Rent-to-Own

Ready to Run the Show: An APROfile of Shannon Strunk by Kristen Card

Clock Watching by Phillip M. Perry

Three New Books from the Poverty Press by Ed Winn III

Tampa: Treasure the Memories by Julie Sherrier

 

 

 

 

Ready to Run the Show: An APROfile of Shannon Strunk

by Kristen Card

 

Once you’ve spent a few minutes talking with Shannon Strunk, it’s easy to envision him as a 10-year-old boy with energy to burn, taking over his older brother’s neighborhood TV Guide route just to have something to do. “Every Thursday I went around and had regular customers who bought TV Guide from me,” Strunk says. “And, of course, I’d always order extra and try to make new customers.

 

My mom was happy I had a job as I was probably driving her crazy.” Strunk’s rapid-fire speech belies his longtime residence in deeply Southern, moss-covered Pascagoula, MS (population 26,000). Though this port city may be named for a peaceful Native American tribe—translated, the name means “bread eaters”—and hometown to such legendary easy-goers as singer/songwriter Jimmy Buffett, Strunk definitely doesn’t fit the stereotype of the droll and drawling gentleman of business. Strunk is less antebellum, more ambition. “I’ve always had a job; as a matter of fact, I’ve always had two jobs,” he says. “I’ve held more jobs than you can possibly imagine. I’ve never been happy sitting around. Never.”

 

Even today, as Strunk and his wife, Cynthia Baber-Strunk, prepare to open their 49th rent-to-own store in their fourth state, Strunk has taken on a second job as 2004–05 president of the Association of Progressive Rental Organizations and, as ever, he’s revved up and ready to go. Perhaps Strunk’s propensity for perpetual motion began in his childhood as he and his five siblings were moved from home to home as their father accepted various military posts. Strunk doesn’t have much to say about his youth, other than he worked a lot—mostly jobs related to the restaurant or food industry—and went to school.

 

Then, somewhere along his career continuum, Strunk opened a restaurant with a man with whom he ended up at odds. Strunk left and found himself—for the first time since age 10—unemployed. He arbitrarily answered a newspaper ad for an account manager (“I had no idea what it was,” Strunk says) and went to work for Baber’s, then a 12-store rent-to-own appliance and electronics business. “I worked here about a week and a half and made plans to get out,” Strunk says. “I didn’t think I liked the business. “But about two weeks into it, I went to collect on a washer and dryer and the customer refused to give them to me.

 

What she said to me was she was never going to own the laundromat. And that was my education in the rent-to-own business. That’s when I understood what was happening here. I stopped my pursuit of changing careers and started working, working hard.” Strunk moved up quickly within the ranks of this family business, settling in the Pascagoula headquarters when a plane crash took the life of the owner’s son. The son’s widow, Cynthia, also worked for Baber’s. Three years later, she and Strunk married. Then, following the death of founder James Baber in 1999, the couple bought the rest of the company from the other half of the family.

 

Within the past four years, the Strunks have grown the business from 35 stores to 48, located across Mississippi, Alabama and Louisiana. They’ll extend their reach even further in December with the opening of a Pensacola, FL, location. “Our goal is 100 stores by 2010,” Strunk says. “Our first year [of sole ownership] was concentrated on internal store growth—making sure we knew what we were doing and we could grow internally without opening new stores, because the key is to continue growing existing stores while you grow new stores. Right now, we’re on-target for our external goal.”

 

In order to stay on target, Baber’s is having to change its modus operandi. Historically a rural-based company, more than half of its stores are located in towns with populations averaging fewer than 10,000. But recently, the Strunks have begun building on their rural foundation by branching into larger, urban markets— an evolution Strunk claims was inspired by Baber’s 215 or so employees and his company’s commitment to them. “When we open in bigger cities, the stores can grow larger,” Strunk says. “Our pay structure is based on the size of the store, so we can offer good employees better opportunities by going there. We make promises to our employees all the time: ‘You do well, and I’ll make things better for you.

 

I’ll create opportunities.’ We must continue honoring the promises we make.” Employee focus When it comes to Baber’s employees, following through with his commitments is only the tip of a mammoth iceberg for Strunk. In fact, at Baber’s, the customer may be king, but the employee is everything. “Our business philosophy is not so much customer- oriented as it is employee-oriented,” Strunk says. “We talk about our customers all the time; they are our business. But the customer side doesn’t matter if the employee side isn’t right. If you don’t get the employees right, nothing matters.

 

You can see it in store after store after store. If the employees are out of whack, then it just doesn’t matter what else is going on as that store is just not going to perform.” Strunk says Baber’s intense focus on employees is almost as much about logistics as it is about philosophy. With nearly 50 stores and more than 200 employees— as well as several other related businesses to manage—the Strunks can’t afford to delve too deeply into the details of day-to-day. “It’s not that we don’t care about the customer,” Strunk says, “but clearly, we understand that, as big as Baber’s is, we can’t concentrate directly on the customer. All we see are employees, typically at the management level. So all of our emphasis and concentration is on the store-manager level and above—in developing them and helping them become better people so that they can continue to do more and more and, hopefully, better than they expected.

