Rental companies use obscure law to impose jail threat
Statute puts unwitting customers at risk of criminal theft charges.
When Melinda Sandlin walked out of Discount Furniture in Austin in late 2014, she was sure the store had put her on a payment plan to buy a new bedroom suite worth $2,750.
A year later, after realizing she had sent in more than $3,000 for her seven-piece set, she figured she was done. So Sandlin told the store clerk she wasn’t going to be making any more monthly payments.
“I already bought it out,” she recalls telling them. “And they’re like, ‘Oh no, read your contract. It’s a rental contract. It’s not a purchase contract.’”
That’s when her nightmare began.
Sandlin, 43, had signed a “rentto-own” contract through a company called Acceptance Now — a division of Plano-based Rent-A-Center, one of the largest rent-to-own companies in the United States. Sandlin had no clue the company had embedded itself in regular furniture stores around the country.
Not only would Sandlin have to pay another $5,000 in order to keep her bedroom set — on top of the more than $3,000 she’d already paid — she found out the company has a legal hammer unique to the rental industry. And taped phone
calls indicate the company threatened to use it on her.
“We have to get a payment,” the store’s rentto-own manager, Minnie Tovar, told Sandlin during a tense phone call that Sandlin recorded. “We have to resolve this or we do file theft charges.”
Rental companies can avail themselves of a little-known law written decades ago by the rental industry lobby — in Texas and in many other states — that can turn a dispute over a love seat or big-screen TV into a criminal offense report, a trip to jail and even felony theft charges.
In some cases, the customers have already paid thousands of dollars by the time they default, court records show. But if they don’t pay the remaining balance, they can face theft of service charges — even if they return the goods.
Luckily for Sandlin, a local lawyer agreed to help her free of charge. Once she gave the furniture back, her dispute ended without the involvement of law enforcement.
Others haven’t been so fortunate. A monthslong investigation by The Texas Tribune and NerdWallet found rent-to-own companies have pressed charges against thousands of customers at police departments in Texas and in other states.
Policies and record-keeping vary wildly even county to county, so it’s impossible to say for sure how many people have been arrested or prosecuted.
But in McLennan County, where Waco is located — at least six rent-to-own companies pressed charges against more than 400 customers in the past three-and-a-half years, police offense reports show.
Cops as collectors
Rent-to-own customers who get charged with a crime may not realize they could be prosecuted for failing to adhere to the terms of their contracts. When they do, it’s generally a humiliating and life-altering experience.
“What are we supposed to do, just write off that each time a customer skips out on us?” said Darrell Perkins, store manager for Advantage Furniture in McLennan County. “Then people aren’t making no money ’cause you’re giving all your merchandise away.”
Critics say the companies are using the criminal justice system as a collection agency against people with limited resources — threatening them to pay up lest they be locked up.
“It’s just debt collection by the police,” said attorney Jonathan Sibley, whose firm has represented defendants who fall into the crosshairs of rent-to-own stores in Waco. “Other companies can’t call and threaten prosecution to collect a debt.”
In the tiny town of Bellmead, adjacent to Waco, the volume of rent-to-own cases was so high earlier this year that the police department had to assign an investigator to them to take pressure off uniformed officers, said Sgt. Kory Martin, the department spokesman. After receiving only two such reports from 2011 to 2013, the department has seen 82 complaints by rentto-own companies against their customers since 2014.
More than 70 percent of those complaints since 2014 have come from a single store, Advantage Furniture, located in a strip shopping center off Interstate 35. That’s where single mother Maribel Walker, 36, rented bedroom and living room furniture for her and her kids in April 2015.
Walker acknowledged that she stopped paying for the furniture after a few months and didn’t return it for more than a year. She said a string of personal calamities — she lost her job, got evicted from her home and briefly went to jail for driving with an invalid license — overwhelmed her and she forgot to make payments after she put the furniture into storage.
In February, Walker said she finally felt she was getting her life back together when she went to get her driver’s license renewed — and was promptly arrested on felony theft charges punishable by up to two years in jail.
“I was crying because, like I said, it was supposed to be my new beginning . ... And to be taken away like that,” she said, fighting back tears. “I mean, it could have been solved a different way.”
Perkins, the store manager at Advantage Furniture, said he made attempts to reach Walker to get a payment or have the goods returned. Walker said she was never contacted after she moved.
Perkins confirmed that Walker returned the items after she was charged with felony theft. But even if he were to ask the DA to drop the charges, he said it’s too late to help Walker. He’s tried to do that with others his store has accused of theft, to no avail.
“They won’t even talk to us about it. Once the warrant’s issued, it’s an active warrant,” Perkins said. “So they have to be arrested, and they have to go to the DA.”
If Walker were indebted to a credit card company or a car dealership — which look at a person’s creditworthiness before approving financing — she would have faced civil collection procedures such as lawsuits or a repossession.
But because rent-to-own companies can use criminal laws when customers default, Walker faces felony prosecution — and along with it the fear that a felony record will keep her from getting a job and providing for her family.
Walker’s case is still pending.
McLennan County District Attorney Abel Reyna did not respond to questions from The Texas Tribune.
The law makes it easy for rent-to-own companies to pursue theft charges against their customers.
In Bellmead, the rental stores themselves provide the facts needed to establish a case and then turn them over to the police — usually several cases at a time.
“There really is no longterm investigative process. It’s, ‘What do you have?’ The evidence is pretty much bundled and presented to us,” said Martin, the police department spokesman.
Not every county is as active as McLennan, where 32 of 38 theft of service prosecutions since 2015 have involved rent-to-own customers. In Bexar County, where San Antonio is located, the district attorney’s office reported receiving no theft of service cases involving rentto-own companies over the same period.
