Corporate Social Responsibility and Rent To Own Centers

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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 that the customer will not be able to pay RTO centers encouraging unregulated renting practices since the majority of its profits come from repossessions.

Highly Inflated Prices - RTO interest rates typically exceed 100 per cent and have been as high as up to 300 per cent. For example, at Rent-A-Center, a television that had a suggested retail price of $299, was contracted out at $11.70 per week for 78 weeks and totaled $920.10 to own, an effective annual interest rate of 200%. Rent-A-Center services can be misleading; they attract low income families by offering supposedly easy low payments with the idea to own. Many of these customers are often educationally disadvantaged and may not fully understand the terms of the rental. Through RTO, a poor person pays $1,200 for a $400 television set that the average person can buy for $450 on credit.

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