 

Our focus as owners is 100 percent dedicated to our employees and their personal development.” This investment of interest in employees is returned many times over to the company, Strunk says, and has proven to be key to Baber’s success. “Strong, strong employee loyalty is probably our biggest asset as a company,” he says. “What we do best is take good people and make them better. We educate and motivate them into doing a better job so that they can move up. “We have a lot of promotion within the company,” he says. “If people don’t work out, then we move them back—but we don’t lose them, which is very uncommon. We have a lot of employees who have let us try them out in a variety of positions and move them around if it doesn’t work out.” Overseeing Baber’s employees and operations is Strunk’s main responsibility as company president, while his wife oversees the company’s financial dealings.

 

The couple is careful not to intrude upon one another’s areas of responsibility, but Strunk says they still share everything— including an office. “Cynthia’s my wife, my friend, my business partner, she’s everything to me,” Strunk says. “We provide a counterbalance for each other, both professionally and personally. I’m the one who will crawl out on the limb; she’s the one who stays close to the trunk. She keeps me from going way out and falling off; I get her far enough out to enjoy it. And everything we do, we do together.” Last year, the unqualified success of the Strunks’ togetherness approach was acknowledged by the RTO industry as a whole, when APRO presented its 2003 Rental Dealer of the Year award to the twosome as a unit, making them the first couple to be honored this way. The event was a high point for both Cynthia and Shannon. “It was an absolute surprise,” Strunk says.”

 

When your friends and colleagues are watching you and saying they appreciate what you’re doing and you’re the best out there doing it, it’s a wonderful feeling. Then, to be recognized with your soul mate at the same time…well, it just doesn’t get any better than that.” Raising the bar for APRO and its membership Though his wife will definitely be cheering him on from the sidelines, Shannon Strunk’s APRO presidency will be a solo act, although he’s no novice. An APRO member since 1987, Strunk has played several leadership roles for the organization already, including serving as chairman of the nominations and the public relations committees and most recently as APRO’s first vice president. Additionally, he helped organize and has served as president of both the Mississippi Rental Dealers Association and the newer Alabama-Mississippi Rental Dealers Association.

 

Strunk’s vision for the rental-purchase industry is broad, as you might expect from this big-picture kind of guy. “I want to serve. I want to make a difference. I want to do more,” Strunk says. “I want to continue the remaking of APRO. I’ve got a basic philosophy that year after year—not just from beginning to end, but every year—it’s our responsibility to leave the Association better than when we took it. In taking over as president, I have a big task ahead.” Strunk, who has participated in more than 70 APRO Legislative Conference meetings with Congressional members, counts passage of the federal Consumer Rental-Purchase Agreement Act among his top priorities for the organization.

 

But he also wants to hone in on APRO’s membership, especially how to attract new members and satisfy current ones. “We’ve got to expand the services we offer and constantly monitor what members want,” Strunk says. “I want to get people involved and lead by example. There isn’t a single time when I’ve not gotten more from the organization than I’ve given, in an educational way. For example, I had the opportunity to speak for a group and while I was there, members of the group educated me more after the seminar than I educated them during my speech. They told me about new things they were doing or new ways they were doing it or new products they were offering. Then, when I came back and made changes at Baber’s, we all benefited from them.

 

Every single meeting we go to, that’s what happens. This organization is a networking opportunity unlike any other.” Also toward the top of Strunk’s priority list is his own pet project, the APRO Education Foundation, which Strunk launched almost single-handedly last year. His goal is to create a fund for the organization to grant educational scholarships to RTO customers and employees. “I believe the Education Foundation is the most important way for our industry to give back to the people who have given to us and to cultivate our future business leaders,” Strunk says. “With this, we can educate people, send them through college and bring them back into our industry to become our leaders, which would be the greatest thing of all. The rent-to-own industry is trying to show people who we really are, not just tell them. And by offering these scholarships, we’re showing them.”

 

Currently, APRO is working to raise the Education Foundation’s “seed” money. “We need to collect a million dollars and just put it into the bank,” Strunk says, “so that we can have a perpetual scholarship and don’t have to continue trying to sell carnations or whatever. We must collect the money, put it aside and begin providing scholarships to well-deserving people. It’s just that simple.” Stress breakers: food and vacations The fast-paced trajectory Strunk is taking through life is necessarily streamlined. He and Cynthia spend the bulk of their time managing Baber’s and their other businesses, which include collection, check-advance and real-estate businesses and managing their blended family that includes four kids aged 14 to 27.

 

When one or both of these areas are giving him trouble, Strunk releases his demons with a perhaps unexpected pastime, which he tackles with his usual, um, zest. “I love to cook,” Strunk says. “I like to try new things, go way out there. There’s nothing I won’t try. I cook a big old meal to burn off bad days. I do a lot of seafood, I’m crazy about seafood.” Occasionally, Strunk and his wife also indulge in their favorite escape, which is escaping. The Strunks enjoy travel-together, naturally—particularly where saltwater sports are part of the trip. But even this interest seems to be dictated by their real calling: their profession. “We like short vacations, like three- or four-day getaways,” Strunk says. “We want to get back to work, because we love it.

