On appeal from Superior Court of New Jersey, Law Division, Camden County, Docket No. L-21-03.
Before Judges Petrella, Lintner and Parker.
The opinion of the court was delivered by: Petrella, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Plaintiff Hilda Perez appeals from a summary judgment dismissing her complaint*fn1 alleging that her"rent-to-own" contracts with defendant Rent-A-Center, Inc. (defendant or Rent- A-Center) violated the Consumer Fraud Act, N.J.S.A. 56:8-1 to - 135, and the Retail Installment Sales Act (RISA), N.J.S.A. 17:16C-1 to -61, because the time-price differential exceeded the 30% per annum interest rate permitted under the criminal usury statute, N.J.S.A. 2C:21-19. Defendant counterclaimed for return of the items Perez had rented from it because she had ceased making rental payments. We affirm the grant of summary judgment and conclude that neither the Rental Sales Installment Contract (RISA) nor the criminal usury statute is applicable to the sales transactions at issue.
On appeal, Perez argues that:
(1) Rent-A-Center's contracts in New Jersey are governed by RISA, and it is collaterally estopped from arguing to the contrary;
(2) the judge erred in holding that RISA did not apply;
(3) RISA does not permit the charging of a time price differential/interest greater than 30% per annum;
(4) the Saul*fn2 and Steffenauer*fn3 decisions referred to by the motion judge are not applicable to whether RISA contracts are subject to a 30% interest cap; and
(5) Rent-A-Center's reliance on common law doctrines of"Loan or Forbearance" of money or the"Time Price Doctrine" is inconsistent with the legislation.
On November 25, 2002, Rent-A-Center filed a small claims complaint against Perez in Camden County seeking money damages arising from Perez's refusal to pay for or return a big-screen television and computer that she had rented from it. The record does not reflect the resolution of the small claims action. Perez contends she answered the small claims complaint with a"class action counterclaim," and moved to transfer the case to the Law Division, but while her motion to transfer was pending, Rent-A-Center dismissed its complaint.
Conversely, Rent-A-Center contends that the small claims action was transferred to the Law Division and consolidated with remaining similar claims in Utley v. Rent-A-Center, Inc., CAM-L- 2432-02, which was ultimately removed to the United States Bankruptcy Court for the District of New Jersey. Perez denies that the case was consolidated with Utley.
Neither party substantiates their version of the procedural history except for providing a copy of the small claims complaint. For purposes of this appeal it appears that: (1) the small claims action is either no longer pending or was consolidated with the Law Division action presently under appeal; and (2) whether a consolidation ever occurred between the case under review and Utley is now immaterial.
On March 21, 2003, Perez filed an"amended"*fn4 complaint in the Law Division, alleging that her"rent-to-own" contracts with Rent-A-Center violated the Consumer Fraud Act and RISA because they imposed a time-price differential allegedly in excess of the 30% per annum interest rate permitted under the criminal usury statute. Rent-A-Center counterclaimed for breach of contract and conversion. It sought compensation for property Perez allegedly rented, including furniture, a washer and dryer, a computer, a big-screen television and cabinet, and a DVD player, with a retail value aggregating about $9,300, on which she stopped making payments after paying $8,156.72, and which she refused to return. Perez answered the counterclaims, denying liability and claiming entitlement to the rented items on the ground that Rent-A-Center was legally prohibited from enforcing the rent-to-own contracts.
In September 2004, Perez moved for partial summary judgment and Rent-A-Center cross-moved for summary judgment. In a November 21, 2004 oral opinion, the judge held that rent-to-own transactions are not covered by either RISA or the criminal usury statute and granted Rent-A-Center's cross-motion. A January 14, 2004 order dismissed Perez's complaint.
A consent order dated February 12, 2004 was then entered in Rent-A-Center's favor on it's remaining counterclaims against Perez, and she was directed to return all merchandise rented from Rent-A-Center. Enforcement of the order was stayed, however, until thirty days after resolution of this appeal.
Rent-A-Center, a Delaware corporation with corporate offices in Texas, is apparently the largest company in the rent to-own industry. As of December 2002, it owned forty Rent-A Center stores and had eight franchised stores in New Jersey.
