I just caught another RAC tv ad and have wondered about this for years. First is they claim the offer isn’t available in WI. Why?
Next, they have a disclaimer that the renting is fine, but can’t lead to ownership in MN. WTF?
The only thing I can come up with is some sort of law on the books disqualifying it due to an interest rate that’s too high. But then I thought about MN allowing the rental in the first place.
Say you have a family in Minneapolis that is lower income, doesn’t have good credit to buy from Sears, but needs a washer and dryer. They can go to RAC and rent the 2, pay every week (or month, however it works) and have no equity. They essentially pay for the things without ever having a chance to own it after a certain amount is spent.
You could in theory pay thousands of dollars renting over a few years, when in another state you’d have full ownership after a much shorter time period of renting.
So how does this renting deal work? And is it worth it for MN residents?
My guess (and that’s all it is, as I have no familiarity with MN law) is that your first impression is the correct one, and the adverse result on low income people is an unintended consequence.
States used to have usury laws that capped interest rates. Some have abolished them and others have amended them with exceptions that weaken their impact, but my guess is that MN still has one with some teeth. At some point, someone may have succesfully argued that a rent-to-own contract is just a disguised financing arrangement, with a built-in interest rate that exceeds the cap. But if ownership never transfers, it can’t be a financed purchase, and no interest rate can be imputed.
That’s what I was thinking. The only problem I have is a state having control over a family deciding to go into contract with a nationally known and respected (?) company to purchase goods. The <?> is because I’ve never dealt with them.
If John Q. Public can’t get credit through Sears for a Kenmore, but RAC will let him buy the same product at a higher interest rate, what’s the problem? He either buys it at a higher interest rate or he doesn’t get it. Either way, he still needs the appliance.
I’m at the edge of turning this into something pit-worthy so I’ll stop now.
I’m from MN. It arose pretty much from a lawsuit brought on by the state when RAC was pretty much caught red handed with some financial shenanagins perpatrated against lower class customers. Sky high interest, compounded daily in some cases, refusal to act in good faith, tons of shady practices. IIRC, it was mostly the work of a shady franchisee, but corporate did little to stop it.
They pretty much had the book thrown at them by the AG, and ceded most points.