 

When I die, I hope I come home from work and sit down in a recliner and just go. I don’t ever want to retire, ever. Business is a passion for me. I love it.” What fuels Strunk’s passion for his business is what he learned about the rental-purchase industry during his first two weeks working in it and what’s kept him working in it over 17 years: it’s a business that helps people. “We provide a needed service other people aren’t providing,” Strunk says. “And it’s not a wanted service, it’s a needed service. We give people a choice to get something they might not have a choice of getting otherwise. Whether it’s for a short-term need or whether they intend to own, it doesn’t matter. We give them choices and opportunities no one else does.”

 

Kristen Card is an independent business writer in Austin, TX.

 

Clock Watching

by Phillip M. Perry

 

Who gets paid overtime? If you’re like most employers, that question has caused more than a few sleepless nights. After all, lots of money rides on the answer. Load up the hourly gravy train and you end up with a bloated payroll that erodes your profits. Exempt the wrong people, though, and you face a worse risk—costly litigation for back pay from employees claiming misclassification. No wonder employers often feel caught between red ink and a lawsuit. Is there a solution? Maybe. New overtime regulations from the U.S. Department of Labor provide some clarity to what has long been a woolly patchwork of regulations.

 

The new rules, which took effect August 23, seem to be a mixed blessing for employers. On one hand it looks as though more lower-income workers will be eligible for overtime. That means you may well be paying out more in wages under the revised regulations. On the other hand, the extra expense may be more than offset by a decline in legal expenses. Because the new regulations are somewhat clearer about what types of employees must be granted overtime, the number of “wage-and-hour lawsuits” is expected to decrease.

 

THREE KEY CHANGES

 

The complete regulations are long and complex (see sidebar for more information). You should become aware, though, of the following three provisions. The first two are expected to substantially add to the rolls of employees eligible for overtime; the third is expected to slightly moderate that number. 1) The new rules mandate overtime for all workers earning less than $455 per week, which translates to $23,660 annually. This three-fold increase from the former threshold of $155 is expected to increase the number of non-exempt workers by some 6.7 million. 2) Workers earning more than $455 weekly and less than $100,000 annually are subject to protections from loss of overtime pay, under standard “duties tests” that are equal to—or more protective than—former tests. This provision, then, should also increase the number of non-exempt workers. 3) Employees who earn more than $100,000 in annual pay are subject to a new set of “duties tests,” which are less protective than the ones for the middle tier of workers. This provision is expected to result in some 107,000 highly compensated employees losing overtime protection.

 

AVOID COSTLY PENALTIES

 

You must take action quickly to make sure you comply with the new regulations. “Most employers are looking at jobs now and auditing their positions,” says Joseph P. Harkins, a partner at Washington, D.C.-based Littler Mendelson, the nation’s largest employment law firm.” It’s important to do this and make adjustments where required.” Delay too long and you can get hit with costly financial penalties from two sides. First, employees may sue you for misclassifying them as exempt from overtime, leading to back wage settlements. Second, you may be hit with government fines.

 

“If you do not comply with the new rules, you could be penalized for any overtime that the Department of Labor believes you should have paid to employees,” says Timothy S. Bland, a partner in the Memphis office of Ford & Harrison. Ford & Harrison is a law firm that defends businesses on employment related matters. “You can also be assessed liquidated damages—fines totaling double the back pay you are deemed to owe misclassified employees.” In either case, it’s clear that the longer you wait the greater the potential financial damages. Be aware that your investigation may uncover instances of what attorneys call “task creep.” This refers to the gradual modification in the duties performed by an employee, so that a formerly exempt individual becomes non-exempt or vice versa. Task creep can occur unnoticed and can lead to serious misclassifications.

 

YOUR PAYROLL MAY INCREASE

 

So how will this affect your payroll costs? If you are like most employers, it will mean more money spent for wages. Your own experience, though, will depend on your location and current wage structure. “This law will impact employers very differently depending on where they live,” says Robert D. Lipman, managing partner at the employment law firm Lipman & Plesur in Jericho, N.Y. “The biggest impact may be felt in rural areas where employees may earn less than $455, but still have a fair amount of responsibility.” Smaller employers in general may be more affected since they may have a greater percentage of employees who might not meet the minimum salary test under new rules.

 

The effect may be mollified in some cases by a reduction of overtime eligibility by individuals who earn a salary higher than the legislation’s “highly compensated” upper threshold. If an employee makes $100,000 a year and the person’s “primary duty includes performing office or non-manual work,” the employer only has to justify exemption by showing that the employee “customarily and regularly performs any one or more of the exempt duties” as specified in the regulations. “This will impact those employers who have hourly jobs near the upper threshold,” says Harkins.

 

THE MUDDLED MIDDLE

 

You are most likely to come to grief trying to classify people with earnings that are more than $455 weekly but below the amount needed to be highly compensated. “Most employees fall in between the lower and upper thresholds,” says Harkins. “Employers are struggling to figure out where these individuals fit.” Unfortunately, the new guidelines are not much help. “While the law is slightly different in wording, it is basically similar to the old one,” says Harkins. “You must still deal in vague terms such as ‘independent judgment’ and ‘discretion,’ and ‘responsibility to hire and fire.’”

