Progressive Leasing will pay $175 million to settle Federal Trade Commission charges it misled consumers about the price of items purchased through its plans. The company markets rent-to-own payment plans at more than 24,000 retail locations – including stores such as Best Buy, Lowe’s, Big Lot’s, and Kay Jewelers – in 46 states and the District of Columbia.
Consumers who visited retailers to buy items such as furniture, jewelry, or cellphones were often told that Progressive’s payment plans were “same as cash” or “no interest” – leading consumers to believe they wouldn’t be charged more than an item’s sticker price, according to the FTC’s lawsuit filed Monday.
Instead, the lawsuit alleges, consumers paid more than the sticker price, and often paid about twice the sticker price if they made all scheduled payments under the plans. When consumers were presented with the terms of Progressive’s offers, they were shown the “cash price” of the item, as well as the cost of their initial payment and each periodic payment.
To get consumers who didn’t quality for other payment options due to low income to sign up for Progressive’s offer, it trained retail sales associates on how to pitch its rent-to-own plans, according to the lawsuit. For example, Progressive’s online training course for them included instructions on how to answer common questions posed by consumers such as: “What’s the interest rate like?”
If asked this question by a consumer, Progressive advised sales associates to say: “There actually isn’t an interest rate, because it’s not a loan.” Progressive directed sales associates to refrain from explaining that there were additional charges to the consumer; specifically, it’s training materials instructed that an “incorrect” answer would be: “Well, there’s not an interest rate, but if there was an interest rate, it would be something around this much....”
Under the terms of the proposed settlement, Progressive will be required to pay $175 million to the FTC for providing refunds to consumers.
Progressive will be prohibited from misrepresenting the cost and terms of its plans. The company also will be required to clearly disclose the total cost to own a product when marketing its plans. In addition, the company will be required to get consumers’ consent before charging or billing them.
Progressive also will monitor third parties, such as retailers that offer its plans, to make sure their marketing complies with the settlement.
However, one of the FTC commissioners, Rebecca Kelly Slaughter, wrote in a dissenting statement that the settlement came up short in three ways:
- The monetary relief doesn’t adequately remediate harm.
- The lack of individual accountability diminishes the order’s specific deterrence.
- The FTC’s failure to charge the full range of law violations in its lawsuit is a failure to maximize general deterrence.
Slaughter said the law is clear. “When you deceive consumers, you are presumptively on the hook for the total amount you collected in connection with the deception. Taken together, the facts and the law are more than sufficient for me to conclude that $175 million falls far short of the injury Progressive inflicted upon consumers.”
She said consumers have paid Progressive Leasing more than $1 billion in extra fees and charges.