Following is a statement issued by Rent a Center
in response to the courts ruling.
On December 10, 2003, we were notified that
the Superior Court of the State of California for the County
of San Diego granted the plaintiffs' motion for class
certification in the coordinated proceeding filed against us
by Benjamin Griego and Arthur Carrillo, alleging violations of
California's Rental Purchase Act and Consumer Legal Remedies
Act. The class includes our customers in California from
February 1, 1999 through January 31, 2002.
In their amended complaint, the plaintiffs
allege various claims, including that the Company's cash sales
prices exceed the pricing permitted under the Rental Purchase
Act, that the guaranteed merchandise replacement benefit in
the third-party membership program offered by us to our
customers in California violates the restrictions in the
Rental Purchase Act relating to the sale of property
insurance, that the membership program prematurely offers
service contracts to our customers, and that the fee for the
membership program is excessive. In addition, the plaintiffs
allege that our form of rental purchase agreement in
California does not strictly comply with the type-size
requirements under the Rental Purchase Act. The plaintiffs
further allege that our rental purchase documentation
improperly references certain merchandise as "previously
rented" rather than "used," does not contain all of the
required disclosures and terms of the transaction, and
includes language that the plaintiffs interpret as affording
us rights not permitted under the applicable California
statutes.
In accordance with a previously issued opinion
from the California Legislative Counsel, we believe that the
pricing formula utilized by us in California complies with the
Rental Purchase Act. In addition, we believe that under
California case law, courts have found that arrangements
similar to the guaranteed merchandise replacement benefit
offered to our customers do not constitute insurance.
Upon notification of the alleged violations,
we promptly modified our rental purchase documentation in
California, including increasing the type-size in our rental
purchase agreements from 9-point type to 10-point type and
modifying the language in our rental purchase documentation
to, among other things, refer to "previously rented"
merchandise as "used." In addition, we dispute plaintiffs'
interpretation of the language in our rental purchase
agreement and note that the rights the plaintiffs contend were
granted to us were never asserted by us. In connection with
the revisions described above, we also modified our rental
purchase documentation to clarify our disclosures and the
disputed language. As part of that process, we promptly
communicated to our California customers that their statutory
rights remained intact. Accordingly, we believe that no harm
to our customers could have occurred as a result of these
claims.
The plaintiffs have not alleged specific
damages in the amended complaint, but contend that no proof of
actual harm or damage on the part of the individual consumer
is necessary to establish recovery for these claims, which we
vigorously dispute. Under the Rental Purchase Act, a consumer
damaged by a violation of the Rental Purchase Act is entitled
to recover actual damages, statutory damages equal to
twenty-five percent of an amount equal to the total amount of
payments to obtain ownership if all payments were made under
the rental purchase agreement (but not less than $100 nor more
than $1,000), reasonable attorney's fees and court costs,
exemplary damages for intentional or willful violations, and
equitable relief. A consumer who suffers any damage from a
violation of the Consumer Legal Remedies Act is entitled to
recover actual damages, injunctive relief, restitution,
punitive damages, certain civil penalties and attorneys' fees
and costs. The recently certified class encompasses class
members who entered into approximately 400,000 rental purchase
agreements. Such class members also purchased approximately
167,000 memberships. With respect to such rental purchase
agreements, we believe that twenty-five percent of the total
amount of payments to obtain ownership (the maximum percentage
applicable to statutory damages) was approximately $500 per
agreement on average.
We believe the claims in the plaintiffs'
complaint are unfounded and that we have meritorious defenses
to the allegations made. We further believe that a class
should not have been certified by the court. Although we
intend to vigorously defend ourselves in this case, we cannot
assure you that we will be found to have no liability in this
matter.