 

You and your attorney will need to reference the complete law that defines terms, describes details and provides real world examples. Here, though, are some key points that will assist you when talking with your attorney: The Department of Labor has stated that you may classify as exempt from overtime certain employees whose workplace activities “primarily involve executive, administrative or professional duties.” Most readers of this magazine will be concerned with the first two categories. In addition to the salary tests described earlier in this article, exempt individuals in these categories must meet the following “duties tests”: 1) For an executive employee: The “primary duty” of this individual must be the “management of the enterprise.”

 

Additionally, this person must be one who “customarily and regularly directs the work of two or more other employees.” Finally, this individual must either have the authority to hire and fire other employees or offer suggestions and recommendations for such personnel actions that carry “particular weight.” Retailers have typically relied on the executive exemption for their managerial personnel. So are the new rules favorable or not? “A lot depends on the size of your store,” says Harkins. “An exempt individual is required to supervise two full-time equivalents. That’s great for a branch of a big store. But a small shop might not meet the test.” 2) For administrative employees: This person’s “primary duty” must be “the performance of office or non-manual work directly relate to the management or general business operations of the employer or the employer’s customers.”

 

Additionally, the primary duties must include the “exercise of discretion and independent judgment with respect to matters of significance.” Retailers typically rely on the administrative exemption for personnel who are not managers, but who are critical to store operations. Unfortunately, the language of the new regulations adds little or no clarity in this area. “We had hoped that the administrative exemption would be cleared up and made easier to apply,” says Bland. “That’s not the case. This is unfortunate for retailers.” Just how much “discretion and independent judgment” has to exist to meet the duties test is extremely difficult to apply in the real world. “Some employees have very little discretion in the job and are obviously not exempt,” says Bland. “A few have so much discretion they clearly are exempt. But most employees, by far, fall into a grey area, so it comes down to a judgment call.” Be aware that the above paragraphs provide a sketch of the complete picture, the shading and color of which must be filled in by you and your attorney. They do, however, provide a basis for discussion.

 

DEFINE YOUR TERMS

 

The new regulations attempt to define the key terms used in analyzing personnel exemptions. For example, the rules provide a long list of activities that constitute the practice of “management” and what factors constitute “particular weight” for determining the exemption of executive employees. For administrative exemptions, the regulations attempt to define phrases such as “discretion and independent judgment” and “directly related to management.” Reiterating such definitions is beyond the scope of this article and must be done in conjunction with your attorney to analyze the particular status of your personnel. One term, though, is particularly important because it pops up in all of the duties analyses.

 

That is “primary duty.” The term primary duty has been expanded from the time spent on exempt work to the perceived value of exempt work. An employer might claim that many non-exempt tasks performed by an employee are in support of exempt tasks. By way of example, an administrative assistant might be doing a lot of clerical tasks but they are all in support of getting vendor agreements in order. This person might well be classified as exempt. The new regulations have discarded the old rule that an exempt individual could not spend more than 20 percent of time on nonexempt work.

 

Indeed, it is not even necessary that an individual spend more than 50 percent of work time on a duty for that activity to be deemed “primary.” Rather, the determination must be made on a case-by-case basis, taking into account such matters as “the relative importance of the exempt duties” and “the employee’s relative freedom from direct supervision” and wage disparities between the individual and nonexempt employees. By way of illustration, the regulations posit an assistant store manager who spends more than 50 percent of time “performing nonexempt work such as running the cash register.” Such an individual may still be exempt if he or she performs managerial work such as supervising other employees and ordering merchandise.

 

The exemption becomes questionable, though, if the individual is “closely supervised” and earns “little more than nonexempt employees.” The regulations also note that an assistant store manager may perform concurrent nonexempt duties without losing exempt status. For example, an exempt employee can “simultaneously direct the work of others and stock shelves.”

 

BETTER SAFE THAN SORRY

 

Given the number of people in the muddled middle and the vagueness of the applicable duties tests, it’s clear you will need to engage in serious analysis to avoid non-compliance penalties. When faced with ambiguity, many employers are taking the “better safe than sorry” option. “I do not see a lot of clients going out of their way to make hourly people salaried,” says Harkins. “But I do see employers taking salaried people and putting them into the hourly category. So I would not be surprised if the new legislation increases the number of people eligible for overtime to a level even higher than what the DOL has predicted.” Now is the time to take a new look at your own employees and classify them appropriately. When in doubt, remember that the law presumes your employees are hourly—it’s up to you to show otherwise. Says Harkins: “It’s always legally safer to pay wages and overtime.”

 

Phillip M. Perry is a free-lance business writer based New York.

 

Three New Books from the Poverty Press

by Ed Winn III

 

There is a publishing phenomenon in the country—authors who crank out studies and reports on how low-income Americans live. Some books take the large view, looking at life in general; others focus on particular aspects of lives lived at the lower socio-economic levels, such as schools, inner city housing, nutrition, health care or family life. These works generally decry the plight of their subjects and call on the powers that be to tax the rich more, give the money to the poor and make it better. They make this plea even though life as a poor person in this country has more ease, comfort, safety and creature comforts than life in most other places in the world. The goal of these works is often to shock the middle and upper classes and to goad them into, presumably, more redistributive thinking. Some books have specific messages for people or for the government, advice on how to fix some socio-economic problem and in the most strident tomes, a grand plan to do away with the existence of poor people once and for all.

