Colon v. Rent-A-Center
| Decision Date | 09 November 2000 |
| Parties | TABITHA COLON, on Behalf of Herself and All Other Persons Similarly Situated, Respondent-Appellant,<BR>v.<BR>RENT-A-CENTER, INC., et al., Appellants-Respondents. |
| Court | New York Supreme Court — Appellate Division |
Leah Guggenheimer of counsel (Guy J. Velella, Seth R. Lesser and Marc Edelson on the brief; Bernstein Litowitz Berger & Grossmann, L. L. P., Velella, Velella, Basso & Calandra and Hoffman & Edelson, attorneys), for respondent-appellant.
Jay Cohen of counsel (Donald W. Hawthorne, Jeffrey L. Nagel and Julia L. Tarver on the brief; Paul, Weiss, Rifkind, Wharton & Garrison, attorneys), for appellants-respondents.
This case calls upon us to scrutinize the Rent to Own Program Law (RTOPL), whereby the New York Legislature sought to regulate the conduct of retail businesses engaged in the leasing of furniture, appliances and consumer goods. In this sense, it is a matter of first impression at this appellate level.
This is a purported class action in which plaintiff is the lessee of various household goods from defendants, under standard-form rental-purchase agreements, subject to the provisions of the RTOPL (Personal Property Law, art 11, § 500 et seq.). Defendants, who are mega-enterprises in the retail leasing field with widespread interstate operations, sold the items under identical written leases, allegedly in full compliance with the statute.
RTOPL, which took effect in 1987 (L 1986, ch 792), regulates the merchandising of household furniture and appliances through the device known as a rental-purchase agreement. Under this scheme, the consumer contracts to rent the property for successive periods on the same terms, making payment in advance of each term. The arrangement can be terminated by the consumer at any time, upon return of the merchandise, without further obligation. The law even allows a consumer to reinstate the contract after missing scheduled payments (see, Davis v Rent-A-Center, 150 Misc 2d 403). A maximum limit to the obligations imposed by lease is established by the statute at the outset. If the consumer has made all rental payments (the "total cost"), at that point he will acquire ownership of the item. "Total cost" cannot exceed twice the "cash price," which is defined as the price at which a merchant, in the ordinary course of business, would offer to sell the merchandise to the consumer for cash on the date of the rental-purchase agreement (§ 500 [2]). The consumer can also acquire ownership by exercising an "early purchase option," tendering the cash price less 50% of all previous rental payments. Should the consumer fail to return the merchandise for any reason after missing a payment, or should the property be lost or stolen, the consumer becomes liable in a sum equal to the early purchase option price.
Plaintiff rented merchandise under a six-year lease, ending in November 1997. In her complaint, plaintiff alleges numerous violations of the RTOPL, for which she seeks, inter alia, declaratory and injunctive relief, with particular focus upon the failure of defendants to set forth in their leases the effective interest rates involved in the transactions. In response, defendants emphasize that the statute itself imposes no such requirement. After joinder of issue and some discovery, both sides moved for summary judgment. Upon this core issue—the absence of interest disclosure in defendants' form leases—the IAS Court held that defendants' failure to disclose interest in their leases, and whether such omission constituted a violation of the statute, presented a factual issue for a jury to resolve. We reverse that central finding, so modify the order on appeal, and remand for a trial limited to the remaining claims asserted in the complaint.
Defendants submitted the views on "household credit" from a financial expert on the faculty of the Graduate School of Management at Purdue University, who opined that the leases at issue did not require any recital of interest because the rental transactions did not involve the advancement of a principal amount, as would be the case in the extension of credit. Since no debt was created, there was no forbearance of debt if the customer chose not to renew the agreement. All the disclosure a customer was entitled to, under the RTOPL, was a statement as to the total cost (allowing comparison between "cash price" and the cost of exercising an early purchase option), the amount and timing of rental payments, the amount and purpose of any nonperiodic charges or fees, and the conditions under which the consumer might exercise an early purchase option or either party might terminate the lease. Defendants argued that in the...
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