In Tarrant County, home to Fort Worth, about one of every five theft of service cases involved rent-to-own companies in the past twoand-a-half years.
Law dates to 1977
The law that Bellmead and other authorities in Texas are using to prosecute rent-toown customers was added to the Texas Penal Code in 1977. Only two people testified in favor of the bill at the time: a pair of lobbyists for the rental industry. No one opposed it.
One of the lobbyists, Travis Phillips, said he drafted the legislation at the behest of Texas equipment rental companies and got a Houston state senator, Walter “Mad Dog” Mengden, to carry it for them.
The solution didn’t seem radical at the time. Phillips wrote a new section of the penal code, under “theft of service,” just for rental companies. It’s in the same section of law that a hotel owner might use if a guest stayed the night and left without paying.
But when it comes to rentals, the 1977 provision turned the concept of “innocent until proven guilty” on its head. On a scratchy recording of the Senate committee hearing 40 years ago, Phillips can be heard explaining that the goal of the industry was to “put the burden on the person who is the actor in this case, the person who rented the property, to come forward and explain their failure to return the equipment.”
The result: People are presumed to have stolen rented items if they sign a rental contract, don’t return them as required and then don’t respond to a certified letter sent by the company. The law doesn’t require receipt of the letter — only proof that it was sent. There are similar provisions in many of the rental theft laws around the country.
“The Legislature, in this business-friendly environment ... was all too eager to allow commercial interests to use the criminal statutes to clean up bad decisions they may have made in entering into contracts with people,” said Tom Krampitz, who was assistant director of the Texas District and County Attorneys Association when the bill was passed. “The reason why the (rental) industry deserves a special deal, without sounding too jaded, is they had a good lobbyist.”
Four decades later, rent-toown companies are using the Texas law far more aggressively than the equipment rental businesses that originally pushed for it.
In McLennan County, for example, rent-to-own disputes made up 98 percent of the theft of service complaints filed with the Waco and Bellmead police departments from 2014 through the first half of 2017, according to offense reports provided to the Tribune and NerdWallet under state freedom of information laws.
There wasn’t a single report of theft of rental equipment services.
At least eight states — including Florida and Texas — have laws that specifically make the theft of rental services a crime, according to the American Rental Association. That’s the trade group for companies that rent out construction equipment, tools and event trappings such as banquet tables and tents.
Rental Association lobbyists actively promote the adoption of theft-of-service laws around the country, and the association isn’t shy about touting its success at getting new statutes enacted in Idaho, Illinois and Iowa in 2016 and 2017.
The rent-to-own industry has its own trade group, the Austin-based Association of Progressive Rental Organizations. But the association hasn’t made criminal statutes a priority. Instead, the group has fought off attempts in Congress and in state capitals to introduce new regulations that could limit how much the companies can charge and how they can collect debts.
A legislative fix
The threat of arrest certainly got the attention of Sandlin, the Austin woman who was warned about the possibility of criminal charges over the phone by the representative from a division of Rent-A-Center.
Sandlin said she never intended to rent furniture. In October 2014, after moving into a new house, the suburban mom was looking for a bedroom set and actually had enough money to buy one. But she thought paying for it over time would help her establish a credit history.
So she went to Discount Furniture in Austin and picked out the seven-piece set.
“We were discussing the payment options, and I had asked if I could just pay it upfront because I had the cash to pay for a whole bedroom set at that time. And they told me, ‘If you want to improve your credit, you need to make at least three or four payments,’” she recalled.
Sandlin said she never would have signed the contract if she’d known she was actually doing business with a rent-to-own company.
She wasn’t aware that Rent-A-Center’s Acceptance Now division caters to middle-class Americans just like her. Nearly 1,300 retailers, including Rooms to Go and Ashley Furniture, now offer lease-to-own arrangements through Acceptance Now representatives or kiosks in their stores.
“If I wanted to rent, I would have gone to an Aaron’s, I would have gone into an actual Rent-A-Center store,” Sandlin said. “They never once mentioned to me that I was going to be renting it, not once.”
Tovar, the Acceptance Now manager at Discount Furniture, disputed Sandlin’s account and said the contract has “‘lease agreement’ all over it.”
Sandlin acknowledged the lease language is in the “Rental-Purchase” contract she signed. But she believes she was misled, and by the time she realized she had signed a rent-to-own contract, it was too late.
Sandlin said she wanted to share her story with The Texas Tribune and NerdWallet so that others don’t expose themselves to criminal prosecution by unwittingly signing rent-to-own contracts in otherwise traditional furniture stores.
“See what you’re actually signing,” Sandlin said. “Because once you sign a contract, there’s no getting out of it.”
So what would happen to rent-to-own companies if they couldn’t hold the threat of arrest over the heads of their customers?
Not much, said General Counsel Ed Winn III, the head lawyer for the Association of Progressive Rental Organizations. He noted that in South Carolina, which took rent-to-own transactions out of the state’s theft of service law in 1984, financial losses are no worse than in states that have it.
That approach would suit state Rep. Gene Wu, a Houston Democrat, just fine. Wu remembers taking a dim view of rent-to-own theft cases as a former Harris County prosecutor and he said he’s now mulling legislation to tweak the law when the Texas Legislature meets again in 2019. He said if the rent-to-own industry doesn’t resist it, he expects “an easy lift.”
“If somebody got something and they end up not able to pay because they lost their job or they gave them more credit than could afford, that should be a purely civil matter,” Wu said. “The police should not be involved at all.”