RTO and Politics

Monitoring legislation that could affect the RTO industry.

It is an old saying, never truer than today: “No man’s life, liberty, or property are safe while the legislature is in session” (Gideon J. Tucker, 1866). It is difficult to avoid politics during these days of acerbic hyperbole being flung daily by each side against the other, even if you are not doing any of the flinging.

The RTO world certainly cannot escape politics, nor should dealers even try, and while political issues facing the industry might not threaten life or liberty, yet, they certainly affect property and one’s ability to accumulate it.

It is late summer, and most legislatures have either gone home until next year or at least are on vacation, and so it is a useful moment to look at the kinds of issues that have percolated at the state and federal levels that either have or would have impacted RTO had they been enacted or will impact RTO if the legislature comes back and passes them. It is a longer list than you might suspect, and know that at times, it has been longer.

Beyond the splash of the annual APRO Legislative Conference, the occasional public hearing on RTO legislative proposals in D.C. (the last one was in 2005), and occasional state RTO issues that arise, there exists—largely behind the scenes—a pool of professionals with sophisticated systems in place to monitor legislative activity that could have an impact on RTO business practices and economics, either affecting everyone federally or dealers in certain states.

It is not just RTO-specific proposals that are being monitored. There are lots of bills introduced that could affect businesses generally, their owners, their employees, their customers, their vendors, or their lenders. APRO keeps an eye on all bills that could affect rental dealers. Since its inception, the association has had a government relations committee in charge of such activity. Public companies have their own lobbyists and systems. APRO electronically monitors all bills that are introduced that contain any of the key words identified as possibly relating to the business. It has in the past, when the need has arisen, hired its own lobbyists to work on specific legislative issues.

Some state associations are in the game with their own lobbyists on retainer in their state capitals. A few states have their own legislative days, when dealers visit state capitals and representatives to discuss issues of the day. Some of these efforts are on call every single day, including Saturdays and Sundays, to ensure, insofar as possible, no legislative ills befall RTO.

These efforts go largely unnoticed, unacknowledged, and unpublicized by dealers in the day-to-day challenge to “rent and collect.” Even so, it is happening. Here is a peek behind the curtain at the kinds of issues being monitored in order for you to be able to operate your business as safely and profitably as possible.

What has passed in 2019 so far

1. Texas amended its Theft of Services law by declaring that RTO transactions are no longer covered by that law. APRO sent out six separate APRO Alerts apprising dealers of this issue. APRO sent staff to a public hearing last summer before any bills were filed. Rental dealers touched on the issue with legislators in Austin and were able to tweak the original bill slightly, but there is a new law that will curtail criminal prosecution of RTO thieves in the state, effective Sept. 1, 2019.
   
2. Arkansas amended its RTO statute to resolve an ongoing conflict between tire and wheel rental dealers and vehicle lenders who repossess cars or trucks with rented tires or wheels on them. RTO dealers working through the newly reorganized Arkansas Rental Dealers Association negotiated with used-car dealers, including a state representative who was pushing an anti-RTO bill, hired a lobbyist, and were able to amend the state RTO statute and forge a satisfactory compromise between rental dealers and the lenders in possession of the dealer’s rental property. Briefly, once notified, lenders must cooperate with rental dealers and allow them to recover their property in exchange for replacement tires or wheels or else pay the dealer for it.
   
3. Indiana made a number of amendments to its RTO statute. It clarified that while tires and wheels qualify as RTO property, “component parts” of vehicles do not and therefore cannot be rented. Neither can pets. The new law further defines an “Initial Rental Payment” in an RTO kiosk transaction to include any payments made directly to the retailer, which payments must be included in the total RTO price. The Rental-Purchase Dealers Association of Indiana is an organized group with its own lobbyist and negotiates regularly with the Department of Financial Institutions (DFI), the regulatory body with oversight over the RTO industry. Relations with the DFI have historically been good, and the two sides have negotiated 16 different amendments to the Indiana RTO statute over the years. ana is a registration state, and the DFI audits every RTO company and store in the state every year, which doubtless contributes to the perceived need to revisit the state statute so often.
   
