"Government is not reason, it is not eloquence, it is force. Like fire, it is a dangerous servant and a fearsome master."
George Washington

Vermont is a perfect example of the old adage "Be careful what you wish for". Prior to 1993, Vermont had no specific statute regarding rent to own. Wishing to 'legitimize the transaction', as well as offer RTO companies and consumers some protection, RTO executives began lobbying the Legislature for a clearly defined statute. A bill modeled on the New York statute was submitted to the Vermont legislature for review. The issue bogged down in committee and no vote was planned. Everyone went home...that's when things went awry.

For some reason, no one knows exactly how or why, the chairman of the committee added language to a piece of pending legislation called the "Economic Progress Act of 1994". The language updated the Uniform Commercial Code (UCC) of Vermont to give regulatory power over rent to own transactions exclusively to the Attorney General. In 4 short sentences, the Attorney Generals office was given the power to develop, write, and enforce the law regarding rent to own in Vermont. Efficient to be sure, but also unconstitutional...or so it was thought.

In 1996, a legislative panel led by Elliot Burg, Vermont's Assistant Attorney General for Consumer Affairs, created a rule that required rent to own stores to disclose effective annual percentage rates (EAPR) for all rent to own agreements. It's a bit of a bi-polar rule, in that Vermont also recognizes that Rent to Own agreements are not credit sales. Nonetheless the rule became effective on January 1st, 1997. Several rent to own companies sued the Attorney General claiming that, allowing the AG to effectively write and enforce law is unconstitutional. The Vermont Supreme Court disagreed. The court held that the Attorney General did not exceed the authority granted him in the statute.

That was 7 years ago. What effect has disclosing EAPR had on business? Although the RTO owners we contacted in Vermont are unanimous in their opposition to disclosing an EAPR on what is effectively a lease, those companies following the letter of the law have experienced no negative effects. That's not to say there haven't been issues.

In 2000, Vermont Attorney General William Sorrell claimed Rent a Vision "altered it's advertised cash prices in a deceptive way". The state alleged that Rent a Vision manipulated the EAPR by raising cash prices. EAPR is determined by the difference between cash price and total to acquire ownership. Raising the cash price effectively reduces EAPR. Rent a Vision denied the allegations but agreed to pay $447,000 in fines and customer reimbursements as part of the settlement. Rent a Vision was acquired by Rent Way in 1999.

Others have fared better. In the months leading up to the January 1, 1997 deadline, independent RTO owners in the state were seriously concerned. "When it first went into effect we thought customers would be totally turned off by it", says Andy Amour, owner of Rental Express in Burlington. But those fears faded quickly as he learned that consumers understand the 'no-obligation' nature of rent to own better than regulators. "I don't feel there should be an EAPR since it's not a sale, but other than a little extra paperwork, it has not affected our business" added Mr. Amour, who has operated Rental Express for 12 years.

Dan Companion, owner of Rent-n-Go (2 locations), said "Consumers have not been distracted by this." He adds "People that utilize rental purchase look at the transaction in very specific terms. I can get it today and return it next week. The idea of EAPR does not enter into their decision to rent." He adds that consumers in the state are completely un-phased by EAPR disclosures.

The Vermont EAPR disclosure rule is often cited by supporters of federal legislation as an example of "What could happen" if the Consumer Rental Purchase Agreement Act is not passed (The Act would override Vermont's rule and eliminate the EAPR disclosure).

Rent a Center went so far as to change its business model in the state to avoid setting the precedent of disclosing EAPR. According to competitors, Rent a Center customers in Vermont sign a lease that obligates them for 18 weeks (Vermont's Attorney General defines rent to own as being an agreement of 4 months or less). Other companies simply disclose an EAPR between 50% and 150% depending on the term of the agreement. Either way, consumers recognize it as moot since, despite what the AG's office claims, far less than 50% rent until ownership is acquired. In the meantime business rolls on and we are happy to report that Rent to Own is alive and well in Vermont.

Vermont is a rural state, population 613,000 (2001). Burlington, Vermont's largest city, is located in Chittenden county. Chittenden county contains 146,000 residents; the average county in Vermont has 43,000 residents.
	Vermont Counties
	click to enlarge

What lessons can be learned? Bureaucrats are expert at turning non-issues into law. When the state interferes in the marketplace, whether by invitation or perceived necessity, what was once 'not broke' will always be 'fixed'.

In a 1993 speech, Edward H. Crane, President of the Cato Institute said it best...

...in a political society business regulation takes on a life of its own, with agencies brimming with bureaucrats who make a living by throwing wrenches into the machinery of the free market. That's why the so-called Clean Air Act requires about $4 billion of expenditures to combat acid rain, when a ten-year $500 million government study concluded that acid rain was a non-problem. Less than one percent of American lakes are acidic and the majority of those are acidic for natural reasons, unrelated to industrial waste.

The great Nobel laureate economist F. A. Hayek used to refer to attempts by bureaucrats and politicians to improve on the marketplace through government regulations as the "fatal conceit." It's an apt phrase, because what the bureaucrats and government planners never really comprehend is that the market is a continuous discovery process. Regulation, by its nature, blunts the discovery process by forcing businesses to act in a prescribed manner, thereby limiting the options from which to discover better alternatives.
Edward H. Crane
Dallas, Texas
July 14, 1993