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Bill hiking rent-to-own rates advances

Opponents predict a jump in interest rates. Supporters say the bill will offer more protection to N.J. consumers.

A bill that would allow rent-to-own stores to dramatically hike interest rates was approved by the Assembly Consumer Affairs Committee yesterday.

Supporters of the bill, Assembly Bill 695, to be known as the New Jersey Rental-Purchase Consumer Protection Act, say it will require more detailed contracts, which will protect consumers who rent-to-buy furniture, televisions, computers and appliances, for example.

The bill is sponsored by Assemblywoman L. Grace Spencer (D., Essex) and has 12 cosponsors, including Assembly Speaker Joseph J. Roberts Jr. (D., Camden) and Assemblyman John Burzichelli (D., Gloucester).

Spencer said the bill was intended to regulate the rent-to-own industry to protect consumers.

But opponents warn the bill would allow rent-to-own stores to bypass the state's criminal usury law, which caps interest rates on installment sales. That would mean the stores, which are limited by state law to an annual percentage interest rate of 30 percent, could charge up to 152 percent, opponents say.

Neil Fogarty, president emeritus of Consumers League of New Jersey, said the bill "gives away the store to the rent-to-own lobbyists."

"The bill is a get out of jail free card, which lets rent-to-own stores break a criminal usury law," Fogarty said. "Since when are our legislators in favor of criminal usury?"

AARP New Jersey also opposes the bill. In her testimony before the Consumer Affairs Committee, Patricia Kelmar, associate state director for advocacy, said rent-to-own stores, which are concentrated in urban areas, prey on the poor and the elderly, reaping profits from selling and repossessing goods, which are often substandard.

Kelmar said that while the bill's intent appeared to be good, in reality, it would hurt consumers.

"The bill in its current form legalizes exorbitant interest rates under the guise of a consumer-protection bill," Kelmar said. "The Supreme Court has made a statement and we believe that court's decision should be the law in the state."

Kelmar was referring to the Supreme Court ruling in Perez v. Rent-A-Center, in which the court ruled that Rent-A-Center, a national chain of rent-to-own stores based in Texas, could charge no more than 30 percent interest.

The bill requires rental-purchase agreements to spell out in more detail the terms of the contract, including fees. However, opponents say to protect consumers, the bill should require, for example, that the annual percentage interest rate be disclosed.

Spencer acknowledged that the bill, in its current form, may not be perfect, but said she hoped it would start a necessary dialogue.

"It's not my intention to have the bill go to the floor before we have worked out the problems," Spencer said.