Glenn Grothman, Assistant Majority Leader of the Republican Caucus, is leading the charge to protect consumers from Wisconsin's rapacious rent-to-own industry. Governor Scott Walker's $68.2 billion budget bill contains provisions that would rollback common sense regulation of the industry, which has been in place since 1985.
Grothman was joined at a recent press conference to oppose the changes by Milwaukee Archbishop Jerome Listecki, Democratic State Senator Lena Taylor, WISPIRG president Bruce Speight, and the president of the Hispanic Chamber of Commerce, Maria Monreal-Cameron. The governor's 2013-2014 budget bill would allow the industry to scam consumers by hiding prohibitive interest rates, which can reach 300 percent. It also untethers rent-to-own businesses from accountability under the Wisconsin Consumer Act and gives special legal protections to the industry by capping what consumers can receive in damages from a lawsuit against rent-to-own stores.
"I assume Governor Walker does not know how predatory and just plain evil this chain is," Grothman said. "I hope we can get Governor Walker to change his mind. I assume that if this chain comes in here," referring to Plano, Texas's Rent-A-Center franchise, "they will be bleeding millions of dollars every year from our most vulnerable citizens." (In 2002, a Milwaukee County judge ordered Rent-A-Center to pay the state $7 million in restitution and $1.4 million in penalties and fees, for not disclosing all terms of consumers' contracts.)
Opponents of the budget provisions say rent-to-own companies prey on people already deeply in debt or those who have language barriers, while charging hefty interest at the rate akin to payday lenders. Bishop Listecki says it's a method to keep those already struggling month-to-month in economic servitude. "If someone wants to pay seven times the amount for an item, they are more than welcome to pay more than seven times for the amount for the item," he said. "The difficulty is when you are not told when you are paying seven times the amount."
What is "Rent-To-Own"?
The stores sell furniture, appliances, and other products that allow consumers to pay over time, while also charging the consumer until they have paid two or three times their retail value. WISPIRG surveyed rent-to-own stores in Rockford, Illinois last month, comparing their prices to those offered by other retailers. WISPIRG found Rockford rent-to-own stores charged customers an effective annual interest rate of 221 percent on average; rates ranged from 138 percent to 370 percent.
WISPIRG's Speight notes a rent-to-own business might advertise a television for 78 weekly payments of $10. "The industry doesn't want to tell you that the effective interest rate on that loan, however, is 220 percent, with a $560 finance charge, and that roughly 30 percent of consumers don't even end up owning the television." The proposed revision in the governor's budget bill has the companies disclose price, the cost for rental services, and total amount that would ultimately be paid until the "borrower" is an owner, but not the outlandish interest rate.
Forty-seven states have separate laws governing rent-to-own businesses favorable to those companies, only North Carolina and New Jersey join Wisconsin in applying legally enforceable consumer protections and robust disclosure to the industry. The Association of Progressive Rental Organizations says there are 15 firms with 90 employees and annual revenues of more than $11 million operating in the state. An analysis by the Wisconsin Center for Investigative Journalism showed $235,000 in political donations in excess of $100 from individuals associated with the rent-to-own industry over the last two decades going to both parties.
Another Broken Promise From The Governor
This is an 18-year quest by Grothman to keep rent-to-own businesses regulated in Wisconsin. In March, he called them "a sleazy industry that preys on the poor by giving them contracts that no mathematically literate person would sign." Previous repeal of consumer-protection regulations have been vetoed by Governors McCallum and Doyle. Republican Senator Rob Cowles says Walker has broken a campaign promise. "This governor campaigned on not having policy in the budget. What happened to that promise?"
While the Republican party in Wisconsin has generally maintained a unified front the last two and a half years in the face of controversial policy, this issue has fractured the caucus. Grothman claims many Republicans agree with him privately, but won't speak out publicly.
Never shy to share his opinion is Republican Senate President Mike Ellis: "Rent-to-own is a pig. It is legal thievery... They are nothing more than usury. It's like the old Al Capone movie."
Stripping the rent-to-own provisions from the governor's budget bill would require five Republicans to align with all the Democrats in the Joint Finance Committee as the GOP has a 12-4 majority on the committee. Stay tuned.