Silva v. Rent-A-Center, Inc.

(Massachusetts Supreme Judicial Court)

• Supporting Rent-to-Own Businesses and the Consumers They Serve

The issue in this case, which was before the SJC on a certified question from the U.S. District Court for the District of Massachusetts, was whether rent-to-own agreements involving personal property for personal or household use (excluding motor vehicles) are true leases or instead disguised installment sales contracts.  If found to be the latter, they would be subject to the heightened requirements of the Retail Installment Sales Act (“RISA”), G. L. c. 255D, §§ 1 – 32, including a cap on interest charges, which, as NELF argued in its amicus brief in support of Rent-A-Center, Inc., could make the  rent-to-own business model obsolete in the Commonwealth.  On behalf of itself and co-amicus Associated Industries of Massachusetts, NELF argued that rent-to-own agreements are true leases and not subject to RISA, relying in part on precedent distinguishing a true lease as here from a conditional sale agreement, which merely assumes the form of a lease while in fact creating a sale.  NELF argued that the facts of this case clearly are unlike those found in a disguised, conditional sale.  NELF also argued that the rent-to-own agreements at issue are covered by the state Consumer Lease Act (“CLA”), G. L. c. 93, §§ 90 – 93, rather than RISA, relying in part on federal judicial interpretations of the federal Consumer Lease Act, 15 U.S.C. § 1667.  In addition, relying on state regulatory law and federal regulations governing the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq., NELF argued that the plaintiffs erred in characterizing the rent-to-own agreements as credit sales, since these agreements are terminable at will by the lessee without penalty and therefore can create no creditor/debtor relationship.  In its decision, the SJC agreed with NELF, holding that rent-to-own agreements are not sales contracts but week-to-week rental contracts with multiple options to renew.  As such, the Court held these are true leases and not subject to RISA.  The Court also held, along lines similar to NELF’s argument, that these agreements do not create a creditor/debtor relationship.  Provided that the agreements concern goods leased primarily for personal, family, or household purposes, the Court found them to be governed by the state CLA.