4. Washington state did not amend its RTO statute, but it did amend the state employment laws declaring noncompetition provisions in employment contracts to be void and unenforceable for employees making less than $100,000 per year and for independent contractors making less than $250,000 per year. The new law covers RTO companies and every other employer in the state. The new law also renders unenforceable “no-poach” provisions in franchise agreements that prevent franchisees from trying to hire employees from other franchisees or the franchisor.

What has been introduced in 2019, is RTO-specific, but has not passed:

1. North Carolina has introduced RTO-specific legislation that would bring North Carolina law in line with the other 46 states that have RTO-specific statutes. Readers will recall that North Carolina has never had an RTO statute. Rather, the North Carolina Retail Installment Sales Act defines an RTO transaction as a credit sale unless there is a final balloon purchase option price that is greater than 10 percent of the original cash selling price. The balloon was intended to draw a line between the rental part of the transaction and the purchase part.
   
   That has been the law since 1983, and rental dealers have all had an 11 percent final balloon purchase option price since then. Most state RTO statutes prohibit balloon payments of any size, so multistate dealers must have a different business model for North Carolina. No sooner was the bill introduced than it attracted the attention of various consumer advocate groups that have been lobbying for an assortment of price controls added to what is essentially a disclosure bill.
   
2. Tennessee reintroduced a bill to ensure that used tires meet certain safety standards before they can be resold or rented. The same bill was introduced last year and went nowhere.
   
3. New York has an assortment of bills in the hopper that would affect RTO, but only one is RTO-specific. That is a bill to remove RTO from the theft of rental property statute, similar to the law that was enacted in Texas and is also the law in Virginia and South Carolina.
   
4. North Dakota saw a peculiar bill introduced that would require consumers to initial every paragraph in a rental transaction. Mississippi has had a similar requirement all along in its RTO statute, and dealers have been able to accommodate that requirement without incident there.

What has been introduced, has not passed, is not RTO-specific, but would impact the business:

1. While there is an unusual amount of sound accompanied by equal measures of fury, and a number of bills in D.C., the Congress is hopelessly deadlocked, and the only bill with any real chance of passing this term is the “Stopping Bad Robocalls Act,” which just passed the House by a vote of 429-3. A similar bill has already passed in the Senate, and the two bodies are expected to present the President with agreed-upon language in the fall. Phone companies will have to adopt call-identification tools and offer free call blocking to consumers. The FCC will have enhanced enforcement powers and higher fines for violations of the law. There were 48 billion robocalls made in 2018. Robocalls to customers who opt in will still be OK. Robocalling strangers will not. The new law should not have much, if any, impact on RTO business practices.
   
   Rep. Waters has introduced the Consumers First Act, a bill that would expand the authority of the CFPB. Sen. Brown has introduced the Arbitration Fairness and Consumers Act, aimed at curbing the use of arbitration agreements in consumer transactions.
   
   Sen. Cruz has introduced a bill to do away with the CFPB altogether. Rep. Cohen has introduced the Fair Access to Credit Scores Act of 2019 to allow consumers to get free credit reports. Several other MOCs have introduced similar bills. Sen. Gillibrand has introduced the Protections in Consumer Lending Act, aimed at preventing discrimination in consumer lending transactions. Sen. Durbin has introduced the Protecting Consumers from Unreasonable Credit Rates Act, an attempt to establish a federal usury rate. Sen. Sanders has introduced the Loan Shark Prevention Act, with a similar goal. Sen. Hawley has introduced the Do Not Track Act to safeguard consumer privacy when wandering around the Internet by establishing a national “do not track” system. Rep. Speier has introduced the Repeated Objectionable Bothering of Consumers on Phones Act (some bills have better titles than others). Sen. Kennedy has introduced the Own Your Own Data Act, designed to prevent the collection of data or information from the Internet. And the list goes on.
   
   The industry is watching 75 federal bills because some bill might get a head of steam and start moving, and there is ever the danger that RTO restrictions get tacked on at the end.
   