 

Some books merely chronicle the misery of a life of poverty, contrasting such a life with the lives of the books’ readers. The goal, often unspoken, is to trip guilt levers and strengthen the charitable or activist impulse. Whatever the reason for such books, there is an unending flow of them. They get bought and read and speak to something in human souls, perhaps like Greek tragedies used to do. They both serve to purge the emotions. They allow the reader to exhale and mutter, “There but for the grace of God, go I.” The poverty press is, of necessity, of interest to rental dealers because their business is often highlighted in the pages of such works as an example, usually among many others, of how the poor are made to pay more.

 

Dealers may also glean insights into how a portion of the RTO customer base thinks and behaves. Most of the output from the poverty press is either shrill and sanctimonious or academic and unreadable. There are, however, three new books from this nook of the publishing world worth noting because a couple of them have been best sellers: Nickel and Dimed: On (Not) Getting By in America, by Barbara Ehrenreich, Holt and Co., 2001; Taming the Sharks: Towards a Cure for the High-Cost Credit Market, by Christopher Peterson, University of Akron Press, 2004; and The Working Poor: Invisible in America, by David Shipler, Alfred A. Knopf, 2004. Nickel and Dimed: On (Not) Getting By in America Of the three, the Ehrenreich book is perhaps the best known, although it is also the least insightful and most polemic. Ehrenreich is a best-selling author and hers is an easy read. The book is a first-person chronicle of the author’s few months of “slumming” as it were.

 

She left her comfortable life as a writer of left-wing books and articles and took a series of low-paying jobs, incognito, first in Key West, then in Maine and then in Minnesota. She recounts her experiences, emoting what it felt like to work in those jobs as a waitress, house cleaner, dietary aide in a nursing home and Wal-Mart associate. She writes of her fellow employees that she met along the way and their various plights and hers, with making ends meet at the low end of the economic spectrum. She has unkind words for all of the bosses and managers, as well as drug tests, personality tests and all of the other accoutrements of the job application process.

 

The good news is that she does not single out industries for attack and nowhere does she mention RTO. Rather, her beef is with management in the large sense, which consistently and intentionally underpays labor to such an extent, in her view, that workers cannot make ends meet and that ought not be the case in a country as wealthy, overall, as this one. She shows great sympathy for her coworkers, whom she abandons without further thought every few weeks, but she is continually astonished that they don’t daily take up arms against the system, which she indicates she would certainly do if this was how she really had to live. She reached the following conclusion after a couple of months in the trenches:

 

“You don’t need a degree in economics to see that wages are too low and rents too high.” She abruptly left the “low-income” life to write her book about her experiences fully persuaded that all employers resist wage increases with every trick at their disposal and also persuaded that the poor cannot make it in America, despite the fact that they do. Her experiences demonstrated to her that the rich and even the middle classes are isolated from the poor. They live in different neighborhoods, they shop in different stores and they send their children to different schools.

 

The goal of the book is more than merely to trigger guilt among the non-poor. Ehrenreich wants to shame all those who she sees as living on the backs of the poor without realizing it. She offers no real recommendations for changing things, assuming that the unveiling of the precarious lives led by low-income workers will spur others into action. For rental dealers, her reporting on her experiences with the job application process and how applicants react may help them reexamine their own application processes to make them less intimidating, more likely to result in an upgrade to the workforce.

 

Taming the Sharks: Towards a Cure for the High-Cost Credit Market The least readable and the most academic in approach is the Peterson book. In contrast to Ehrenreich, this book offers specific recommendations for making the world a better place. This book also discusses RTO in some detail, although it reaches back to allegations made 10 years ago to score points against the industry. Peterson does insist that RTO be included among his definition of “high-cost credit” and that the RTO industry be made subject to the credit reforms that he proffers.

 

Peterson is a law professor and his thesis is that the high rates of interest paid by the working poor have a high social cost, not only on the borrower, but also on the borrower’s family, neighborhood, community and, finally, society as a whole. He analogizes the prevalence of high-cost credit today to an illness in the country and seeks solutions by examining the issues of informed consent in medicine and how the country has dealt with tobacco use, another societal illness in his view. Contributing to the malaise are payday lenders, pawnshops, tax refund loans, rental-purchase companies, tote-the-note car lots, mobile home dealers and sub-prime mortgage lenders, each of which gets analyzed and condemned in this book.

 

Peterson offers a worldwide historical review of how societies have dealt with the extension of credit to consumers— as opposed to commercial lending—from pre- Biblical times, including an analysis of Babylonian, Roman and Chinese laws relating to debt. He categorizes the different social attitudes that have arisen toward consumer credit over time. The historical analysis is fairly balanced, although Peterson does have a point of view and it shows. His opinion is that “the American culture has become one of reckless borrowing” over the past 40 to 60 years and the ramifications of such behavior are deleterious and far reaching. During his historical review, Peterson identifies the 1920s as the turning point in America, “when the culture of thrift and rugged individualism gave way to one of consumerism and personal debt.”

