Wednesday, June 12, 2013

A little consumer protection post

A collection of stories recently popped up that highlight the lengths to which some will go to separate people from their money.  In particular, two of these stories highlight the cost of being poor and outside of the traditional banking sector.  We've long been aware of the cost to the poor that frequent check cashing stores (ie, payday loans) and pawnshops, but the emerging area of "Rent-to-own" keeps expanding as opportunities arise.

1) When I first read this story, I assumed it had to be fake.  There's no way people are actually going to "rent-to-own" stores for TIRES, right?  However, after a little research it seems that companies like Rimco, Rent-a-Wheel, and Rent and Roll, are indeed a real business.  The examples used in this article are gut wrenching for me to read because it's a clear example of a business taking advantage of their customers' weak math skills.

"When the tires on their Dodge Caravan had worn so thin that the steel belts were showing through, Don and Florence Cherry couldn't afford to buy a new set.
So they decided to rent instead.
The Rich Square, N.C., couple last September agreed to pay Rent-N-Roll $54.60 a month for 18 months in exchange for four basic Hankook tires. Over the life of the deal, that works out to $982, almost triple what the radials would have cost at Wal-Mart."
"The tires on their Chevy Silverado were in terrible shape, too dangerous to be used for the long drive to his new job as an industrial painter. But they were such an odd size that the cheapest replacement set cost $1,340 at a regular tire store, far beyond Collins' budget.
The Rimco salesman said he'd get her rental tires for the same price and almost no money down — so long as she paid them off within 120 days. What Collins didn't realize was that the cost would skyrocket if she missed the "same-as-cash" deadline.
She found out the hard way.
This spring, Collins, who owns a used-book store, made her 18th and final monthly payment of $164.10, bringing the total price for the tires to nearly $3,000. That works out to the equivalent of more than 120% annual interest, quadruple the highest credit card rates."
I actually hesitated linking to this article because my fear is that someone will see this and say "Hey, you know what the North Country needs?  Rent-to-Own tires where I can charge 120% interest!!"
2) Another company that makes my skin crawl is Coinstar - the provider of the ubiquitous green coin sorting machines spread around retailers everywhere.  They will kindly count your coins in exchange for 10% of your money!!!  So, turn in $50 of coins and they keep $5.  Some people would be say "Hey, $5 to not have to roll 200 quarters?  That's worth it."  However, that's exactly the mentality that Coinstar is looking to take advantage of.  
Well, now Coinstar has come up with a new way to get their 10% and keep you spending.  Rather than just getting 90% of you cash back, they'll now let you fund your Paypal account so you can keep online shopping without missing a beat.  As Susan Waldman would say "Goodness gracious!!".
Maybe one day we'll be lucky enough to have a TD Bank open up in our area where coin sorting is offered for FREE.
3) This story may have made the local news, but if it hasn't you need to see this list.  A Tampa newspaper did a nice piece of research breaking down how much money various charities spend trying to raise MORE money.  The results are discouraging.  You'll notice that many of the worst offenders sound like real charities - for example, the Kids Wish Network sounds like some sort of mash up of Children's Miracle Network and Make a Wish Foundation.  If a newspaper can make this determination by looking at tax filings it seems like IRS could as well.  I'd love to see a bill reach the floor of Congress that said "if you spend less than 50% of your donations on direct aid for 2 consecutive years, you lose your tax-exempt status."  However, I'm sure there are lobbyists from somewhere in North Dakota where the soliciting telemarketers live, that would argue that this would be a job-killer.  Sigh. Politics.

PS - Thanks for hanging in there during some lean posting over the past few months.  I promise to pick up the pace :)

1 comment:

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