A U.S. government consumer watchdog agency is investigating the $8 billion rent-to-own industry and related companies over questions about unfair, deceptive and abusive practices, NerdWallet has learned.
Investigators for the Consumer Financial Protection Bureau are asking specifically about Rent-A-Center, the nation’s largest rent-to-own enterprise with more than 2,400 stores selling furniture and appliances mostly to low-income Americans.
NerdWallet reported two weeks ago in a joint investigation with Raycom Media that Rent-A-Center customers nationwide have complained their credit had been harmed and they were badgered by bill collectors over accounts they had paid off.
Five days after the stories appeared, Rent-A-Center’s top executive, Steven L. Pepper, resigned amid a continuing power struggle on the board of directors. Shares of the publicly traded company, headquartered in Plano, Texas, have declined nearly 75 percent in the last four years as it has struggled to increase revenue.
The CFPB sent Rent-A-Center a civil investigative demand in late July, requesting details about customer accounts it had sold to a debt buyer and other information about its business practices.
Investigators have interviewed people familiar with Rent-A-Center’s record-keeping. They asked about the company’s ability to credit customer payments properly and to report accurate information about consumers to credit reporting agencies, say people the CFPB interviewed.
Bureau staff members have also inquired about complaints that Rent-A-Center store managers pocketed consumers’ money instead of applying it to their accounts, one person interviewed by the agency told NerdWallet. He asked not to be identified because of a nondisclosure agreement he signed with the CFPB.
The CFPB declined to comment on its investigation.
Errors In Customer Accounts
The NerdWallet-Raycom investigation detailed the account errors and mistreatment of customers, including people who say they were threatened with criminal prosecution and had their doors kicked in. NerdWallet provided guidance to consumers harmed by the company.
Shareholders filed a federal lawsuit against the company in December 2016 over problems with its system for tracking customer payments. The complaint said Rent-A-Center had difficulty starting a new point-of-sale system in 2015, causing “severe harm” to company operations.
The company introduced the system despite repeated internal warnings about its flaws, leading to outages that caused customers to fall behind on their rental agreements, the shareholders allege in court filings. Rent-A-Center conceded its system had flaws. The company failed in an attempt to get the lawsuit dismissed.
A former senior information technology employee who helped with the rollout told NerdWallet that Rent-A-Center’s system had glitches that could show up in any account.
“There was no way to assure the veracity of any specific transaction,” said the former employee, who asked not to be named because of a nondisclosure agreement he signed with the company.
Gina Hethcock, a Rent-A-Center spokeswoman, said in an email this week that the company had received an inquiry from the Consumer Financial Protection Bureau regarding a prior debt sale. She said the accounts involved in the debt sale, and the CFPB’s inquiry, are unrelated to the rollout of the point-of-sale system the company uses in its 2,400 stores.
Rent-A-Center has long pushed to keep federal regulations at bay, spending more than $7.2 million lobbying Congress in the past decade, according to data collected by the Center for Responsive Politics.