On certification to the Superior Court, Appellate Division, whose opinion is reported at 375 N.J. Super. 63 (2005).
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
The issue before the Court is whether the following consumer protection statutes: the Retail Installment Sales Act (RISA), N.J.S.A. 17:16C-1 to -61; the interest rate cap in the criminal usury statute, N.J.S.A. 2C:21-19; and the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -135, are applicable to rent-to-own contracts.
Between March 2001 and May 2002, Hilda Perez, entered into five rent-to own contracts with Rent-A-Center, in order to become the owner of used furniture, a used washer and new dryer, a used DVD player and television, a new computer, and a used large screen television and cabinet. Under the rental contracts with Rent-A-Center, Perez paid a pre-calculated weekly rental amount, a portion of which defrayed the price of the goods. She could return the goods at any time and stop making payments. However, in order to purchase them, Perez agreed that she would pay an amount equal to or in excess of their value along with a purchase option price. If she chose to purchase the rental property early, Perez was required to pay a prorated portion of the remaining rental payments and option price. All the items Perez rented had a total cash price of $9,301.72; however, if she paid the weekly rates and the additional option payments, Perez would assume ownership after having expended $18,613.32. The difference between the market value of the goods and their ultimate cost was Rent-A-Center's interest charge for the consumer's privilege of buying the products over time. Perez had paid $8,156.72 by May 2002, when she ceased payments.
Rent-A-Center filed a small-claims complaint, seeking money damages against Perez resulting from her failure to pay for or return the rental items. In response, Perez sued Rent-A-Center in Superior Court, alleging that her rent-to-own contracts violated RISA and the CFA because the contracts imposed an interest rate in excess of the criminal usury statute 30% cap. Rent-A-Center counterclaimed for breach of contract and conversion. In 2004, Perez moved for partial summary judgment, declaring the applicability of RISA and the usury cap. Rent-A-Center filed a cross-motion for dismissal of the complaint, which the trial judge granted, dismissing Perez's entire complaint.
Perez appealed to the Appellate Division arguing that: 1) Rent-A-Center is collaterally estopped from defending against the RISA claim; 2) RISA, by its plain terms, applies; and 3) the usury limitations are applicable to Rent-A-Center's operations. The Appellate Division rejected Perez's collateral estoppel argument and ruled in favor of Rent-A-Center on the merits.
The Supreme Court granted certification.
HELD: Based on the statutory language as well as established principles of statutory interpretation, Rent-A-Center's rent-to-own contracts are subject to the Retail Installment Sales Act, the interest rate cap in the criminal usury statute, and the Consumer Fraud Act.
1. The threshold issue is whether the summary judgment in Robinson v. Thorn Am., another case involving Rent-A-Center, constituted a final judgment on the merits warranting issue preclusion in this case. Settlement after the entry of judgment does not automatically relieve the party against whom the judgment was entered from its legal effects. In order to assure that the judgment will not be used against it in the future, the losing party should file a vacatur motion. In Robinson, no vacatur motion was made or vacatur order entered. Nonetheless, despite the absence of an unequivocal vacatur order, the "Final Order and Judgment" entered in Robinson was intended to supersede the earlier partial summary judgment. Although the better course would have been for Rent-A-Center to more to vacate the earlier judgment, the settlement order was intended by the parties and the judge who approved it to operate to vacate the earlier summary judgment. Thus, Rent-A-Center is not collaterally estopped from defending against the RISA claim filed against it. (Pp. 11-16)
2. The leased goods at issue are of the type described in RISA. Whether Rent-A-Center fits the definition of "retail seller" and whether Perez fits the definition of "retail buyer," depends on whether their transaction is consistent with RISA's description of a "retail installment contract." It is fair to say that Perez's rent-to-own contracts are not a perfect fit with the language of the RISA statute. Thus, the Court's obligation is to interpret that statute reasonably to serve its apparent legislative purpose. As such, the Court is satisfied that the language of RISA was intended to cover agreements like the ones between Rent-A-Center and Perez. The leases can be viewed as a form of conditional sale as that term is used in RISA. At the very least, Perez's leases were instruments "similar" to conditional sales. Reference in RISA to "similar instruments" was intended to incorporate cleverly drafted agreements like this one so that "subtle distinctions" are not allowed to defeat the manifest purpose of the law. (Pp. 16-30)
