RTOHQ: The Magazine January-February 2011

Complete issue of RTOHQ: The Magazine by APRO 

As the Rental World Turns: Lessons Learned From Some Thought-Provoking Circumstances by Ed Winn III

Most APRO members regard the rent-to-own industry as one big, mostly happy family. Amidst that kindred spirit, many actual families run their businesses. Throughout 2011, Kristen Card invites you to meet some of the families who work together to keep rent-to-own thriving, generation after generation.

There's an abundance of camaraderie and compassion within the rent-to-own industry— so much so that many consider the Association of Progressive Rental Organizations to be more like a family and less like a random collective of likeminded business people. As is the case with all families, sometimes APRO members bicker and other times they embrace—but at the end of the day, the bonds remain intact. Throughout 2011, we'll celebrate this sense of family, paying tribute to our alliances and the united sense of purpose that goes beyond the typical colleague-to-colleague exchange. This summer's Rent-to-Own Convention and Trade Show in Little Rock will be the industry's "Family Reunion," your best opportunity to catch up with brothers and sisters, be they literal siblings or the proverbial type. Within the larger APRO family, there are many family-run businesses, where several generations of DNA-sharing entrepreneurs work together to assure that offspring will one day inherit a thriving enterprise. Throughout the year, we're paying tribute to these families as well, beginning here with clans who have been in the business long enough to produce three generations of successful rent-to-own dealers: the Windsors of Missouri, Quinns of Washington and Ferrimans of Ohio.

Kevin Quinn's professional path— from selling mobile homes in Moses Lake, Washington, to owning and operating 18 successful rent-to-own stores statewide and earning APRO's 2010 Lifetime Achievement Award—has had its share of twists and turns, with a family member around just about every corner.

It's a story that, sadly, begins with the death of Kevin's dad and launches into a tale that includes an asparagus farm, a volcanic eruption and 22.5 percent interest rates that led, ultimately, to Tacoma and a Prime Time Rentals franchise.

Happily, through it all, Kevin had Angie, his bride of 32 years and counting. She and Kevin were the only employees when their first rent-to-own store opened in Puyallup, Washington, in 1982 (not counting their sixmonth- old daughter, Courtney, "who was no help," Kevin quips). "But once Courtney could talk, we'd put her in one of those booster seats that hangs at the end of a table, but she'd be at the counter," Angie remembers fondly. "She'd talk to customers and her first words to every customer were, 'Fifty dollars, please.'"

A second daughter, Casee, came along, followed by the Quinns' first and second employees—Mike Little, who remains with the company today, and Bryan Huff, Angie's younger brother, who now serves as the company's vice president and head of operations. The tale continues with a (different) brotherly partnership, its dissolution, a cousin coming aboard and the company's evolution to Quality Rentals. The brotherly partnership reformed, the partner—Kevin's older brother, Dan—died suddenly, and Kevin's oldest brother, Bill, joined Quality Rentals as its chief financial officer, while his son works as a manager.

Today, the Quinns have 17 Quality Rental locations, along with one Rent-n-Roll store. Among their 110 employees are the above-mentioned family members, as well as their now-grown daughters. But members of the Quinn family aren't the only ones still hanging around. According to Kevin and Angie, more than 10 percent of their employees have been with them more than 20 years, and over half of the staff has been there more than a decade. "Family business doesn't have to do with just blood," Kevin notes. "Even though our family members are a huge part of this, our long-term employees are like an extended family to us."

So the story that began with one man's sad end, the Quinns have turned into a happy, continuing legacy for many. "Kevin's father's passing is what provided us with this opportunity to support our family and other families," Angie says. "So the business holds a different, deeper level of commitment for us."

"Our business is about creating futures for people we love—from our immediate family to the people who have been with us for years," Kevin adds. "Some people run their businesses searching for an exit strategy, a way to cash in on their success. Our so-called 'exit strategy' is our family, so our employees can feel secure that they'll have jobs until they retire. Our employees have given up a lot for our family, so no matter what happens, we stay with it. That's what families do."

Mark and Kathy Windsor, their children and their family business—National TV Sales & Rental—all come from Missouri. And these Show-Me State natives stay true to their home state's nickname, proudly displaying their values for their employees, customers and the world to view. According to Kathy, they are not alone.

"Most of our friends are in rent-to-own, and while our businesses might differ, our priorities are the same: God, family and business," Kathy asserts. "We're proud of our beliefs. Even though sometimes today, it's not politically correct to put your values out there, ours are right out there for everyone to see—and it's always been like that."

