Rent-to-own abuses reined in

On Monday, Governor Shumlin announced something or other. Everybody paid attention.

On Tuesday, he signed a bill that will help a lot of people. Pretty much nobody paid any attention.

S.73 is a consumer protection bill whose primary purpose is to prevent rent-to-own stores from preying on the working poor. When I was a guest on the Mark Johnson Show after the legislative session and he asked me which piece of legislation would have the most impact, I said that for some, it wouldn’t be education reform or RESET or the budget or Lake Champlain; it’d be S.73.

Rent-to-own stores, at their worst, are a lot like payday lenders: they allow the poor to acquire consumer goods like furniture, electronics, and appliances with little or no money up front. Instead, they charge monthly lease rates. In some cases, a consumer will pay far more over the life of a lease than they would have if they’d paid cash (or had a credit card) up front. Like 200% more.

It’s usury by another name.

S.73 sets reasonable limits on rent-to-own terms. On a two-year lease, the stores will be able to charge a maximum interest rate of 24.5%, which would seem to allow plenty of room for profit.

Some Republicans supported the bill. Indeed, Sen. Kevin Mullin sponsored and promoted the bill, and deserves full credit for that. Others acknowledged the abuses of rent-to-own but disagreed with the idea of regulating an industry even if it was guilty of usury. I guess those folks are happy with caveat emptor.

And of course, none of them are in a financial position to resort to a rent-to-own deal, so it’s no skin off their backs.

This is one of the small graces of living in a Democratic majority state. If businesses are ripping people off, our government is likely to take action. And if businesses complain, well, they’ve only got themselves to blame.

So raise a glass to S.73. It’ll probably never benefit you or me, but it will help some of our most vulnerable residents avoid getting taken advantage of.

Advertisements

6 thoughts on “Rent-to-own abuses reined in

  1. christolicious

    In other words, people aren’t responsible for their own choices, and their Democratic champions are required to shield them from being stupid. Fantastic. Here’s an idea: If you can’t afford something, don’t buy it until you can.

    There. Problem solved. And no champions wasting time congratulating themselves required.

    Reply
    1. John S. Walters Post author

      If that’s the kind of society you want, you are welcome to pursue it. Some of us want a government to step in when a business is deceiving and defrauding its clientele.

      Reply
  2. Sen. Joe Benning

    Re: “Some Republicans supported the bill.”

    Oh come now John! I think you know the bill’s lead sponsor was Republican Kevin Mullin. He engineered a bipartisan sponsorship and vote in his committee, gave Democrat Becca Balint one of her first opportunities to explain a bill on the floor, and choreographed a tripartisan vote for passage in the Senate. Shouldn’t that have been a stronger theme in this story? I’m puzzled why your story denies him that credit, choosing instead to rib the 13 House Republicans who opposed it on the principle that it was bad policy for state government to set arbitrary limits on profits of private business. (As noted by Representative Willhoit while explaining his vote, the bill limits the profit margin to two times what the business paid for the product.)

    So, two questions: First, why did you choose to ignore Republican Mullin’s lead sponsorship and thus downplay bipartisan/tripartisan cooperation in the successful passage of this bill?

    Second, and perhaps most importantly, do you believe it is perfectly acceptable for Vermont’s government to set arbitrary limits on the profits a business can earn?

    Reply
    1. John S. Walters Post author

      Since you ask… it’s not just who voted for and against. I sat in on a House Republican Caucus meeting in which the speakers were uniformly critical of the bill. And, in fact, misrepresented its effects. As did Rep. Willhoit; the law doesn’t limit the profit margin to two times what the business paid for the product. It sets the “purchase price” at 1.75 times what the retailer paid for it, and it sets the total “consumer cost” at 2 times the purchase price.

      I don’t blame Rep. Willhoit for that. That’s what he was told, incorrectly, in caucus. If that’s why he voted against the bill, then his leadership did him a disservice.

      I could have given credit to Sen. Mullin as a lead sponsor; I didn’t mention any of the bill’s sponsors. But given the fact that I included criticism of Republicans, you have a point: I should have indicated that many Republicans supported the bill and one was a primary mover. In fact, I will rewrite that section.

      As for the philosophical point: as a general rule, I prefer not to have the government set limits on business. But when a business flouts all sense of propriety and fairness, then the government must step in. It hurts the honest businesspeople in the rent-to-own game, but we can’t just let the bad apples stay in the bushel.

      As always, thank you for writing. I do appreciate your part in the conversation, even if we often disagree. I wish there was a stronger conservative presence in our blogosphere.

      Reply
      1. Sen. Joe Benning

        Re: “as a general rule, I prefer not to have the government set limits on business. But when a business flouts all sense of propriety and fairness, then the government must step in. It hurts the honest businesspeople in the rent-to-own game, but we can’t just let the bad apples stay in the bushel.”

        Good to hear! That was why I held my nose and voted for the bill. I held my nose because, as Christolicious above so appropriately points out, there is another side to this. We should always use extreme caution when using government to interfere with normal business dealings. But in the end, the evidence in this case was pretty damning against those who clearly were taking advantage through bad business practices. It is a shame we had to create legislation, but in this case I wouldn’t reverse my vote. And thanks for giving Senator Mullin his due.

  3. Michelle Fay

    Such an important bill. I hope that the 13 reps who voted against it are held to account for prioritizing businesses’ right to price gouge a captive market over the financial well-being of low-income Vermonters.

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s