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Growing Conscious Consumerism: Understanding the Rent-to-Own Industry in NYC

For our workforce development colleagues: you know the importance of financial education and empowerment in positioning your participants to maintain jobs and build sustainable employment. However, protecting the communities you work with from predatory financing and lending practices that put them at long-term risk can be a challenge. One piece of the solution is understanding where financial risks lie. We recently conducted a survey of practices in the Rent-to-Own (RTO) industry in New York City to understand how RTO stores conduct business and help explore ways in which consumers can identify risks within these types of agreements. Our research – including interviewing subject matter experts, conducting outreach to consumers, and doing our own secret shopping – taught us a lot about this sometimes illusive industry. We wanted to relay a few of our learnings in the interest of raising awareness around these issues and informing how RTO might impact your clients or program participants.

First, how it works: RTO is a service directed to consumers who immediately need specific products such as appliances or household furniture, but may not have the funds on hand to make a purchase outright. An RTO retailer will rent those products to consumers through a modest upfront payment, followed by recurring installments for an agreed to period of time until the product is paid off. Unfortunately, many who enter these rental agreements can end up paying more than 2.5 times the purchase price of a product through the structure of monthly payments and interest over their rental term. For example, during our secret shopping we found that a television marked $699.99 at Best Buy might be $1,049.99 in total fees at an RTO establishment. Simply put, that’s a bad deal.

Second, things to look out for:

  • In NYC, RTO chains are consolidated in neighborhoods with above average poverty rates, including areas in the South Bronx, Upper Manhattan, Central Brooklyn, and Southeast Queens. By mapping Aaron’s and Rent-a-Center locations in NYC, two of the nation’s largest RTO retailers, we found that they are predominantly situated in or near areas with more than 20% of households in poverty.
  • Our research suggested that RTO salespeople frequently focus their pitch on the product, and are often vague or unclear about the rental payment terms. They often do not share written terms until after you’ve agreed to purchase an item. Consumers also noted difficulty in getting RTO salespeople to provide clear and informative responses to their questions.
  • Even when rental terms are provided, consumers expressed confusion on how to assess those terms and admitted they didn’t understand what they were getting into – or the ultimate costs – before committing to the purchase.
  • Consumers noted the negative effects of missing just one rental payment. RTO retailers reportedly hire collection agencies to collect missed payments, using employer information and personal references to track down consumers.

Raising awareness around RTO and these practices is a critical next step in helping protect consumers. It may sound straightforward, but encouraging consumers to request and thoroughly review payment terms before signing any rental agreement is likely to go a long way in helping them to protect themselves. While our survey represents initial consumer engagement, further research and outreach would help surface nuances to the experience and challenges faced by consumers in NYC, which in turn will help inform actionable solutions. We encourage you to raise awareness around RTO within your organizations and keep an eye out for when your participants may have fallen victim to unfavorable rental terms.

June 2017 Newsletter: Join our CXJM training | Small Business Supports | Summer Happenings

Want to learn how Customer Journey Mapping can enhance your programs? Sign up for our training.

On June 22, we’re partnering with the Workforce Professionals Training Institute for a half-day skills-building workshop on Customer Journey Mapping. Journey Mapping is a technique for understanding how clients move through your services, and a great way to identify opportunities to enhance services in ways that address client needs. During this training, workforce practitioners will learn how to problem-solve in real time based on customer feedback on what’s working well and where pain points exist. We will share tools and resources to help your team redesign current services or design new ones through the journey mapping practice. Learn more and register today.

We’re helping design supports for business growth:

Last year, we supported the NYC Department of Small Business Services’ Small Business First Initiative to help streamline the way the City interacts with business owners. A large component of our work focused on designing programs and resources that more clearly communicate rules, and regulations and help business owners avoid common violations. Check out these supports now available:

  • Compliance Consultations: business owners can schedule a free site visit with an SBS Adviser to learn how to comply with City rules and subsequently avoid fines. According to reports from ABC 7, fines are down 40%!
  • Sidewalk Usage Guide: SBS offers many regulation- and industry-specific guides to educate business owners. We collaborated on their new Sidewalk Usage Guide, which breakdowns how the sidewalk in front of a storefront can and cannot be used. Trust us, you’ll never look at a sidewalk café quite the same way once you know what it took to get it there.

This summer, our team is growing:

Please join us in welcoming Favio Germán as Public Works’ new Project Coordinator. Favio is a graduate student at NYU’s Wagner School of Public Service focusing on Nonprofit Management. Previously, he served in the Peace Corps in Paraguay, where he facilitated the creation and development of community groups, and trained incoming volunteers as well as Paraguayan Government officials on community development, project management, and experiential training models. We know Favio’s passion for supporting community based organizations and extensive experience in stakeholder engagement and performance measurement will make him a tremendous addition to our team.

Clients in the news:

  • A Goodwill Outlet, located in a warehouse in Long Island City, was recently profiled in the New York Times for inspiring a sub-sector of competitive shopping and re-sale. With clothing sold in bulk and below Goodwill’s usual, already-discounted prices, shoppers – from fashion bloggers to new immigrants – gather daily to race for new items.
  • In May, Cities for Financial Empowerment Fund hosted its annual Bank On conference in Washington D.C. Among the day’s discussion topics, CFE Fund announced a new data portal pilot to collect information about certified accounts across the country, offered insights from the Summer Jobs Connect program informed by our research, and introduced new Bank On resources.

Walk A Mile In A Business Owner’s Shoes

As a small business ourselves, we understand the power of well-designed support for business growth. Last year, we supported the NYC Department of Small Business Services’ Small Business First Initiative to help streamline the way the City interacts with business owners. A large component of our work focused on designing programs and resources that more clearly communicate rules and regulations and help business owners avoid common violations. Check out these supports now available:

  • Compliance Consultations: business owners can schedule a free site visit with an SBS Adviser to learn how to comply with City rules and subsequently avoid fines, particularly when just starting out and being exposed to a wide array of requirements for the first time. According to reports from ABC 7, fines are down 40%!
  • Sidewalk Usage Guide: SBS offers many regulation- and industry-specific guides to educate business owners. We collaborated on their new Sidewalk Usage Guide, which covers everything from advertising to selling goods, repairs to serving food. Call us biased, but we think it’s a great breakdown of how the sidewalk in front of a storefront can and cannot be used. Trust us, you’ll never look at a sidewalk café quite the same way once you know what it took to get it there.

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