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Reality Check: Lending Rip-Offs

Tommy decides that he wants to purchase an entertainment center for his bedroom. He checks into the cost at a few different electronic stores. Then he sees a television commercial about renting an entertainment center through a local rent-to-own store and how he can own it after a certain number of payments. This sounds like a great idea to Tommy so he tells his parents about the commercial. Tommy's parents tell him to compare the costs of the rent-to-own store and the layaway plan at a local retail store.

• What are some other ways that Tommy might consider paying for this entertainment center?

Tommy and Jane have become confident consumers with the help of their parents. You, too, can become a confident consumer. What have you learned from this website already?

Additional Activities

1. Visit the National Military Family Association's Web site, http://www.nmfa.org/nefe/c3/c3a.html and review their information related to rent-to-own stores.
1. The example used is a $400 television. Based on the information provided in the Newspaper in Education insert, what other types of purchase options might be available that cost less money?
2. What are some additional links on this Web site that are considered expensive money loans?
2. Visit the Responsible Lending Organization's Web site, http://responsiblelending.org/practices/rent.cfm and review their information on rent-to-own service contracts.
1. What should you know before you might decide to sign one of these contracts?
2. Why should you ask about how much interest is charged for the item you rent?

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Additional Resources

• American Banker's Association: http://www.aba.com/Consumer+Connection/CNC_pred1.htm has information on how to recognize and prevent becoming a victim of predatory lending, as well as consumers' rights in these situations.
• Better Business Bureau: http://www.bbb.org has web pages devoted to scams related to predatory lending. Visit http://www.bbb.org/pubpages/scamspage.asp for more information on advance fee loan scams, predatory lending with home mortgages, and cash grants, just to name a few.
• Easy Credit? Not so fast. The truth about advance fee loan scams: http://www.ftc.gov/bcp/conline/edcams/advfee/index.html. Check out this web site for additional publications available through their "Consumer Information" section of the site.
• Federal Deposit Insurance Corporation: http://www.fdic.gov/consumers/consumer/news/cnsum02/cvrstry.html featured "High-cost Âpredatory' home loans: How to avoid the traps" in their Summer 2002 FDIC Consumer News series.
• Federal Reserve Board: http://www.federalreserve.gov/pubs/shop/ has a publication, "Shop: The credit card you pick can save you money". This publication has a wealth of information on helping you pick out the best credit card for your situation and can be used to help you consider alternatives to predatory loans.
• Federal Trade Commission: has many free, online publications related to predatory lending by visiting: http://www.ftc.gov. Some of these include:Pay Loans=Cost Cash, http://www.ftc.gov/bcp/conline/pubs/alerts/pdayalrt.htm
• Jump$tart Coalition: http://www.jumpstart.org has a clearinghouse of educational materials and links to other sources on personal finance education topics.
• Junior Achievement: http://www.japersonalfinance.com/gsjapf/welcome.jsp has additional links for personal finance education and additional information for topics you wish to consider for financial education
• National Credit Union Association: http://www.ncua.gov/news/legislation/107-PredatoryLending.htm has information on predatory lending legislation.
• National Military Family Association: http://www.nmfa.org/nefe/c3/c3b.html provides information on sources of money drain, such as predatory lending, credit, and rent-to-own stores.
• Office of Comptroller of the Currency: http://www.occ.treas.gov/handbook/compliance.htm has more information on the Truth in Lending Act
• Responsible Lending Organization: http://responsiblelending.org has basic information on predatory lending and what to look for.

Predatory Lending Practices Publications

• Mattox, Amy. (2000). Is rent-to-own right for you? University of Kentucky Cooperative Extension Service. Publication FAM-RHF.107.
• Meier, K.J., Garman, E.T., & Keiser, L.R. (1998). Regulation and Consumer Protection: Politics, Bureaucracy and Economics. Houston: Dame Publications.
• O'Neill, B. Predatory lending practices and credit rip-offs: A Curriculum for financial educators. Available by contacting Dr. Barbara O'Neill, oneill@rce.rutgers.edu.

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