 

The author considers the advent of the Truth in Lending Act in the 1960s to have been a watershed event in this country. However, Peterson determines that the effort to provide uniform disclosures without unduly interfering with the free market was ultimately a failure, because while Truth In Lending may lay out the truth of a transaction for all to see, the disclosures fail to work as intended because consumers do not understand them. The economic underpinnings of free market theory are only operative when knowledgeable buyers and sellers get together.

 

When the buyer fails to understand the transaction, the economics are flawed, according to Peterson. He gives anecdotal evidence that consumers either do not or cannot understand current credit disclosures in a variety of contexts. Peterson veers off into psychology and behavioral economics when analyzing the current high-cost credit market in the United States and why it has grown so over the past 30 years. Readers will have to assimilate Benthemite utilitarian preference theory and positive and negative Pigouvian externalities when learning why it is that consumers take out payday loans at 400 percent to 800 percent interest when, according to Peterson, they clearly should not do so. Peterson does attempt to remove morality from the analysis, even though, “for millennia, human civilizations have produced both social norms and laws construing high cost consumer borrowing as morally degenerate.”

 

Peterson notes also that" in the early American consciousness, consumer credit was inextricably associated with poverty, untrustworthiness and the path to moral decay.” It does no good, he argues, to maintain that high-cost creditors are bad, unscrupulous people or that high-cost debtors are undisciplined or lazy. If the debate over what to do remains on the moral plain, no progress can be made, with each side pointing fingers at the other, crying “foul” or “shame.” He argues that instead of moral finger pointing, the debate and new research and policy decisions should be about the personal financial risk of using high-cost credit. He explains that early on there was a moral argument against tobacco use, which ultimately failed. It was not until empirical evidence was adduced about the health risks of smoking that the anti-tobacco forces began to make real progress.

 

Peterson acknowledges that the policies underlying Truth In Lending were sound, but that the implementation of disclosing credit information needs updating. He wants credit tiered by the government, so that the low-cost credit is everything under 6 percentage points above the yield on comparable term Treasury notes, middle-cost credit is everything under 12 percent annual percentage rate and high-cost credit, “including rent-to-own transactions,” is everything over 24 percent APR. The higher the cost for the credit, the more disclosures and other safeguards for consumers. Peterson does not suggest that any current credit offerings be banned or even curtailed. He insists that “any borrower can borrow any loan at any price” under his plan. He does want consumers to have to jump through a lot of procedural hoops, however, including passing a test to show an understanding of the transaction, before entering into a high-cost credit transaction. He wants strongly worded financial warning labels on high-cost loans not unlike those devised for cigarette packaging.

 

He comes up with six concrete proposals in all, which, if implemented, would add a level of federal oversight over consumer lending heretofore unknown. He does not discuss the cost of such a bureaucratic burden, but one can assume that Peterson deems it less that the current social cost of high-cost credit to the country. As an academic piece aimed at the popular market, the book is thorough, well documented and often carefully argued. The book ultimately fails by exaggerating the ills of the current system and then by attempting to create grandiose and impractical forms of government intervention. It is unlikely that Congress will undertake implementation of the proposals suggested by Peterson.

 

The Federal Reserve Board does not want to start e-mailing and then grading exams for every consumer who wants to borrow money at a rate more than 24 percent. Some of Peterson’s suggestions, however, are the kinds of initiatives that a progressive state legislature might consider. Rental dealers would not want to be lumped in with all of the consumer financial service sectors against whom Peterson rails and, in that sense, the RTO debate will not change based on anything in this book. If state governments or the federal government start considering radical amendments to the credit laws in this country, some of Peterson’s ideas may have purchase with policy makers. For this reason, it will be useful for rental dealers to be conversant with the suggestions Peterson puts forth. The Working Poor: Invisible in America The third book, by David Shipler, is the best written of the three.

 

Shipler won a Pulitzer Prize for his book, Arab and Jew, and is a gifted literary artist. Shipler’s vision is the broadest as he examines every facet of life among low-income Americans. He tackles schools, migrant workers, medical care, childcare, welfare, taxes, parenting, immigration, the textile industry, housing projects, child abuse and teeth. Teeth loom surprisingly large in the Shipler book. He maintains that dental care is an expense most often deferred by low-income Americans because it can be, which in turn leads to tooth decay and, finally, bad teeth. Bad teeth lead to embarrassment and are an impediment to a good self-image, which in turn leads to bad performance and self-consciousness during job interviews. Bad teeth, then, tend to keep low wage earners from rising to such an extent that Shipler postulates that bad teeth have become an indicator of a certain low-income lifestyle.

 

The Shipler book is full of real people, skillfully drawn, bad teeth and all. He recounts tales of tragedy, mostly. There is little triumph in this book. The difficulties that befall the people in this book are not always the fault of employers or landlords or the government or the system as they are in the Ehrenreich book. Many injuries among the poor are self-inflicted and painful to read about, especially in the hands of a good writer: “The villains are not just exploitative employers, but also incapable employees, not just overworked teachers, but also defeated and unruly pupils, not just bureaucrats who cheat the poor, but also the poor who cheat themselves. The troubles run strongly along both macro and micro levels, as systemic problems in the structure of political and economic power and as individual problems in personal and family life.” Shipler brings into sharp contrast the American myth that anyone “from the humblest origins can climb to wellbeing” and the American anti-myth, which “holds society largely responsible for the individual’s poverty.”

