A Vermont consumer protection bill that would regulate the rent-to-own industry and temporarily ban lawsuit loan companies from operating in the state passed in the Vermont House on Friday.
The bill started in the Senate as a bipartisan effort to regulate rent-to-own companies like Aarons and Rent-A-Center that sell furniture to people with bad credit or no credit. In the House, S.73 morphed into a seven-section pro-consumer measure. The bill is now headed back to the Senate, where they can either approve the additional sections or call for a conference committee.
The legislation sets new caps on the cash price that merchants can charge for their goods and calls for clearer consumer information about how the cost of a rent-to-own agreement compares with the cash price.
Critics of the rent-to-own industry, including Vermont Gov. Peter Shumlin and Attorney General William Sorrell, have said that consumers often dont understand that if they make it to the end of a rent-to-own contract, they often end up paying far more for a product than if it were bought for cash or on credit.
If signed into law, Vermont would be the 14th state to set price caps on companies that rent furniture and home appliances. The state would be the first to put an indefinite moratorium on lawsuit lending deals, also known as settlement loans.
Some key sections of the bill include:
Rent-to-own dealers would be allowed to charge roughly twice the cash price of a product over the course of the rental agreement. They could run credit checks on customers before renting furniture and other home items but could not force the person to sign an arbitration agreement as part of the rental contract.
Settlement loan companies, also known as consumer litigation funders, would be banned indefinitely. Susan Donegan, commissioner of the Vermont Department of Financial Regulation, would be required to submit a report on the industry by Dec. 1 and the state's House Committee on Commerce would then likely take up the issue in 2016.
Companies that keep customer information on file - through a companys special store card - would have clear guidelines on how they have to notify Vermonters when someone has hacked personal information.
The state would establish a Financial Literacy Commission starting July 1, that would sunset in 2018. A report from the Champlain College Center for Financial Literacy gave Vermont a "D" in December for financial literacy. The commission wants to bring bankers, nonprofits, educators and other stakeholders together to help people make better financial decisions. The federal Consumer Financial Protection Bureau endorsed Champlain Colleges idea.