Rent-to-own businesses in Wisconsin would face fewer regulations under a bill approved late Tuesday night in the state Assembly.
The legislation, which would remove the rent-to-own industry from the oversight of the Wisconsin Consumer Act, passed the chamber 59-35, with Rep. André Jacque, R-De Pere, joining Democrats in opposing it. Its future in the Senate is unclear.
Opponents of the move say it will allow a predatory industry to take advantage of the poor, while supporters argue it will offer certainty that will bring business to the state.
"They clearly see an opportunity to profit off of the least fortunate in our society," said Assembly Minority Leader Gordon Hintz, D-Oshkosh, a longtime opponent of the rent-to-own industry. "This should be rejected by legislators and by humans."
Rent-to-own stores sell products like furniture, electronics and appliances. Customers pay for the items through weekly or monthly payments.
"They make their money off of low-income individuals who don’t have credit, who don’t have cash and are stuck in a cycle of consumer indebtedness," Hintz said.
Under the bill, rent-to-own retailers would no longer be required to disclose an annual interest rate on transactions. They would instead be required to disclose the total cost to own an item, the cost to rent it, the cost to purchase it with cash, a list of potential charges and fees and several additional terms of the contract. According to the Federal Trade Commission, annual interest rates on rent-to-own purchases can range from 100 percent to 350 percent.
The bill would also limit the amount of money customers could receive if they successfully sued a rent-to-own company in a class action suit. The amount a company could be forced to pay would be capped at $500,000, or 1 percent of its net worth — whichever is smaller.
Sarah Orr, director of the Consumer Law Litigation Clinic at the University of Wisconsin Law School, said the bill would "dramatically weaken rent-to-own customers’ rights."
"We know from our charitable work that those who are least able to pay for goods often end up paying the most," said Wisconsin Catholic Conference executive director Kim Wadas in a statement. "Government policy should focus on combating this, rather than compounding it."
Assembly Speaker Robin Vos, R-Rochester, said the goal of the legislation is to "create certainty for the industry but also have world class consumer protections."
Vos said he believes the bill will encourage rent-to-own companies to open more stores throughout the state, which would create jobs. He argued that people should have plenty of options to rent things like furniture on a temporary basis.
Rep. Dale Kooyenga, R-Brookfield, offered the example of a soldier who is stationed somewhere for a few months at a time — too long to stay in a hotel, perhaps, but not long enough to buy furniture.
"Sometimes a man wants a couch, or a female soldier wants a couch," Kooyenga said.
Bill author Rep. Warren Petryk, R-Eleva, said he believes the bill is an example of how legislation should be developed, noting that several amendments were added after he heard concerns about the initial proposal. One amendment will require rent-to-own companies to contribute $1 for each rental-purchase agreement to financial literacy programs.
"The intention of this legislation is to provide more choices ... for our consumers, our constituents, in the free marketplace of durable goods," Petryk said.