 

Shipler, by telling in deft detail the stories of real people he met and interviewed, explains how real life is neither myth nor anti-myth, but is lived somewhere in between. “Each person [in the book] is the mixed product of bad choices, bad fortune, of roads not taken and roads cut off by the accident of birth or circumstance.” Among books published by the poverty press, it is rare to find one so balanced, so nuanced and so gracefully written, which is what makes this book a standout among works in this genre. The goal of Shipler seems more to make visible what he thinks is invisible, how the working poor live, rather than to offer up social policy to correct the ills that he sees. The picture he unveils is a complex one. To make life better for the working poor would require the will, effort and resources of everyone: government, business and, not the least, the poor themselves.

 

Middle-class Americans will be shocked when they read this book, rental dealers perhaps less so. Rental dealers already know a great deal about how the working poor live. Some, even many, are rental customers. Rental dealers hear their sad stories every day, but the Shipler book occasionally cuts deeper than the idle chat in the store on Friday afternoon or even than the lessons learned while collecting on hard accounts. The chapter about child abuse in families is especially poignant. Shipler’s is an accurate eye, often a piercing one. Dealers may not rent more TVs for having read the Shipler book.

 

They will, however, think harder about their business and about their customers. They might even work harder. They will almost certainly know that they have spent time with a talented writer and will leave with a better understanding of and appreciation for their lot in life.

 

Ed Winn III is APRO’s general counsel. His e-mail address is edwinn@e-bylaw.com.

 

Tampa: Treasure the Memories

by Julie Sherrier

 

 

The biggest highlight of the 2004 APRO Convention and Buying Show, held August 4–7 in Tampa, FL, was the very successful transition of the annual trade show into a buying show. With free buyer registration, show specials offered by vendors and cash-giveaway inducements to attendees to place orders on the buying show floor, the first annual Buying Show netted exhibitors more than $13 million in purchase orders.“ There was a feeling of purpose in the air,” says Denis Rosen of Florida State Games, a regular exhibitor at the APRO show. “I was very pleased at the orders we received. APRO definitely got the word out. We are proud to be an APRO vendor,” says Rosen. “It was apparent to me, after hearing from so many of you, that the convention needed a buying show rather than a trade show,” says 2003–04 APRO President Lyn Leach. “I had set a modest goal in mind of achieving perhaps $8 million in sales and it blows my mind that we got as far as $13.2 million. I expect that next year we will even exceed that amount as this was only our first try. I am proud of everyone who participated in the event, both buyers and sellers, for making this such a successful show.” More than 1,000 attended this year’s show. Here are some highlights:

• 2004–05 APRO President Shannon Strunk took over the helm from Lyn Leach, who served as president for the 2003–04 year.
• There were 233 booths in the exhibit hall representing 118 companies. The biggest order takers during the show were electronics vendors, who captured more than $8 million of business. Furniture vendors wrote more than $2.5 million and appliance vendors did close to $1 million in business. Other big sellers included truck and advertising/promotional vendors.
• The APRO Education Foundation held an auction of some wonderful trips donated by APRO members, which garnered almost $25,000 that will go toward the APRO Education Foundation. The foundation is a non-profit arm of APRO that will award scholarships to those in the industry once the foundation contributions hit the $1 million mark.
• The Ernie Talley Lifetime Achievement Award was presented to Darrell Tissot of Countryside Rentals in Bainbridge, OH. The President’s Award of Excellence was presented to Jim Brown of ABC Rent-To-Own in Wichita, KS. The Rental Dealer of the Year was awarded to Martin Auble of Appliance Furniture & Rent All in Sioux Falls, SD. The Vendor of the Year award went to Ashley Furniture, based in Arcadia, WI, and the 2004 State Association of the Year was presented to the Arkansas Rental Dealers Association.
• The 2004 Rental-Purchase Employee of the Year winner was Jody Katz of Buddy’s Home Furnishing in Tampa, FL. The 2004 Rental-Purchase Customer(s) of the Year went to Patrick and Marianna Head of Dorsey, MS, who are customers of Baber’s Leasing.

 

2004 BUDDY AWARD WINNERS

 

The APRO “Buddy” awards are presented every year to those outstanding individuals and organizations that have raised the level of what can be done to better the industry for everyone. At the annual APRO awards banquet, held August 7 at the Tampa Marriott Waterside, the recipients of the Ernie Talley Lifetime Achievement Award, the President’s Award of Excellence, the Rental Dealer of the Year and the Norm Smith Vendor of the Year were named. Ernie Talley Lifetime Achievement Award: Darrell Tissot, Countryside Rentals, Bainbridge, OH The 2004 Ernie Talley Lifetime Achievement Award is presented only to those individuals in the rent-to-own business who have dedicated a lifetime to the industry and who have served the industry as a role model for others. This year, the award was presented to Darrell Tissot of Countryside Rentals.

