In today’s piece, we examine the booming business of rent-to-own. This is where people too broke to buy things such as furniture and electronics, agree to buy these items via weekly payments. Of course, they typically never end up owning anything, as 75% of the time the items are repossessed or returned within weeks of the transaction. Those who do end up owning the items, pay multiples of the retail price.
Now, from the Washington Post:
CULLMAN, Ala. — The love seat and sofa that Jamie Abbott can’t quite afford ended up in her double-wide trailer because of the day earlier this year when she and her family walked into a new store called Buddy’s. Abbott had no access to credit, no bank account and little cash, but here was a place that catered to exactly those kinds of customers. Anything could be hers. The possibilities — and the prices — were dizzying.
Five years into a national economic recovery that has further strained the poor working class, an entire industry has grown around handing them a lifeline to the material rewards of middle-class life. Retailers in the post-Great Recession years have become even more likely to work with customers who don’t have the money upfront, instead offering a widening spectrum of payment plans that ultimately cost far more and add to the burdens of life on the economy’s fringes.
What national economic recovery? It is an oligarch recovery. Nothing more, nothing less.
The poor today can shop online, paying in installments, or walk into traditional retailers such as Kmart that now offer in-store leasing. The most striking change in the world of low-income commerce has been the proliferation of rent-to-own stores such as Buddy’s Home Furnishings, which has been opening a new store every week, largely in the South.
In some ways, the business harkens back to the subprime boom of the early 2000s, when lenders handed out loans to low-income borrowers with little credit history. But while people in those days were charged perhaps an interest rate of 5 to 10 percent, at rental centers the poor find themselves paying effective annual interest rates of more than 100 percent. With business models such as “rent-to-own,” in which transactions are categorized as leases, stores like Buddy’s can avoid state usury laws and other regulations.
And yet low-income Americans increasingly have few other places to turn. “Congratulations, You are Pre-Approved,” Buddy’s says on its Web site, and the message plays to America’s bottom 40 percent. This is a group that makes less money than it did 20 years ago, a group increasingly likely to string together paychecks by holding multiple part-time jobs with variable hours.
“Basically, the market pulled back from all low-income borrowers instead of trying to figure out how to serve them,” said Michael Barr, a University of Michigan law professor and author of “No Slack: The Financial Lives of Low-Income Americans.”
Full Story @ [libertyblitzkrieg]