There is no Senate companion legislation and sources expect that there will be no interest on the part of the Republican Senate Majority to submit a bill.

Photo RTO Online

Nick Barrella presenting to the New York Rental Dealers Association at the group's recent meeting in Verona, New York.

New York Bill, A66C, a bill to amend New York's Rental-Purchase law, has been added to the Assembly Codes agenda for Tuesday, June 10th where it will likely be reported from to either Ways & Means or the Rules Committee. There is no Senate companion legislation and sources expect that there will be no interest on the part of the Republican Senate Majority to submit a bill. If this holds true, the proposed amendment would remain in committee.

In addition to other changes, A66C directs the Consumer Protection Board and the Department of Economic Development to perform a survey to determine the average markup applied by retailers to consumer goods. The agencies would use the survey to recommend formulas for determining limits on Cash Prices and Total Rental-Purchase Costs that rent-to-own dealers can charge.

Nick Barrella, Managing Partner of Capital Group LLC, an advocate working with the New York Rental Dealers Association, said, "This proposal is a costly, unnecessary and inappropriate change from current New York law." Barrella sent a letter on behalf of the Association to New York lawmakers urging them to Vote No on A66c. The letter clearly states the impractical nature of the proposed amendment.

Following is the opposition letter in its entirety:

On behalf of the New York Rental Dealers Association, I am writing to urge your opposition to A66C Pheffer. We respectfully offer these comments and hope to work with you to resolve any concerns you have regarding our industry and how it is regulated in New York State.

Founded in 2000, the New York State Rental Dealers Association (NYSRDA) represents over 250 rent-to-own stores with nearly 1,500 employees operating in New York. NYSRDA, the statewide advocate for rent-to-own companies, is committed to promoting and maintaining a competitive industry for our members across the Empire State.

New York State -- like 47 other states, the District of Columbia, Puerto Rico, and Guam -- already has a comprehensive and effective Rental-Purchase statute that works extremely effectively to educate and thoroughly protect consumers who choose rental-purchase. New York's law also creates a balanced legal environment, one that provides real and valuable protections for consumers, achievable compliance requirements for rental-purchase merchants, and predictable enforcement by the courts.

The current Rental-Purchase statute already limits the Total Cost of rental-purchase. However, while undoubtedly well intentioned, A66C will saddle New York taxpayers with enormous costs for futile administrative agency efforts to determine average retail markups for hundreds of products. Such averages are not merely illusive, but constantly changing in response to market forces, and therefore, are impossible to ascertain accurately. These averages are to be used in formulas for determining maximum charges allowed in rental-purchase transactions. A66C is unworkable because it does not take into account the higher costs of operating a rental-purchase business. Rather, it arbitrarily ties rental-purchase charges to retail averages without any consideration whatsoever of the costs and profit margins associated with offering rental-purchase transactions.

Additionally, competition in the rental-purchase industry in New York is keen. While approximately 10 new stores have been opened by various companies since 2003, a national franchise operation has seen its franchisee store count dwindle from 17 to 3. Arbitrary price controls will have severe negative impact on the ability of rental-purchase merchants, especially small independents and start-ups, to survive.

The package of services offered to rental-purchase customers, including the right to terminate without penalty, delivery and pick-up, and repairs, are costly but are the core of the flexible rental-purchase transaction. Given the industry's modest profit margins, A66C will potentially eliminate rental-purchase in New York State and deny merchandise to customers who might not otherwise be able to enjoy the benefits of those products.

As you know, leasing a car is more expensive than paying cash. Renting formal wear, party equipment or videos is always more expensive on a per-use-basis than buying the item at retail. Leasing is more expensive for a merchant to offer due to higher operational costs not incurred by a typical retail merchant.

In addition to the services provided to their rental-purchase customers, merchants refurbish returned merchandise and incur inventory and merchandise loss costs due to theft or damage. The current New York Rental-Purchase statute requires that all of these costs be clearly and conspicuously disclosed and ensures that each rental-purchase customer can make an informed choice.

A66C directs the Consumer Protection Board and the Department of Economic Development to perform a survey to determine the average markup applied by retailers to consumer goods. The agencies are directed to use the results of the survey to recommend formulas for determining limits on Cash Prices and Total Rental-Purchase Costs that rental-purchase merchants can charge.

This approach is impractical because "average markup" for any given item is continually changing, based on such things as competition and consumer demand. The proposed survey will be outdated before it is completed, and will lock rental-purchase merchants into maximum charges that are out of step with the market. For a number of reasons, this proposal is a costly, unnecessary and inappropriate change from current New York law:

1. RTO dealers currently offer over 300 products from more than twenty manufacturers. The proposed survey will cost New York taxpayers tens of thousands of dollars, will be of questionable accuracy, and will establish outdated averages of ever-changing and disparate retail prices so as to be of no useful value. Consider the effort required to gather retail prices for all brands and styles of all electronics, appliances and furniture offered by rental-purchase merchants. A66C also requires that the survey include gathering prices for automobile accessories, musical instruments and jewelry. Finally, it requires that used merchandise prices be gathered, as well.

2. The retailers from whom the agencies will need to ascertain average markups will not be likely to cooperate, but even if they do, there will be no economically feasible way to verify or monitor the accuracy of data they supply.

3. The rental-purchase industry is highly competitive and its Cash Prices and Total Costs reflect that competition. Current New York State law already ensures that customers can comparison shop with ease, because total rental-purchase charges are tied to the Cash Price and full disclosure of all rental-purchase charges is already required.

4. Retailers are not forced to measure prices against others in their markets. If a survey is necessary to determine fair and reasonable cash prices for rental-purchase customers, why shouldn't it apply to all retailers to ensure that all New York consumers pay fair and reasonable prices? Competition works in retailing and it works in rental purchase.

5. The Rental-Purchase merchant is not in the retail business. The higher operational costs a rental-purchase merchant incurs are unique and not shared by traditional retailers. A "Cash Price" set by a rental-purchase merchant reflects his unique costs and competitive circumstances as a rental-purchase merchant, not a retailer.

6. Even if average retail markups existed and could be determined, forcing rental-purchase merchants to sell merchandise at prices tied to such averages would likely eliminate rental-purchase for New York.

For these reasons, I urge you to vote "No" on A66C and appreciate the opportunity to present the New York State Rental Dealers Association's position on this very important matter.

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