ASSEMBLY PANEL RELEASES CARABALLO BILL REGULATING RENT-TO-OWN CONTRACTS

FOR RELEASE: CONTACT:
December 8, 2005 Assemblyman Caraballo (973) 350-0048
Beth Auerswald
(609) 292-7065
ASSEMBLY PANEL RELEASES CARABALLO BILL REGULATING RENT-TO-OWN CONTRACTS
Measure Would Provide Clarity, Strengthen Consumer Protections

(TRENTON) -- The Assembly Consumer Affairs Committee today released legislation Assemblyman Wilfredo Caraballo sponsored to extend consumer protections to currently unregulated rental-purchase agreements.
The bill (A-3851) was crafted after a state Appellate Court in February determined that rent-to-own contracts fall outside the scope of the state's Retail Installment Sales Act and usury laws that regulate retail installment sales involving an extension of credit.

In February, the Appellate Division of the Superior Court upheld a trial court decision dismissing a complaint against Rent-A-Center Inc. The court found that the contracts entered into by Rent-A-Center and merchandise renters did not fit the definition of a retail installment sales contract under the Retail Installment Sales Act, because renters were never under an obligation to purchase the rented items and were free to return them at any time with no further financial obligation.

"While the court was correct in its finding that these agreements do not fit into the broad description of retail installment sales, and that no consumer debt is incurred under these agreements, there remains a need to control these agreements," said Caraballo (D-Essex). "I believe consumers, young, old and in-between can be protected better by legislation to make rental-purchase agreements clearer and more consumer-friendly."

Caraballo said his legislation is necessary because there remains a genuine public interest in regulating these agreements to ensure adequate safeguards for renters.

Rental-purchase agreements are used by individuals -- ranging from young people starting out in life to elderly couples -- to acquire the latest computer technology, entertainment products or household furnishings without the burden of long-term ownership. These agreements also provide renters with the option of purchasing the consumer goods at some point during the course of the rental contract.

"New Jersey must provide clarity and certainty to rental-purchase agreements," said Caraballo, who served as one of the state's last Public Advocate. "This legislation would impose strict disclosure, price controls and other requirements on the part of businesses renting consumer goods that can be purchased later by renters. Right now, these transactions are essentially unregulated."

Caraballo added that many of the provisions of his bill would extend greater protections to rent-to-own consumers than the state's Retail Installment Sales currently provides to credit consumers.

New Jersey is one of the few states that do not regulate rental-purchase agreements. In fact, 46 other states, as well as the District of Columbia and Puerto Rico, regulate these agreements.

Under Caraballo's bill, all of a renter's rights and obligations would have to be disclosed, in simple language, to a consumer. The weekly or monthly rental charges, the total cost of all rental-purchase payments, late fees and any other miscellaneous costs to the product user also would have to be disclosed clearly in rental-purchase agreements.

The bill would impose strict, but reasonable, limits on both late fees and the maximum price that could be charged for a rental item if a renter chooses to purchase it during the term of the rental-purchase agreement.

In a provision that would be unique to New Jersey consumer law, the bill would require that rental-purchase merchants must reduce weekly fees to renters if those renters are laid-off from their jobs or otherwise experience a reduction in pay through no fault of their own. Rent-to-own businesses also would be required to adhere to strict protection of a renter's privacy rights in the event that a rented item had to be repossessed for any reason.

"The bill outlines regulations that are progressive and tough, yet reasonable," said Caraballo. "Legitimate rent-to-own companies will be able to adhere to the new requirements, and consumers will be more knowledgeable about the binding agreements they enter."

The measure was released 4 to 1. It now heads to the Assembly Speaker, who decides if and when to post it for a floor vote.

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