DATE: Saturday, November 22, 1997           TAG: 9711220297

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY TOM SHEAN, STAFF WRITER 

                                            LENGTH:  112 lines

TV TAKES ON RENT-TO-OWN STORES "20/20" MADE SECRET TAPES OF SALES TACTICS AT SEVEN NORFOLK FRANCHISES.

The ABC-TV news program 20/20 is scheduled to broadcast a segment next Friday on the sales tactics at several ``rent-to-own'' stores in Norfolk, Richmond and New Jersey.

Using area residents who wore hidden cameras, the news staff secretly taped sales efforts at seven Norfolk stores and one in Richmond, said Michael N. Salort, an investigative producer for 20/20.

``The bottom line is that you get very spotty information'' at these stores, Salort said.

``You have to demand to see the contract,'' but sales people discouraged prospective customers from taking their contract home to read before signing them, he said.

``Some stores were brutally honest, but most weren't,'' Salort said.

Rent-to-own stores allow customers to rent stereos, televisions, VCRs, appliances and furniture month by month with the option of eventually buying the merchandise.

Consumer-advocacy groups have complained that many of these retailers use aggressive sales tactics and prey on lower-income individuals who have little or no access to credit. Consumer groups also contend that the rental contracts are essentially loans with exorbitant interest rates.

The rent-to-own industry counters that its retailers provide a flexible service to individuals who are uncertain about their economic futures and reluctant to take on debt.

``If you do run out of money, you can give (the merchandise) back and nobody is going to hound you,'' said Ed Winn III, general counsel of the Association of Progressive Rental Organizations.

The TVs, VCRs and other appliances at rent-to-own stores are available at much lower prices from other retailers, he acknowledged. However, comparisons with the prices charged by department stores and appliance chains aren't apt because they don't take rental expenses into account, he said.

``We're not competing with Circuit City and Best Buy. We're in the rental business,'' said Winn, who said he was interviewed by ABC News reporters for the 20/20 show.

Salort said ABC News focused on rent-to-own stores in Norfolk and Richmond because of research done by the Virginia Poverty Law Center, a legal-services organization that has surveyed the prices and sales practices at rent-to-own stores.

In June, the Richmond-based legal center and the Virginia Citizens Consumer Council published a study comparing the prices of appliances at 17 rent-to-own stores in the Richmond area with prices at department stores and appliance chains.

The low weekly rental rates charged by rent-to-own stores might seem enticing, but they were much higher than what a consumer would pay for the same merchandise when financing it with a credit card, the report concluded.

The findings of the two Virginia advocacy groups were borne out in ABC TV's research of rent-to-own stores in other states, including Minnesota and Vermont, Salort said.

The 20/20 segment, which lasts about 13 minutes, comes at a time when two bills to regulate rent-to-own activity are pending in Congress.

One, introduced by Rep. Joseph P. Kennedy II, D.-Mass., would treat rentals as credit transactions and apply the ``truth-in-lending'' disclosures required of banks to rent-to-own retailers.

Kennedy's bill also would apply the provisions of the Fair Debt Collection Practices Act to these stores. The federal collection practices act bars collectors from using threats, abusive language and other forms of harassment when trying to recover debts from borrowers.

Another bill, introduced last June by Rep. Walter Jones Jr., R.-N.C., would impose milder restraints on rent-to-own retailers. That bill has the backing of the industry, said Winn, the trade association's general counsel.

While compiling the report for 20/20, ABC News reporters interviewed Patrick Sherman of Richmond, the former manager of a rent-to-own store. His remarks will be part of the show, Salort said.

Earlier this week, Sherman told a consumer-affairs gathering in Richmond about some of the practices at his store, including abusive collection tactics.

``If I felt like calling you at 10 o'clock at night'' about an overdue payment, ``I would call you at 10 o'clock at night,'' he said during a conference sponsored by the Virginia Citizens Consumer Council.

For customers, ``the bottom line was `Don't miss a payment,' '' he said.

Sherman said his store rented a two-head VCR that was available from other retailers in the Richmond area for $175 to $275. A customer who rented the store's VCR paid $9.98 a week and would own it after 78 weeks - for a total price of almost $780.

Most of the store's customers relied on welfare payments and Social Security for their incomes, but store employees were pressured to have these customers rent more than one product, he said.

Sherman said he left the business after taking back the wedding rings from a recently married couple whose rings came from his store. The husband, said Sherman, was 10 days behind in his payment.

``I got tired of doing that day after day . . . because (customers) couldn't make their payments,'' he said.

Winn, general counsel of the rent-to-own trade association, said the activities Sherman described were not typical of the industry.

``We don't prey on anybody,'' he said. ``If we were preying on people, we wouldn't be growing.''

According to the Association of Progressive Rental Organizations, the nation's 7,500 rent-to-own stores rang up sales of $3.9 billion last year.

There are more than three dozen rent-to-own stores in Hampton Roads.

Salort said 20/20 reporters visited rent-to-own stores in New Jersey because of a class-action law suit brought against Rent-A-Center, the nation's largest chain of rent-to-own stores.

In January, a Camden County, N.J., Superior Court judge ruled that Rent-A-Center violated New Jersey's consumer fraud laws by failing to make the credit terms of its contracts clear.

The case involved a complaint from a Rent-A-Center customer who contended that her rental agreement was, in effect, a loan and that the interest rates exceeded the legal lending limits on credit transactions.

Estimates of the damages that Rent-A-Center may have to pay its New Jersey customers have ranged from $90 million to $120 million.

Rent-A-Center's parent, a unit of the British company Thorn PLC, said it plans to appeal the case as soon as a final judgment has been entered. KEYWORDS: RENT-TO-OWN STORES 20/20

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