On March 15, 2006, the Supreme Court decided Perez v. Rent-A-Center, 186 N.J. 188 (2006). By a 6-1 vote, with Justice Rivera-Soto issuing a partial dissent, the Court held in an opinion by Justice Long that “rent-to-own” contracts are subject to the Retail Installment Sales Act, N.J.S.A. 17:16C-1 et seq. (“RISA”), to the interest rate limitation contained in the criminal usury statute, N.J.S.A. 2C:21-19, and to the Consumer Fraud Act, N.J.S.A. 56:8-1 et seq. (“CFA”). The Court thereby reversed the decisions of the Law Division and the Appellate Division that had granted summary judgment against plaintiff and the putative class.
Rent-to-own, Justice Long wrote, had grown from modest beginnings into “a multi-billion dollar business.” Dealers rent furniture, appliances, and other goods (even jewelry) to persons who pay for those items weekly or monthly. After a given number of rental payments, or payment of a set amount, the consumer can own the property being rented.
Though such arrangements were rife with the potential for abuse, Justice Long also quoted a Federal Trade Commission report that noted the benefits of rent-to-own. “Rent-to-own transactions offer immediate access to household goods for a relatively low weekly or monthly payment, typically without any down payment or credit check. These terms are attractive to many consumers who cannot afford a cash purchase, may be unable to qualify for credit, and are unwilling or unable to wait until they can save for a purchase.”
After dispensing with a threshold issue of collateral estoppel that defendant presented, Justice Long turned to the merits. She first went through a historical analysis of the differences in treatment between the taking of interest on a loan as opposed to on the purchase of goods, dating back to 19th century cases in England. Justice Long noted that the tide had begun to turn against the artificial distinctions that had prevailed in this regard. She then turned to RISA, quoting the definition of “retail installment sales contract,” which was key to the Court’s ruling:
“Retail installment contract” means any contract, other than a retail charge account or an instrument reflecting a sale pursuant thereto, entered into in this State between a retail seller and a retail buyer evidencing an agreement to pay the retail purchase price of goods or services, which are primarily for personal, family or household purposes, or any part thereof, in two or more installments over a period of time. This term includes a security agreement, chattel mortgage, conditional sales contract, or other similar instrument and any contract for the bailment or leasing of goods by which the bailee or lessee agrees to pay as compensation a sum substantially equivalent to or in excess of the value of the goods, and by which it is agreed that the bailee or lessee is bound to become, or has the option of becoming, the owner of such goods upon full compliance with the terms of such retail installment contract.
Justice Long found that this plain language compelled the conclusion that rent-to-own contracts fell under RISA. The rented goods were “of the type described in RISA—for family, personal, or household use,” and the terms “retail seller” and “retail buyer” were uncontroversial. Defendant contended, however, that RISA was inapplicable because there was no “absolute and unequivocal obligation on the part of Perez to purchase the items she leased. Justice Long rejected that argument, noting that RISA did not require any such absolute obligation.
Other defense arguments failed even though the Court recognized that “Perez’s rent-to-own contracts are not a perfect fit with the words of the statute.” The Legislature’s intent called for a ruling for plaintiff. “In enacting RISA, the stated legislative purpose was protection of the public interest through the regulation of the charges associated with the time sale of goods. By including conditional sales, chattel mortgages, security interests, leases, and similar instruments within RISA’s protective ambit, the Legislature signaled that it intended to sweep into the Act as many cognate agreements as possible, even those that did not strictly fall within a denominated category.” Along with the fact that RISA, a remedial statute that is to be construed liberally, that intent won the day for plaintiff.
After a separate, but equally exhaustive analysis of the criminal usury statute and the parties’ arguments, Justice Long held that its interest rate limitation applied to RISA transactions. Finally, the Court rejected defendant’s contention that because RISA applied, the CFA could not also apply. Justice Long observed that RISA and the CFA were complementary, and defendant had not “suggested, even obliquely, any conflict between the CFA and RISA, let alone one of a direct and unavoidable nature, nor do we perceive one. Accordingly, the acts must be construed in concert with each other and Rent–A–Center’s contention that only one can be applicable at a time must be rejected.”
This opinion is one of the key consumer protection rulings of the Court, written by a Justice whose pedigree included service as Director of the Department of Consumer Affairs. It correctly left behind antiquated and artificial constructs, and instead recognized the Legislature’s intent to protect rent-to-own consumers in the modern age.