It's not as hilarious as Coke's notorious "Bite the wax tadpole!" but Aaron's "Max Your Tax!" slogan this spring sounds equally unpalatable. The posters and commercials make clear that they ostensibly want you to maximize the value of your tax return. But it's just as well. The misreading conveys what'll really happen to you if you shop at Aaron's when your check from the IRS comes.
They're marketing pretty aggressively this tax season, so it must be a pretty exciting offer, right? Here's the "deal," according to a news release:
"It's really easy to get started owning at Aaron's – you are pre-approved for up to $2,500 in merchandise without needing credit. Right now you can save up to $100 off any new lease agreement with Aaron's MAX YOUR TAX Savings Event. Hurry in and help your tax refund go further than ever!"
And -- spoiler alert -- here's the fine print:
"*When you begin a new lease for $99 a month or more for 12 months or longer with Aaron's from 2/1/14 – 3/15/14, you can receive $50 off of your first monthly lease payment and $50 off of your final monthly lease payment of a completed 12 month agreement. No cash, surrender or carryover. Cannot be combined with other offers or early payout. Valid only at participating locations. See manager for details. Ownership of leased merchandise is not acquired until required payments have been made by the lessee or exercising an early purchase option. This transaction advertised is for a rental-purchase agreement. All in-store merchandise is new, unless marked pre-leased or clearance."
Aaron's and its main competitor Rent-A-Center are part of the Rent-To-Own (RTO) Industry. These stores have a very profitable business model, and a legion of unsatisfied customers, who we'll hear from later. They also hire lawyers to be high ranking executives, and employ their very own lobby to ensure that bloggers like me couldn't possibly get away with calling them words like "racket" or "scam" or "faustian" or "cartel of loan sharks thinly disguised as legitimate retailers." I could never say those things, although the federal government calls them predatory lenders.
That's really the Hulkster in a Rent-A-Center commercial. Via
If your wallet is let's face it, basically empty, RTO stores have a sweet sounding offer: Necessary items that you can't afford for around the house cost a tiny fraction of retail PER MONTH, even if you can't get a line of credit. During their tax season deal, the upfront cost is even less than usual. Where else can you walk into a store with only $50 in your pocket, and a bottom of the barrel credit score, and get a new brand new big screen TV the same day, (or maybe the next)?
Meanwhile, you've just told them your phone number and address, and you've had to give five personal references: perhaps your mom, your boss, and your friends.
They're banking on you not thinking beyond that initial transaction, because after that it gets ugly. With the "Max Your Tax" deal, you're signing up for a minimum of a year's worth of payments. If all goes according to plan, and you don't miss any payments, you still lose big time on the final cost. The brilliant blog Cockeyed.com breaks down the eventual cost of Aaron's merchandise. It includes an explanation of how Aaron's finagles it so that a $368.00 Playstation costs you $1,319.73.
If, on the other hand, you sign up for one of the "90 days same as cash" leasing plans, you're potentially asking for even more heartache. If you knock it out of the park and pay every payment perfectly on time, as some people do, you essentially get the same kind of deal as a Kmart layaway program, except you were able to take the item home the first day.
If you miss even one payment, the terms of your lease are written in such a way that your "same as cash" (aka: no interest) arrangement is defunct, and now it is as though you were subject to interest from day one. You owe all that, plus newly inflated rates, such that you wind up in one of those crazy $1,319.73 Playstation deals, even though you signed up for a better lease.
Layaway may sound less classy, but it's a much, much, more frugal way to go.
Anecdotally, Aaron's makes it hard or confusing to pay on time, requiring you to make final payments in store, or intentionally missing phone calls to notify them of late payments, per your agreement. Once you don't pay, they know where you live. Aaron's, of course, would refute the idea that it works that way, but more on that in a moment. Here are some choice stories from Consumer Affairs, a site that will let you write anything you want about a company
"I am late for October, but by 10 days. They have come to my door repeatedly. Today, Saturday, they were at my door at 8:20am. I tried calling the store, but they were still CLOSED." -Stephanie
"they come to my door 3 days after my due date at 8:00 pm without a phone call or anything" -Lisa
"While I was away they banged on my door after dark and nonstop because my friend that lives next door told me. They gave out my information to people they should not have." -Dawn
"They started banging on our door in the dark around December 23 or 24th. Several days they have stopped in the dark and left a hang tag on my door knob. None of the times explained why. It was just listed as 'other'." -Dana
"I thought someone was trying to break into my house and rob me so I got my gun and told them to get away from my door, and that I had a gun. They finally said they were from Aarons." -Carolyn
Aaron's, of course, would argue that they write a lease, explain the terms, and then do exactly what they say they're going to do. "If you can't do the time," I would imagine they often say in board rooms, "don't do the crime." Their chairman, Charles Loudermilk told Bloomberg News that he just provides necessities to people who need a bargain. "We're a need item. We're beds, refrigerators, TVs and computers. These aren't wants or luxury items, and I think that's what keeps us strong." He talks about extending leases, because at 18 month rates, the monthly payments were too high, so he's familiar with the day-to-day practices of employees, in a sense. But in another crucial way, he's not.
In a speech, Vice President Chad Strickland said Loudermilk deliberately doesn't pay attention to who's hired to work in Aaron's locations. "He didn't believe in human resources. He was an entrepreneur. [...] He didn't think that someone in the corporate office in Atlanta should be telling the store manager in Milledgeville whom to hire." Maybe not, but from the accounts of unsatisfied customers, it sounds like they're hiring goon squads. Maybe brass should step in.
As far as I can tell, people shopping at RTO retail, see no other option. Customers interviewed by journalists sound ashamed of their circumstances. A blogger at TheSimpleDollar.com writes, "Our furniture at the time was still the furniture we used during college – in other words, most of it was from the goodwill store." A Mother Jones article describes an immigrant family with no furniture, sleeping on air mattresses. The guy in this TV news report says, "I gotta pay a mortgage and sometimes it's hard. I want a house, but I want to enjoy the house. I want nice things inside to enjoy, but I don't have the money to pay for [it]."
There should be no shame in admitting you just don't have any disposable income, and that's why you're stuck with air mattresses or unfurnished rooms for the moment. There are worse things, like people showing up at all hours to demand payment, or else.