Let’s talk about rent-to-own advertising statutes, which are often overlooked but have recently come into the compliance crosshairs.
You already know that when you begin operations in a new state, you should verify that your lease contract complies with that state’s requirements. This is one thing that seems to come up constantly, and one area where I am constantly preaching compliance, compliance, compliance.
But there’s another area of state compliance that gets less attention—advertising. Just like your state-specific rental disclosure requirements, pretty much every state with a rent-to-own statute has a specific advertisement statute. Compliance with these rules is just as important as your lease agreement if you are advertising in that state.
Recently, the Massachusetts attorney general reached a $7.8 million settlement with a leasing company for alleged deceptive trade practices. The attorney general alleged that the company was placing “unreasonable and unfair barriers” prior to allowing customers to exercise their early purchase option.
But the suit also alleged that the company failed to comply with the state’s advertising statutes. This has brought advertising statutes into the crosshairs of compliance issues. Rather than waiting until it is too late, it is important that you review your ads in each state you operate to ensure compliance, just as you should regularly review your lease agreements.
If you have not reviewed your advertisements lately, now is the time.
CORE REQUIREMENTS COMMON TO MOST STATES
The majority of states with dedicated RTO advertising rules share a common set of rules designed to keep consumers from mistaking a rental-purchase for an immediate sale or credit purchase:
- Transaction Disclosure: Virtually all statutes require ads that reference payment amounts or the right to acquire ownership (early purchase options) and to clearly and conspicuously state that the deal is a rental-purchase (rent-to-own) agreement. This prevents misleading implications of ownership.
- Total Cost and Ownership Timeline: Most states require that you disclose the total number and total amount of payments necessary to acquire ownership, along with a statement that the consumer acquires no ownership rights until the full amount is paid (or the customer exercises an early purchase option).
- Broad Definition of “Advertisement”: Definitions typically encompass commercial messages in any medium (print, broadcast, digital, signage), though many exclude pure in-store merchandising aids like window signs or price tags (unless they promote specific terms).
These core elements appear consistently across most states, reflecting a national emphasis on transparency in RTO promotions.
KEY VARIATIONS ACROSS STATES
While the core disclosures are widespread, states diverge in specifics, scope, and additional obligations:
- Depth of Disclosures: Some states keep it minimal (e.g., basic transaction type + totals), while others require significantly more information. For instance, Massachusetts requires details on initial payments, security deposits (if applicable), payment schedules, and residual value charges for certain leases. New York uniquely mandates explicit labeling of the “total cost” and circumstances for acquiring ownership. California, Maine, and New York require you to disclose whether the property is new or used.
- Restrictions on Claims: Many states prohibit dealers from advertising that a specific item is available at particular prices or terms unless the dealer actually and customarily offers (or will offer) that item on those exact terms. This prevents misleading “bait and switch” style promotions.
Additionally, several states closely regulate claims about initial or upfront payments. For example, if an ad mentions “no money down,” a low initial payment, or any payment due at the start of the lease, it must fully disclose all associated costs—including the periodic payment amount, any other fees, and the total payments required for ownership (examples: Georgia, Michigan, Ohio, and Pennsylvania).
Many states (including Arizona, Connecticut, Delaware, Illinois, Maine, Michigan, Minnesota, New Hampshire, New Mexico, New York, Oregon, Pennsylvania, and others) impose point-of-display rules. Displayed items must carry tags or placards showing cash price, periodic payment, total payments for ownership, and sometimes rental cost or new/used status. These go beyond general ads to address in-store merchandising directly.
Radio, billboards, and directories often receive lighter treatment. South Carolina allows reduced disclosures (just transaction type and no-ownership) for radio or billboards. Many states exempt telephone/Yellow Pages directories entirely. Roadside or radio-only ads in Iowa may need only basic ownership disclosures.
A few states stand out with unique provisions. New Mexico and Wyoming require equivalent disclosures in non-English advertisements. Maine has detailed point-of-rental placards, including new/used status. Rhode Island emphasizes lease terminology, initial payments, deposits, and potential end-of-term charges.
States like Indiana, New Jersey, North Carolina, and Wisconsin have no specific RTO advertising statute (falling back to general consumer protection laws).
Practically speaking, the variation in these statutes means that a single national ad campaign can easily run afoul of stricter jurisdictions. Instead of a one-size-fits-all approach, dealers operating in multiple states should:
- Develop templated language covering the strictest common requirements (transaction disclosure + totals + no-ownership statement) while customizing for outliers like Massachusetts or New York.
- Audit in-store materials, tags, websites, and digital ads for “clear and conspicuous” compliance.
- Implement geo-targeting ads or state-specific versions where feasible.
- Train marketing teams on the risks and maintain records of legal reviews.
The Massachusetts settlement certainly serves as a cautionary tale: even well-intentioned promotions can trigger expensive litigation. This settlement brought advertisements to the forefront and made it clear that compliant leases alone are not enough. If you are advertising in a state, you need to be sure that you are compliant. By proactively addressing your advertisements—similar to how dealers handle varying contract rules—you can reduce exposure while reinforcing RTO as a transparent, consumer-friendly option.
Please remember to do your due diligence to ensure you are up to date and compliant in all states.
