Rent-to-own companies have long argued that they provide an important service to members of the community that do not have the capital or credit to purchase often expensive but necessary household items such as furniture, appliances, and electronics. However, the tactics used by these companies have often been criticized by consumer advocacy groups as predatory, usurious, and unethical.
In Texas, a statute written in the 1970s that allows rent-to-own companies to file criminal charges against individuals that violated the terms of a rent-to-own contract has come under fire from both Democrats and Republicans. Testimony in a hearing conducted by the Texas House Business and Industry Committee provided an opportunity for legislators to hear from individuals exposed to these criminal charges and from representatives of the rent-to-own companies.
“The consensus from the hearing was that legislators did not see a reason for rent-to-own companies to have criminal recourse against customers when it has the standard methods of civil recovery available to it,” said Stephen Hamilton, a Texas Criminal Law Attorney with the law firm Hamilton, Hull & Byrd Attorneys at Law. “The representatives of the rent-to-own companies took the position that it was a rarely-used rule. The response to that seemed to be that having such a rule in place was even less necessary if it was not regularly used.”
Rent-to-own companies sell items to customers in a manner that allows them to pay small amounts on a weekly or monthly basis, with the understanding that they can return the items if they are no longer using them or if they want to get something different. One of the most common complaints is that individuals do not understand they must continue paying for the item even after they paid the purchase price of the item. This often leads to a breach of contract when individuals stop paying.
Civil recourse – such as suing for a breach of contract or seeking to recover possession of the item through a security interest is something that affects many individuals who purchase items, not just those who purchased them from rent-to-own companies. The law at issue in Texas gave rent-to-own companies the right to refer cases directly to a prosecutor for criminal prosecution. The result is that individuals who used rent-to-own to purchase items, who tend to be people of color and people lower on the socioeconomic scale, can be criminally prosecuted in a way that other purchasers of items under contract cannot.
Think about it this way, when someone purchases a car, they agree to make monthly payments. If they miss those payments, the bank will send someone to repossess the car. What the bank will not do, and cannot do, is send the failure to pay to a prosecutor. A person cannot be criminally prosecuted for failing to pay for their car, but they can be criminally prosecuted for failure to pay for your washing machine.
The changes in this law are not guaranteed, but other states that had such statutes on the books have removed them, so the change would not be without precedent. Changes to laws similar to this are necessary to ensure that criminal prosecutions that can damage an individual’s future are limited to legitimate criminal activity and not for failure to pay for appliances.