3. The cancellation provision did not so alter the fundamental nature of the transaction that it insulated Perez's leases from the protections of RISA. That conclusion is bolstered by the fact that the majority of rent-to-own contracts are intended for and do result in ownership, not cancellation. To exclude such purchases from the protections of RISA by merely providing a cancellation option that few would exercise would be an intolerably narrow interpretation of the statute. Thus, RISA applies to the rent-to-own contracts here. (Pp. 30-31)
4. The criminal usury statute prohibits the taking of any money or other property as interest on a loan or forbearance of any money in excess of 30% per year. At the time of its enactment, RISA contained a cap of 10% interest in connection with a retail installment sales agreement. In 1981, Senate Bill No. 3005 (S. 3005) amended RISA to allow the parties to negotiate the amount of the time price differential (interest rate). In addition, Senate Bill No. 3101 (S. 3101), enacted at the same time, amended the criminal usury statute to lower the interest rate cap from 50% to 30%. Pursuant to the language of the amendment, RISA is subject to the 30% cap. The legislative history, including the governor's message, demonstrates a legislative intent to create a seamless scheme wherein consumers and sellers are accorded flexibility to negotiate interest rates to reflect market conditions subject to a 30% safety cap. Because the language used and the circumstances surrounding the enactment of S. 3101 and S. 3005 clearly establish a relationship between the statutes, the Court interprets RISA as incorporating the 30% cap. Thus, Rent-ACenter's contracts, which are governed by RISA, are subject to the cap. Therefore, the counts of Perez's complaint that allege a violation of those statutes should be reinstated. (Pp. 31-41)
5. The CFA should be applied in conjunction with other statutes or common law and is to be applied broadly in order to accomplish its remedial purpose of rooting out consumer fraud. As there is no conflict between CFA and RISA, the statutes must be construed in concert with each other. Because the Court disagrees with the Appellate Division on the fundamental issue of the applicability of RISA and the usury cap, to the extent that Perez's CFA claim is linked to them, it must be reinstated. (Pp. 41-44)
Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the trial judge for reinstatement of Perez's complaint and for such further proceedings as are warranted.
JUSTICE RIVERA-SOTO, concurring in part and dissenting in part, agrees with the majority's holding that Rent-A-Center is not collaterally estopped from defending against Perez's RISA claim. However, he dissents from the majority's conclusions that RISA applies to the rent-to-own contracts at issue; that the 30% interest rate cap in the criminal usury statute applies to the time price differential is RISA; and that Perez's individual and class claims under the CFA must be reinstated.
CHIEF JUSTICE PORITZ and JUSTICES LaVECCHIA, ZAZZALI, ALBIN and WALLACE join in JUSTICE LONG'S opinion. JUSTICE RIVERA-SOTO filed a separate opinion concurring in part and dissenting in part.
The opinion of the court was delivered by: Justice Long
On this appeal, we have been asked to determine whether rent-to-own contracts are subject to certain consumer protection statutes. Specifically, the parties question whether the Retail Installment Sales Act ("RISA"), N.J.S.A. 17:16C-1 to -61; the interest rate cap in the criminal usury statute, N.J.S.A. 2C:21-19; and the Consumer Fraud Act ("CFA"), N.J.S.A. 56:8--1 to -135, apply to such arrangements. The trial judge answered those questions in the negative and the Appellate Division affirmed. Having concluded, based on the plain language of the relevant statutes and established principles of statutory interpretation, that Rent-A-Center's rent-to-own contracts are subject to each of the denominated acts, we now reverse.
The rent-to-own industry, in its present iteration, is generally traced back to a "retail appliance store owner whose customers were being denied credit to purchase washers and dryers." Susan Lorde Martin & Nancy White Huckins, Consumer Advocates v. the Rent-to-Own Industry: Reaching a Reasonable Accomodation, 34 Am. Bus. L.J. 385, 385 (1997). Today, rent-to- own is a multi-billion dollar business that 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 consumers 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. [Federal Trade Commission, Bureau of Economics Staff Report: Survey of Rent-toOwn Customers 1-2 (April 2000)(footnotes omitted)(hereinafter FTC Report).]
Generally, rent-to-own customers engage in such transactions in order to possess consumer goods that they need and cannot obtain through ordinary means. Price Waterhouse LLC, THORN Americas -- New Jersey Customer Survey Report III-17 (November 19, 1996)(hereinafter Price Waterhouse Survey)(Rent-A-Center survey showing over 72% of New Jersey Rent-A-Center customers could not afford to purchase item at traditional retail store); Kathleen E. Keest et al., Interest Rate Regulation Developments: High-Cost Mortgages, Rent-to-Own Transactions, and Unconscionability, 50 Bus. Law. 1081, 1086 (1995)("Rent-to-own agreements are typically entered into by customers who can neither afford to purchase the merchandise outright nor obtain credit."). Indeed, nationally, rent-to-own customers are more likely to be "African American, younger, less educated, have lower incomes, have children in the household, rent their residence, live in the South, and live in non-suburban areas." FTC Report, supra, at ES-1.
