Slippery slopes and dodgy dealings—consumer leases

Financial inclusion is not only about access to financial services, but protection from exploitative products that are inappropriate to consumers’ needs. Consumer leases, or ‘rent to own’ deals as they’re often called, target consumers excluded from mainstream finance, and contribute to financial hardship and chronic debt by offering them high cost credit.

In particular our concerns with ‘rent to own’ contracts are that customers:

  • Are often unaware of the total contract cost because retailers only promote a weekly rate. By the end of a contract most customers will have paid two to five times more than the product is worth.
  • Mistakenly believe they’ll own the product at the end of the contract because retailers use phrases like ‘rent to own’ or ‘rent to buy’. But these are lease contracts so customers are not buying or paying off the product.
  • Mistakenly believe that leasing a product will give them the flexibility to update to newer models, or return the product at any time. Contract terms are actually very restrictive and you can’t simply upgrade or return the product. We assisted a consumer who tried to cancel a contract and faced a $1,900 payout as well as a $3,500 termination fee.

For effective competition to exist, consumers must be able to easily compare the cost of products so they can make an informed decision and buy at the best price. They also need to understand the contracts so they can pick the deal that is best for them. That’s why we’ll campaign for reforms that ensure the real costs are disclosed, bad marketing practices are exposed, and unfair contract terms stamped out.

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