National rent-to-own giant Rent-A-Center will pay $15.5 million to settle a lawsuit that alleged the company had engaged in unlawful business practices including overcharging customers and failing to inform them of their rights, California Atty. Gen. Rob Bonta said Tuesday.
As part of the settlement, which is still subject to approval, Rent-A-Center would pay $13.5 million in restitution to thousands of customers and $2 million in civil penalties.
“Rent-A-Center repeatedly relied on deceptive and unlawful tactics to pad its bottom line,” Bonta said in a release. "We won't stand by when a company like Rent-A-Center overcharges these hardworking Californians, taking money that is needed for rent, food, or other essential expenses."
The lawsuit, filed by Bonta last August, alleged that in 2014 the company began to impose "an unlawful 15% markup" on the cash price for products customers purchased through its "Preferred Lease" program.
The program involved kiosks set up inside brick-and-mortar retailers such as Ashley Furniture where customers who could not afford to pay cash could enter into a rent-to-own agreement with Rent-A-Center for couches, TV consoles and other household goods. Rent-A-Center would then purchase the items from the retailer and deliver them to the customer.
The customer would make monthly payments on the products with the option to purchase them for a "cash price."
But the "cash price" listed by Rent-A-Center on those agreements was 15% higher than that of the retailer's, a violation of the state's Karnette Rental-Purchase Act, the attorney general's office said.
"Practically, the fact that traditional retailers allow Preferred Lease to operate on their sales floors for the limited purpose of serving customers who cannot pay cash up front (or who cannot obtain financing) means the only price available to a cash-paying customer at the inception of the agreement is the retailer’s price," prosecutors said in the complaint.
Additionally, prosecutors alleged that the company did not properly inform its customers of certain rights, including their right to return products, and misled them about the nature of the program.
Customers who rented merchandise through the in-store kiosks are eligible for restitution and will receive notice of the settlement at their last known mailing address.
The judgment also bars Rent-A-Center from charging a cash-price markup or limiting returns, and requires the company to inform customers of their rights and retrain employees.
Rent-A-Center did not respond Tuesday to a request for comment.
This story originally appeared in Los Angeles Times.