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Economy & Business

Walker Looks to Change Rent-to-Own Rules


The rent-to-own industry has been working for years to change the way Wisconsin governs those shops. It now appears Gov. Walker is on board with change. As WUWM’s LaToya Dennis reports, he has included in his budget a provision bringing Wisconsin in line with most other states. His plan will certainly reignite a battle here between consumer advocates and an industry insisting it provides an option some shoppers need.

Here’s a primer on how rent-to-own works. Say you need a new couch but cannot afford to purchase one outright, and for whatever reason, credit is not an option. Rent-to-own stores allow you to take the couch home, while making monthly or weekly payments. Jeff Lebakken says several items are baked into those payments. He owns 11 rent-to-own stores across Wisconsin.

“The cost of lease services includes things like repairs and loaners for merchandise that’s in for service. It includes delivery pickup charges. It includes the cost in regards to the ability to return the property or bring it in on hold,” Lebakken says.

You can return the item any time, or continue making payments until your purchase is paid for.

According to Lebakken, the average monthly payment is $69, and agreements typically last between 18 and 24 months. Under that scenario for the couch, the person would have paid $1656 by the end of 24 months.

Wisconsin is one of only three states that do not have specific rules governing rent-to-own businesses. The courts here have ruled that the rental fees are credit transactions, so the Wisconsin Consumer Protection Act covers the industry. The act requires the stores equate all fees to a comparable annual interest rate.

Lebakken insists the fee is simply the cost of doing business, and Wisconsin would benefit if it changed its perspective.

“Then you can see all these companies like Rent-A-Center and Aarons and others coming back to the state, which will bring a lot more employment, and a lot more tax revenue. And for us, it’ll bring in a lot more advertising dollars from our competition, which is going to help me in getting more business,” Lebakken says.

Rent-to-own is a $7 billion industry. Lebakken says it has gotten a bad rap because people don’t understand the service it provides to people with limited means.

Pete Koneazny is director of litigation for the Legal Aid Society of Milwaukee. He says he doesn’t care whether the people consider the additional cost to rent a fee or interest.

“The effect is the same. You’ll have just doubled sometimes more the cost to buy an item then you or I would have to buy it,” Koneazny says.

Koneazny claims the industry preys upon low-income people.

“My immediate take is that it doesn’t belong in the budget.”

That’s Milwaukee state Rep. Mandela Barnes.

He’s concerned about where the issue is surfacing – in the state budget.

“It doesn’t allow for public debate on that specific issue. The people who would be affected by it, the people who have been affected by it, people who understand it and don’t want it don’t want it in their communities, they don’t have a chance to speak to that issue specifically. It’s not a budgetary item and we’ve got to get out of this mode of putting policy items in a budget,” Barnes says.

However, Barnes says even if legislators convert the provision into a standalone bill, he would not support it because it could lead to the expansion of the rent-to-own industry here.

State lawmakers have debated similar legislation in the past, but both former Govs. Doyle and McCallum vetoed the measure.

Last year, the Assembly approved a bill, but the state Senate didn’t get to it.

Gov. Walker’s plan would require stores to disclose an item’s price and the number of payments needed for ownership. He would cap of cost of renting at double the purchase price.