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Perez v. Rent-A-Center, Inc.

375 N.J. Super. 63, 866 A.2d 1000 (App. Div. 2005)

CONTRACTS; RETAIL INSTALLMENT —A furniture rental company using a rent-to-own contract is not a retail seller, and its customer is not a retail buyer, under the Retail Installment Sales Act.

A consumer entered into several rent-to-own contracts for furniture and electronics. Under the contracts, she was under no obligation to purchase the goods, although she could elect to buy them. In addition, if she elected to return the items at any time, she would not be obligated to pay rent after that date. The consumer claimed that the rental company violated the Retail Installment Sales Act (RISA) because the time-price differential exceeded the thirty percent maximum interest rate permitted under the criminal usury statute. The company argued that it was not subject to RISA because it was not a retail seller, and the lower court agreed. The customer appealed.

Under RISA, to be deemed a retail installment sales contract, three criteria must be met: (1) the contract must be entered into between a retail buyer and a retail seller; (2) the contract must reflect an exchange of good and services that are primarily for personal, family or household needs; and (3) the contract must evidence an agreement to pay the retail purchase price in two or more installments over a period of time. The Appellate Division found that the renter was not a “retail seller” and the consumer was not a “retail buyer” under RISA, There was no intent on the rental company’s part for it to be a sale, and the consumer did not obligate herself to buy the product (notwithstanding her ability to purchase the goods). The consumer could return the equipment at any time and her payments would stop. Therefore, the Court found that it was not a retail installment contract. The consumer argued that the total of her rental payments over the time of the rental exceeded the actual purchase price of the items by more than thirty percent and therefore was subject to criminal usury. The Court found that time-price differential transactions were not subject to either the civil usury statute, or to criminal usury laws. Because the transaction was for the rental of goods and was not really a loan, it did not fall within the usury laws.

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