Although some consumers enter into rent-to-own transactions to fill a temporary need or to try a product out before buying it, id. at 2, the vast majority are the working poor whose incomes are on the margin of economic stability; they engage in rent-to-own for ownership purposes. Id. at ES-2 ("Sixty-seven percent of customers intended to purchase the merchandise when they began the rent-to-own transaction."); Lynn Drysdale & Kathleen E. Keest, The Two-Tiered Consumer Financial Services Marketplace: The Fringe Banking System and its Challenge to Current Thinking About the Role of Usury in Today's Society, 51 S.C. L. Rev. 589, 635-36 (2000); see also Price Waterhouse Survey, supra, at III-17. In fact, studies, including those by Rent-A-Center, have concluded that between 64% and 70% of all rent-to-own merchandise is ultimately purchased by the customers. FTC Report, supra, at ES-1; Patrick A. Gaughan, Ph.D. & Henry L. Fuentes, C.P.A., An Analysis of the Product Offerings of Rent-A-Center, Inc. Perez et al. v. Rent-A-Center, Inc. 8 (Oct. 3, 2003).
Rent-A-Center is the nation's largest rent-to-own company, Gaughan, supra, at 4, with approximately fifty stores in New Jersey alone. Id. at 9-10. Between March 2001 and May 2002, Plaintiff, Hilda Perez, entered into five rent-to-own contracts with Rent-A-Center in order to become the owner of used furniture, a used washer and new dryer, a used DVD player and television, a new computer, and a used large screen television and cabinet. Perez v. Rent-A-Center, Inc., 375 N.J. Super. 63, 70 (App. Div. 2005). Those transactions were documented by the Appellate Division as follows:
Agreement NumberDateProductCash PriceWeekly Rate*fn1Weeks to OwnershipTotal Rent-toOwn Cost*fn2Amount Perez Paid*fn3
3441643305/06/02big-screen TV & cabinet2,966.3545.99120.05,932.71965.79
Totals $9,301.72$172.95 $18,613.32*fn4$8,156.72
The contract for the washer and dryer is representative of all others. It states:
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.
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 will result in a lower total cost than the rental payments, plus the purchase option price provided for below.
If you renew this Agreement for 95.3 successive weeks, you will pay a total of $1,820.33 or if you renew this Agreement for 44.0 successive semi-months, you will pay a total of $1,793.07 or if you renew this Agreement for 22.0 successive months, you will pay a total of $1,671.12 and you will have the option to purchase the property for its then fair market value. For purpose of this option, this price will not exceed $164.57. Thus, in order to acquire ownership of this item, you must pay the total amount of $1,984.90 if you pay weekly rental payments, or $1,957.64 if you pay semi-monthly rental payments, or $1,835.69 if you pay monthly rental payments. Figures do not include tax.
COST OF RENTAL WITH OPTION TO PURCHASE
The difference between the amount of the cash price and the total amount of all the rental payments under this agreement is $997.43 if you pay weekly, or $970.17 if you pay semi-monthly, or $848.22 if you pay monthly, which includes the option to purchase price described above. Figures do not include tax.
5. OUR CASH PRICE FOR THIS PROPERTY is $987.47. This price may be different from the MSRP or other available retail prices.
If you wish to purchase the rental property, you may do so at any time by the payment of 50% of the remaining rental payments calculated at that time, plus 50% of the option to purchase amount described above.
Under the contracts, Perez paid a pre-calculated weekly rental amount, a portion of which defrayed the price of the goods. She could return the goods at any time and stop making payments. However, in order to purchase them, Perez agreed that she would pay an amount equal to or in excess of their value along with a purchase option price. If Perez chose to purchase the rental property early, she was required to pay a prorated portion of the remaining rental payments and option price. Together, all the items Perez rented had a cash price of $9,301.72; however, if she paid the weekly rates and the additional option payments, she would assume ownership having expended $18,613.32. The difference between the market value of the goods and their ultimate cost was Rent-A-Center's interest charge for the privilege of buying the products over time.*fn5 By May 2002, Perez had paid $8,156.72. It was at that point that she stopped paying.
Rent-A-Center thereafter filed a small claims complaint seeking money damages against Perez arising out of her failure to pay for or return the rental items.*fn6 Perez, supra, 375 N.J. Super. at 67. In turn, Perez sued Rent-A-Center in the Superior Court, alleging that her rent-to-own contracts violated RISA and the CFA because the contracts imposed an interest rate in excess of the 30% permitted under the criminal usury statute. Id. at 68. Rent-A-Center counterclaimed for breach of contract and conversion. Ibid. In 2004, Perez moved for partial summary judgment declaring the applicability of RISA and the usury cap, and Rent-A-Center filed a cross-motion for dismissal of the complaint. Ibid. The trial judge granted the relief sought by Rent-A-Center and dismissed Perez's complaint in its entirety. Ibid.
Perez appealed arguing (1) that Rent-A-Center was collaterally estopped from defending against the RISA claim;*fn7 (2) that RISA, by its plain terms, applies; and (3) that the usury limitations are applicable to Rent-A-Center's operations. The Appellate Division rejected Perez's collateral estoppel argument and ruled in favor of Rent-A-Center on the merits. We granted Perez's petition for certification, 183 N.J. 586 (2005), along with the ...