The Federal Trade Commission (FTC), in an April 2000 study, described the rent-to-own industry as:
The rent-to-own industry (also known as the rental-purchase industry) consists of dealers that rent furniture, appliances, home electronics, and jewelry to consumers.
Consumers enter into a self-renewing weekly or monthly lease for the rented merchandise, and are under no obligation to continue payments beyond the current weekly or monthly period. At the end of each period, the consumer can continue to rent by paying for an additional period, or can return the merchandise. The lease provides the option to purchase the goods, either by continuing to pay rent for a specified period of time, usually 12 to 24 months, or by early payment of some specified proportion, usually 50 to 60 percent, of the remaining lease payments. Rent-to-own transactions offer immediate access to household goods for a relatively low weekly or monthly payment, typically without any down payment or credit check. These terms are attractive to many customers who cannot afford a cash purchase, may be unable to qualify for credit, and are unwilling or unable to wait until they can save for a purchase. Some consumers also may value the flexibility offered by the transaction, which allows return of the merchandise at any time without obligation for further payments or negative impact on the customer's credit rating. Other consumers may rent merchandise to fill a temporary need or to try a product before buying it. (footnotes omitted).
The FTC found that rent-to-own customers were distinct in many ways from non-rent-to-own customers. Rent-to-own customers were more likely to be poorer and less educated. FTC statistics were that 67% of rent-to-own customers intended to purchase the merchandise when they began the rent-to-own transaction, and 70% of rent-to-own merchandise was ultimately purchased by the customer.
A 1996 Price Waterhouse, LLC survey for Rent-A-Center of its customers in New Jersey confirmed that Rent-A-Center's customers used its services because they could not afford to purchase the items at a traditional retail store. Most customers understood, however, that ultimately the total payments to purchase an item would be more than they would pay at a traditional retail store.
Two of Rent-A-Center's economic experts in the present litigation, Patrick Gaughan, Ph.D., and Henry L. Fuentes, C.P.A., conducted an analysis of Rent-A-Center's product offerings. They found that 64% of rental units were ultimately acquired by defendant's customers. An average of eighteen months was generally required to obtain ownership of new merchandise.
Perez entered into five rent-to-own contracts with Rent-A Center through its store in Pennsauken. She indicated that she intended to purchase the items she rented. She testified at depositions that she might not have fully understood all of the contract terms. In a March 3, 2001 contract Perez rented several pieces of furniture. In an April 23, 2001 contract she rented a washer and dryer. In an August 3, 2001 contract Perez rented a DVD player and television. In a November 17, 2001 contract she rented a computer. In the fifth contract, dated May 6, 2002, she rented a big-screen television and cabinet.*fn5
The following table summarizes Perez's rent-to-own contracts with defendant:
Agreement NumberDateProductCash PriceWeekly Rate*Weeks to OwnershipTotal Rent-To-Own Cost**Amount Perez Paid***
TV & Cabinet________________ _________________
Totals $9,301.72$172.95 $28,613.32$8,156.72
**Total Rent-To-Own Cost*fn7
***Amount Perez Paid.*fn8
Under the contracts, Perez promised to maintain the items in good working order during the rental terms, normal wear and tear excepted. She was liable for excess damages and loss or destruction of the property from any cause, including, but not limited to, theft or vandalism. Perez could terminate each one of her rent-to-own contracts at her option at the end of any rental term, without penalty. To terminate the contract, the renter had to arrange for the return of the property and make all rental payments due through the date of return. Alternatively, the renter could continue the rent-to-own contract by paying, in advance, a rental installment for another weekly, semi-monthly, or monthly rental term.
The contracts explicitly stated that they were"rental agreements only" and defined the means by which a renter could purchase the rented product. The agreements stated:
THIS IS A RENTAL AGREEMENT ONLY
This is a rental agreement only. You will not acquire any equity in the property by making rental payments. You have not agreed to purchase this property, and will not acquire any ownership rights in it unless you have, at your option, paid the total of rental payments plus the option payment necessary to acquire ownership. The rental agreements further stated (using the example of the big-screen television rental agreement):
4. OWNERSHIP: We own the property you are renting. You will not acquire any ownership rights in the property unless you have, at your option, paid the total of payments plus the purchase option price necessary to acquire ownership as set forth below, or exercise the early purchase option described below. If you want to purchase this or similar property now, you may be able to get cash or credit terms from other sources which ...