 

Tissot began his RTO business in 1985 and today runs his 17-store Rent-2-Own company with his son, Mike Tissot. Darrell Tissot served as APRO president in 1997 and helped the industry during its battle with the Internal Revenue Service to define the RTO transaction as a lease rather than a sale. The industry ultimately won the battle, saving the industry more than $1 billion in potential taxes. Also during his tenure, Tissot assisted the Association and the industry as it was bombarded with media requests from news shows such as 20/20, Bryant Gumbel and NBC Nightly News.” Tissot has also served as a mentor not only to his son, but to rental dealers across the country. He traveled frequently to speak to rental dealers about their business and always was there to lend a helping hand when asked. In 2000, he was awarded the President’s Award of Excellence. He is a charter member of the Ohio Rental Dealers Association and served on the board of directors for TRIB Group and also as TRIB Group president. President’s Award of Excellence:

 

JIM BROWN, ABC Rent-To-Own, Wichita, KS One of the highest honors an APRO member can achieve is the President’s Award of Excellence. This is presented to the person who exemplifies the best in the industry through involvement and support of industry goals. This award can go to anyone who represents what the industry strives to be as a whole. Jim Brown received the APRO President’s Award for his role as one of the pioneers of the rent-to-own industry and founding member of APRO. He was one of the first rent-to-own employees in the nation working for the grandfather of the rent-to-own concept, Ernie Talley, in Wichita in 1965. One year later, Brown went to work for George and John Parsons and, in 1972, became business partners with George Parsons. Brown and Parsons grew their three-store local Wichita small business for the past 30 years. Parsons recently passed away, leaving Brown as the sole proprietor of their business. Brown was one of the original rent-to-own businessmen to form the national trade association for the rent-to-own industry. Since then, APRO has flourished as the voice for the rent-to-own industry representing the industry before Congress, the IRS, state legislatures, the media and the public for 25 years. “Jim Brown is one of the founders and pioneers of the rent-to-own industry and the industry owes him a big thank you. The APRO President’s Award is just the beginning,” says APRO Executive Director Bill Keese. Rental Dealer of the Year:

 

MARTIN AUBLE, Appliance & Furniture Rent All APRO’s Rental Dealer of the Year award is presented annually to one individual in the industry who has contributed in a positive and outstanding manner to the industry and APRO. This year, the Rental Dealer of the Year was awarded to Marin Auble of Appliance & Furniture Rent All in Sioux Falls, SD. Auble received the award for his role representing the RTO industry before the U.S. Congress. Auble is responsible for overseeing the rent-to-own division of Elmen Enterprises, dba Appliance & Furniture RentAll. As company vice president, Auble oversees the company’s 43 stores and more than 200 employees throughout the Dakotas and five Midwestern states. In his spare time, Auble has been indispensable in helping garner support from legislators across the United States for the industry’s federal bills. In particular, Auble was personally responsible for getting S 884 co-sponsorship from Senate Minority Leader Tom Daschle (DSD), one of the most powerful leaders in Senate. “When the Democratic Senate leader believes in business supported legislation, you know have a good and balanced piece of legislation,” says Auble. Senate Bill 884, the Consumer Rental-Purchase Agreement Act, currently has 27 Senate co-sponsors. Without the involvement of persons such as Auble, the industry would not have experienced the success it has received in garnering the support from so many senators. Norm Smith Vendor of the Year:

 

ASHLEY FURNITURE The Norm Smith Vendor of the Year award is given to an outstanding associate member who has supported the Association and its activities. This year, APRO recognized one of the leaders in the furniture business and a real friend of the RTO industry, Ashley Furniture Industries Inc., based in Arcadia, WI. As one of the largest employers in Wisconsin, when Ashley talks, the politicians usually listen. As many of you know, Wisconsin is one of two states without rental-purchase legislation. However, due to Ashley’s education efforts, state legislators have been learning about the importance and validity of RTO in Wisconsin. Facing one of the most hostile legal and political environments the industry has ever faced, Ashley has come proudly forward to explain the company’s place in the industry and the RTO industry’s place in the American economy. Ashley’s efforts have already turned several noteworthy opponents around on the RTO issue. As a result, the industry expects good things out of the Wisconsin Legislature in the near future.

 

APRO’S EDUCATION FOUNDATION AUCTION NETS $24,775 The second annual APRO Education Foundation auction netted more than $24,000 by the close of the 2004 APRO Convention and Buying Show. Augmented this year with an online auction followed by a live auction during the awards banquet on August 7 (graciously performed by Al Benson of Central File), the funds raised will go toward scholarships for deserving students affiliated with the RTO industry. The hottest bidding occurred over presidential memorabilia, donated by APRO’s lobbying team The Washington Group. The bipartisan items—sold separately by party, of course—together netted $4,950. Other popular items included a bird hunting and fishing trips in Washington, a week stay on a Florida island home and fishing trips with “Tiger” John Cleek. APRO President Shannon Strunk spearheaded the diverse marketing efforts of this year’s auction. “I am very pleased with the participation—both the folks who donated to the auction and those who bidded on the items. I want to extend a warm ‘thank you’ to all who helped us build the foundation this year,” says Strunk.