Rent-to-Own Penalties Come Under Fire

October 31, 2017 by

In Texas, government collection agencies, like those that try to collect fines and fees from toll runners, are given a lot of latitude and power over the tactics they use to collect. Another industry is now coming under public fire for using government-sanctioned punishments at their disposal.

A recent report detailing how a large number of rent-to-own furniture stores are lodging criminal complaints against consumers has caught the eye of local media and even some state lawmakers. The complaints are against customers who fail to thoroughly read “rent-to-own” agreements, leading them to fall short on their contractual obligations because they believe their items are paid off. Many of these “rent-to-own” contracts have a stated price in bold print but the contract’s fine print locks customers in to future payments above and beyond the cost of the goods. Under current state law, consumers in these circumstances can face criminal penalties for what amounts to no more than a civil disagreement.

The law is little known and it is entirely in favor of the rental industry. It allows disputes between consumers and rental companies to rise to criminal offenses that can carry jail and felony theft charges. District Attorneys often require little evidence, short of documents showing missed payments, to file charges and issue a warrant.

Across Texas, and the country, rent-to-own businesses are given the freedom to file criminal complaints against these customers for failing to make payments, where, in many cases the customers had already made thousands of dollars in payments, but fell short near the end.

Proponents of “theft of service” laws, like rent-to-own companies, argue that if not for the laws, customers who fail to make payments would never return the items and would have no reason to honor their end of the contact. While that can’t be certain, many take issue not with a company’s ability to pursue payment, but with the severity of the penalty in relation to the crime.

State Rep. Matt Krause (R-Fort Worth) posted the article on his personal Facebook page saying, in part, “the state should not be the collection agency for rental furniture. The remedy for a broken contract here should be a civil penalty, not a criminal one.”

Despite being punitive in a way that seems to outweigh the crime, the punishment can actually prohibit the desired outcome.

Most customers who fail to make payments do so because they can’t, not because they do not want to. Arresting and jailing someone, whether for three or thirty days, can have a negative impact on income, and even transportation and housing, all of which will exacerbate the underlying causes of the original nonpayment.

The current law was drafted, and supported, by industry lobbyists looking for some insurance for their clients. It should be noted that during the hearing in the late 1970s, only two lobbyists testified for the bill, and no one testified against it. Since then, the government has grown to be a default collection agency on behalf of private industry.

“Hoping we can make the necessary revisions to this law in the next legislative session,” Krause indicated echoing statements by colleague, State Rep. Joe Moody (D-El Paso).

This is an area where a government wrong can be corrected. Government shouldn’t be acting as the enforcement arm or debt collectors for private rent-to-own companies and taxpayers shouldn’t be forced to incur an expense to incarcerate someone for failing to pay a private debt.


About the Author

Charles operates the Houston office for Empower Texans/Texans for Fiscal Responsibility.