Eaten Alive

Rent-to-own stores, pawnshops, payday lenders -- it's hope for sale, with interest

Shortchanged author Karger, a lecturer at UH's Graduate School of Social Work, says tax refund loans are among the industry's most exploitative. They pose almost zero risk to lenders because they're automatically deducted from government checks. "The outrage really is the loans are taking money out of the federal treasury that was really divined for these people," he says, "and not tax refund lenders."

Tinita's tax return had already mostly vanished when she gave birth in 1993 to her second son. The 20-year-old wanted to move out of her mother's house and into an apartment in Bear Creek with her boys' father, and she needed furniture. Her salary of $5.15 an hour was just enough, she thought, to cover a $150 monthly rent-to-own payment on a Botaflex imitation-leather furniture set from Rent-A-Center. The store asked for five references and proof of employment and delivered the couch the day she moved in. "It was easy," Tinita says. "When you don't have much, you need easy."

But Tinita's life quickly got more complicated. Two weeks later, she walked into her bedroom and found her boyfriend's closet stripped bare. She burst into tears. He'd bailed to his mother's house. "I just don't want to struggle," Michael Joyce told her, "and I know that's what we're going to do if we stay there."

In his recent book Shortchanged, UH professor 
Howard Karger says fringe lenders are waging "a war 
on the poor."
Daniel Kramer
In his recent book Shortchanged, UH professor Howard Karger says fringe lenders are waging "a war on the poor."

Tinita resolved to pay rent by herself. She applied for food stamps, Medicaid and Women, Infants and Children program money. Her mother tended the children while Tinita worked during the day. But the young mom missed the $150 payment on her furniture. The next day, two Rent-A-Center employees pounded on her door and demanded the couch and chairs. Handing them over would mean losing the payments she'd already made toward owning them, so Tinita resisted. The men threatened to call the police.

The Houston Better Business Bureau fields complaints against rent-to-own companies. More than half of the 40 industry-related grievances received since 1999 mention either excessive calls made to workplaces and family members, foul language or simple harassment -- mostly on the part of employees with Aaron's Sales & Lease, which has 14 stores in Houston. Some consumers reported that repossession attempts intensified when they were on the verge of paying off appliances and owning them. Billie Garcia, a Texas City cafeteria worker, says he made all of his required payments on a washer/dryer set, including two payments after it broke. When Rent-A-Center employees took the unit from his house in 2001, he thought they intended to repair it. They were in fact repossessing it. Garcia never got it back. "I am out all this money," he wrote, "and they have the w/d set to re-rent." (A Rent-A-Center spokeswoman didn't return calls from the Houston Press.)

Still more troubling to consumer advocates are the stores' rental rates, which make Reliant Park beers look like bargains. Garcia paid nearly double the suggested retail price of his washer/dryer set, and Tinita's second-rate vinyl furniture was going to cost her $2,700 to own. According to BBB president Dan Parsons, there's little difference between renting at such rates and loan-sharking. "It's just another way to gild the lily to disguise it," he says, "and to get around laws that were designed to protect people from predatory lending."

Some consumer groups argue that rent-to-own transactions should count as credit purchases, qualifying them for disclosure laws and interest-rate caps. But attorneys with the Association of Progressive Rental Organizations, the industry trade group, have always persuaded state lawmakers that no credit is involved in renting to own; they argue that customers can return their products at any time without a penalty.

The distinction didn't much matter to Tinita, whose vinyl couch became just another prisoner of her finances. November rent was overdue on her apartment; a lockbox barricaded the door. She squeezed through a window in the living room and called her family. They rolled up in the middle of the night, quietly loaded all of her belongings in a pickup truck and carted them away. But they left the rental furniture behind. Maybe Rent-A-Center could convince someone else to buy it.

One of the greatest disservices you can do a man is to lend him money that he can't pay back. -- Jesse H. Jones

Tinita and Michael saw each other off and on, despite their official separation. She and her kids moved in with his sister, Jenny. Rent was an easy $100. Yet there were other expenses: child care, to be sure, but also Levi's, BCBG, Polo and knock-off Gucci. "I still felt like I had to dress," Tinita says, "so my money was pretty much going in the air."

Tinita's fashion demands outstripped her meager salary, so she pawned her 19-inch television for $110. This particular shop, off I-10, allowed her to keep the television, but recorded its serial number and used it as collateral for the loan, which was due in two weeks. (The strategy was popular in the early 1990s, Parsons says, because it allowed stores to circumvent usury laws.)

The extra cash didn't last. Tinita put a down payment on a red Hyundai Excel, writing a $300 check, which bounced. Her salary hadn't increased even though her boss was now asking her to quote insurance prices on cars and houses without a broker's license. In mid-1994, she collected a $140 car insurance down payment from an old lady and spent it on clothes and other random expenses. She was unable to replace the money as she'd planned and too embarrassed to show up at work. Her boss forgave her, she says, but she felt ashamed; after repaying him through a friend, she never went back.

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Payday loans or title loans are very helpful if you manage them properly. Otherwise they can create more problems than they were meant to solve. These loans already have a high interest rate but with the passage of time the interest increase even more. So if you delay the repayment of your loan, you will pile up a huge amount of debt for yourself.

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