2. There are any number of state Personal Information Protection Act bills pending around the country. Almost every state has one or more such bills introduced. There is huge concern over identity theft and what to do about it, with no real consensus. Legislators want to protect consumers’ privacy, but that horse seemingly left the barn some time ago. Technology has run far beyond government’s ability to control it, for better or worse. The effort is underway to rein in parts of it. It remains to be seen whether that is possible.
   
   Most of these bills seek to control how companies collect information from consumers, how they use it, how they safeguard it, and whom they sell it to. The bills try to give consumers control over what happens to information they submit over the Internet, among other things, by allowing consumers to get the names of all entities with whom their private information is shared. In addition, companies collecting private information must offer identification theft prevention and mitigation services. Some of these bills are likely to pass. You are still being watched. Be careful.
   
3. There are several bed-bug bills pending in the states. Those bills put requirements on landlords and other “owners of lodging facilities” to keep their properties free of bed bugs and to be liable for infestations. The danger, of course, is that these bills get expanded to include furniture and bedding providers, which could include RTO dealers.
   
4. There is activity at the state level concerning wage and hour. There are bills to raise the minimum wage in a number of states. Passage of such legislation would almost certainly affect RTO dealers who have a lot of entry-level positions with wages at or only slightly above current minimum wage levels.
   
5. There are bills concerning automatic renewal provisions in consumer contracts, basically outlawing their use. These are the kinds of provisions that more typically exist in cable TV and telephone service contracts. Unless you cancel, the contract renews automatically, sometimes for lengthy periods. RTO does not work that way and, in fact, is just the opposite. Unless the RTO customer renews, the agreement expires. Even so, these bills are being monitored to ensure that RTO does not get added at the last minute.
   
6. There are bills on both coasts to prohibit the use of credit checks in employment. Lots of employers, including RTO dealers, run credit on job applicants. There is evidence that bad credit history goes hand in hand with poor job performance. These bills, if enacted, would take away this assessment tool from employers.
   
7. Several states have bills outlawing price discrimination on the basis of gender or gender identification. There is no evidence that RTO dealers are charging females higher rental payments than males or vice versa, but the bills are being watched anyway.
   
8. There is a bill in New York state labeled Harper’s Law that would require all “clothing storage units” 27 inches or taller to be affixed to the wall so that they cannot tip over if children climb on the drawers. Readers may recall that IKEA recalled several million dressers and paid a multimillion-dollar fine over this issue a few years ago. RTO dealers should expect dressers to be regulated in the near future, similar to how stoves have been regulated with requirements to attach them so that they cannot tip over if a child steps on an open oven door.
   
9. Arbitration and class-action waivers are always popular topics for regulation, and many states have bills pending that would thwart companies’ ability to require arbitration in either consumer contracts, employment agreements, or both. These bills are going decidedly against the grain and the U.S. Supreme Court’s decided preference for arbitration expressed in at least five different decisions involving consumers.
   
10. There are bills here and there concerning caps on late fees and extended grace periods. Oklahoma, for example, has a bill that would give a 14-day grace period for late fees in all consumer contracts.
    
11. There are used-bedding bills in several states that would require companies dealing in used bedding to have procedures and policies in place to ensure the cleanliness of the products being resold. These bills would almost certainly cover RTO dealers. Dealers already have Department of Health regulations in many states that govern used bedding.
    
12. Some businesses, mainly in big cities so far, have quit taking cash. Now there are bills pending to outlaw that practice, the argument being that it discriminates against the poor, who may not have alternative methods of payment.

These are not all of the bills that have been flagged, read, and are being followed. They number in the hundreds. It is one of the important services APRO provides for you and is how part of your dues money gets spent. When adverse legislation gets going, the association does not have the wherewithal to beat it back single-handedly. Happily, it does not have to. Once a dangerous bill has been spotted and is moving, APRO can rally dealers at the appropriate level, be it in a state or federally, and dealers have always responded with their time and treasure. It may not be a perfect system, but it has been working now for nearly 40 years, and tomorrow you will all be free to open your doors and start renting. APRO members who want more information about any of the bills in this article are welcome to contact the APRO office.

Ed Winn III serves as APRO General Counsel. For legal advice, members in good standing can email legal@rtohq.org.