Feature, Operations, Sales & Marketing, V4I5

Full Disclosure

Although many aspects of rent-to-own (RTO) businesses mirror one another, there are definite areas that differ due to state laws governing those peculiarities.

For example, laws pertaining to the information that must be included on price tags for sheds vary from one state to the next. Because of those differences, RTO dealers may not be aware of the information they are to disseminate to customers on price tags and advertisements.

That lack of knowledge can spell trouble, says Edward L. Winn, III, general counsel for the Association of Professional Rental Organizations (APRO) and a shareholder with the Austin, Texas law firm of Martinec Winn & Vickers, P.C.

“There is a risk in screwing up advertising,” Winn says. “I’ve seen brochures from RTO (dealers) that aren’t even close to complying with advertising laws.”

Every state has its own laws regarding advertising and the information that must be disseminated by businesses to potential customers.

When it comes to the fine-print details that must be included on price tags for sheds, Utah is the only jurisdiction that does not require advertisements to disclose all pricing information on price tags, says Winn. However, every other state with RTO-related statutes also delineate some sort of advertising provisions on the industry, he says.

Many states have laws governing the information that must appear on price tags, as they are under the domain of advertising. In those jurisdictions, if a customer is renting a shed, the price tag “must have the RTO monthly price, rental purchase, and a No Equity Statement” on it, says Winn. It must be clear there is a difference between the cost of renting-to-own and paying a cash price, he explains.

Each state with statutes governing the information required to be on price tags has its own unique set of promulgations. For example, current Georgia law requires the disclosure of the cost of leasing services along with the RTO price on written materials discussing the shed’s cost.

Attorney Nick Garrard agrees. Garrard, a member of the advisory board of the National Barn & Storage Rental Association (NBSRA) and a Mississippi attorney, says it is “best practices for as much information as possible to be included” on advertisements and price tags so a consumer can make an informed decision about whether renting or buying a shed is right for them.

Following those advertisement laws is imperative for ensuring a company is not misleading customers, whether intentional or not, says Garrard. Still, he acknowledges that adhering to governing statutes isn’t always easy.

Builders and dealers sometimes offer print materials displaying RTO payments beside the rental price. However, that can be “problematic” depending on state laws because if price tags indicate the RTO payment, “then they have to show the other fine-print details,” like the monthly payment price, says Garrard. Unfortunately, however, many shed dealers are not following those requirements.

If an ad indicates an amount for a monthly payment, it must list additional information, such as the rental purchase amount, too, he says.

Moreover, the written documentation must also inform the customer of their right to eventually acquire ownership. A rental purchase agreement indicating the number of monthly payments it would take to acquire ownership, as well as a statement stating ownership does not pass to the customer until all payments are made, is also required.

“The best practice is to give the customer as much information as possible. Follow state law,” urges Garrard.

According to Winn, 22 states have price tag disclosure requirements on their books. No matter what, he says “every shed on a lot (that is) available for rent should have a rental disclosure tag” indicating the cash purchase price, the monthly rental payment, the monthly rental terms, and the total purchase price.

At least at this time, “no one is suing shed builders about this,” says Winn.

Advertising the sale of sheds is a different animal than price tags on sheds. RTO dealers can “probably” satisfy the price tag consideration if they get a rental agreement, Winn says.

But, when advertisements come in the form of brochures, web sites, or newspaper ads, for example, “there has to be a trigger, some information, that triggers the disclosures. Usually, that trigger is the rental rate. With that, you have to make disclosures,” he says.

Those disclosures are:

  • The customer does not gain equity in the shed by renting it.
  • The term costs.
  • The monthly price of renting to own.

Successful litigation has resulted from faulty advertisements, says Winn, noting the products in question were not sheds but televisions. He tells of a recent lawsuit in Georgia where a young lawyer won statutory damages in four cases against an RTO TV and appliance dealer whose advertisements did not include the required information.

“The RTO industry should take notice but they aren’t. People aren’t suing shed builders because they are under the radar. May they ever remain so,” Winn adds.

According to Phil Falls, president of RTO National, the three main reasons he believes RTO shed dealers are not revealing requisite pricing information include:

  • Dealers do not want the customer to see the sum of all the payments, so they simply do not share the information.
  • Not enough space on a brochure to print prices and the sum of all payments.
  • They are unaware of the disclosure requirements.

Educating RTO dealers about these laws is a constant effort for Winn’s organization. Of those dealers, he says some are diligent while others are less so.

“It’s important to be circumspect about what rental dealers do and don’t do. I don’t know the level of compliance,” says Winn, urging all RTO dealers to educate themselves about the state laws which pertain to their enterprises and then adhere to them.

Note: This article is for informational purposes only. Consult your attorney of choice regarding your particular situation.

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