A common alternative to buying high cost merchandise such as appliances, furniture, and electronics outright, is a rent-to-own (RTO) transaction. In a RTO transaction, consumers can rent merchandise and at a certain point they can obtain ownership of the item.
RTO transactions can provide many benefits to consumers. These benefits include:
- A full cash payment is not required at the time of taking possession
- Rent-to-own is available to people who have poor consumer credit
- Through weekly or monthly installment payments, the person gets immediate use of the merchandise
- There are no repair costs during the rental period of the item because the rental company performs any necessary repairs
- Items can be returned with no further payment or obligation
Consumers who participate in RTO transactions can also experience drawbacks. The final purchase price for an item bought through RTO is usually much greater than if the item was bought using a single payment at a retail store or purchased with store financing. Usually, the final cost to the consumer can be three to four times more.
Nearly every state has rules regulating RTO transactions. Although each state has variations to what must be disclosed in a RTO contract, they generally include the following disclosures:
- The number of payments necessary to acquire ownership
- The due date of the payments
- A statement making it clear the consumer will not own the property until all necessary payments are made
- The actual cash price of the merchandise
- A statement indicating whether the merchandise is new or used
Since the rent to own merchandise will likely be inside your residence, RTO companies cannot enter your property and remove the item without your permission, as doing so would constitute trespass. Therefore, there are numerous tactics that RTO companies use to regain possession of the item without committing trespass, but what may be legal in one state may be illegal in another. Below are some examples of tactics used by RTO companies:
- A RTO representative will tell a customer the merchandise is being picked up for repairs or is being upgraded, when in fact it is being repossessed.
- A RTO company will threaten a customer that if they do not consent to repossession, the company will prosecute them for failure to return rental property.
- In advance of the RTO contract signing, the customer would be required to consent to an entry into their residence to reclaim the merchandise if the customer defaults.
If you are a business and would like to provide a RTO option to your customers, a business attorney can discuss the statutory requirements in your area and can help draft a form contract. If you are a customer who is experiencing a problem with a RTO contract, an attorney can discuss your rights and the remedies available in your area.