Rent-to-own bill would abandon the poor one more time

By John Huebscher

	John Huebscher

Last fall, Americans and people around the world watched in disbelief as thousands of men, women and children clung to rooftops or waited helplessly in horrid conditions after Hurricane Katrina. The disbelief gave way to questions as we asked how it had come to that. Why, in a land of plenty and advanced technology could so many of our neighbors find themselves in such desperate circumstances?

There is no simple answer. But the TV images and other accounts of that disaster made it painfully clear what happens to those who lack resources when they are left exposed to life threats from which the rest of us are insulated. Some of these threats take the form of natural disasters. Others are man-made.

Here in Wisconsin, our state is poised to expose its poor and economically vulnerable to predatory lending practices previously regulated by our laws. Legislation to loosen the regulation of "rent-to-own" businesses is on the verge of becoming law.

Rent-to-own agreements are among what many refer to as "predatory lending practices" that exploit those in difficult financial circumstances. Located primarily in low-income neighborhoods, they extend credit in ways most of us would not tolerate for our families or ourselves.

Currently, Wisconsin is one of a handful of states that treats rent-to-own transactions like credit transactions and requires the disclosure of interest rates. That will change if Gov. Doyle signs legislation sitting on his desk.

The pending legislation will roll back state law and exempt rent-to-own operations from disclosing their annual percentage interest rate, or APR.

It is true that disclosing the APR on a loan does not guarantee that customers will know what they are getting into since it is possible to conceal the true cost of an item. However, it is significant that in the time that rent-to-owns in Wisconsin have been obligated to disclose APRs there have been far fewer complaints from consumers than in other states.

The WCC opposed the bill, as did many other advocates who regularly work with the poor. WCC opposition to this proposal is based in large part on the practical experience of those in Catholic agencies, such as Catholic Charities and St. Vincent de Paul who regularly minister to families in economic need.

Staff in these agencies advised us that rent-to-own agreements and other transactions that burden people with high interest rates and expensive loan agreements are major causes of financial hardship for low-income families.

The bill also weakens the Wisconsin Consumer Act by permitting self-help repossession and shortening the default period. Should rent-to-own companies be able to avoid the provisions of the Act, it is only reasonable to expect that others who lend and sell merchandise will seek their own exemption.

It is a tragic fact of poverty that those least able to pay for goods often end up paying the most. This is especially true when our public policies compound the tragedy by making it easier to engage in transactions that exploit that vulnerability.

Our nation did not deliberately set about to abandon the poor and vulnerable people on the Gulf Coast to the fate that befell them by passing a National Indifference Act. We did so one step at a time, one policy at a time, and one rationalization at a time. The proposal to deregulate the "rent-to-own" industry is an example of one of the steps by which a society abandons its needy.

(Huebscher is executive director of the Wisconsin Catholic Conference, the civil arm of the state's five diocesan bishops.)