Which is saying something, since National TV will celebrate its 25th anniversary this year. Today, the Windsors own and operate 17 locations throughout Missouri and employ more than 90 people—including five family members: eldest son Aaron is a district manager; daughter Michelle has been starring in National's commercials since she was a toddler and now also serves as the company auditor; Michelle's husband works as a service technician; and Mark's brother and a niece are also district managers. At one point, a total of 15 family members were involved in the business—including the Windsors' middle child, Anthony, who recently began training to open up a facility for troubled youth.

With that much family and that much business, the two become easily entangled— and the Windsors like it that way. Mark and Kathy agree that their personal values— working with diligence, acting with integrity, treating people fairly and doing the right thing—are directly reflected in the way they run their company. And while they're ambitiously seeking to expand the business by a dozen stores, the Windsors continue to offer many special family touches. For the holidays, they drove 800 miles around the state to hand-deliver homemade sweets to every store, and Kathy sews baby blankets for each new addition to the staff's families.

Mark and Kathy, married 33 years, also note a common parallel among successful family-run RTO businesses. "We know most of the people in the industry and divorce is extremely rare," Kathy notes. "I think it's about commitment—you make a commitment to your business, you made a commitment to your marriage and that's it."

"A lot of people have fair-weather marriages," Mark adds. "It's all good as long as everything's fine; if not, then just get rid of it. If you have that philosophy and you're in this business, you're not going to last too long."

Clearly, commitment isn't an issue for the Windsors—not only do they work together, but they also live close to each other, enjoy Sunday family dinners and share a family vacation every five years. These self-proclaimed "roads scholars" say that whether at home or away, they can't dissect the personal from the professional—and they don't want to.

"When we're together, we're talking about the company," Mark says. "We've got a big RV so we can all go on vacation together and it's like being at the office: four people with computers up, talking on the phone. Being together works. A no-signal zone? Now, that's a problem."

Gary Ferriman, founder and president of Ohio's Showplace Inc., was renting-to-own before RTO was cool—well, in Ohio, anyway. "I never knew there was a rent-to-own industry," Gary chuckles. "It was the early eighties and a partner and I had a retail TV shop in Marion, buying trade-in color televisions and refurbishing them for resale. I got into rentals at the suggestion of a Cleveland retailer, just by putting together a small agreement to rent these TVs for $10 a week for a year and once a customer paid it for a year, we let them have it."

Soon, a "real" rent-to-own store opened up in Gary's town and he began to study how the business operated. The first year his company rented televisions—1983—it did about $100 thousand worth of business; within three years, it was up to $1 million annually.

Over the next 15 years, Gary's partner sold out, the company became Showplace Rent-To-Own, Gary maxed out at 24 rent-to-own stores and sold 10 of them to Aaron's to focus on his strongest locations. Meanwhile, Gary's wife, Mary Ann, had opened up her own check-cashing/payday loan business, then merged her seven stores with Showplace. Eventually, unfavorable legislation forced the couple to close that piece of the company and Mary Ann joined Gary to help with purchasing for Showplace.

But Mary Ann wasn't the first to turn Showplace into a family business. "My first and longest-term employee joined in 1982, before we even began renting," Gary notes. "My mother, Kathy Anderson, did it all at the beginning: she ran the store, she cleaned up and sold TVs, she did the bookkeeping—she did everything that needed doing. She has stayed with us as our bookkeeper all these years and, at 84, still works a four-day week." Gary's dad also did general maintenance for the company until his death in 1999.

Today, a third generation is continuing the rent-to-own family tradition. Gary and Mary Ann's daughter, Sheri Miracle, works as the company's marketing manager, and son Keith is involved in operations, performing electronics purchasing and overseeing five stores.

Much of Showplace's almost 30-year success seems related to the people Gary hires, regardless of familial status. He expects a lot of energy and lots of going the extra mile, seeking people who are competitive, yet caring— who want to win, but for the right reasons. And he meets one-on-one with every new employee to ensure that he or she understands Ferriman's high standards.

At the same time, Gary fiercely fights any notion of nepotism, confiding that the highest bar of all is reserved for his own family members. But he hopes that by standing on his figurative shoulders, they'll be clearing it for years to come.

"If they are passionate about it, then I look forward to seeing my kids take what I have put my blood, sweat and tears into and make it their success story, too," Gary says. "We work early to late. We love what we do. We feel good about making a difference for our customers and for the employees who are helping us build a special place to shop and work."

As the Rental World Turns: Lessons Learned from Some Thought-Provoking Circumstances

If you work in a rental store, you know that you've seen all kinds —quite literally "the good, the bad and the ugly." Most of the customers are good, a few are bad and fewer still are downright ugly. The case would not change all that much if we were writing about customers at Walmart, or Kroger's or CVS Pharmacy. If issues arise, usually they are resolved quickly, quietly and without a lot of fuss, right there in the store. A few issues bubble up to the home office. A few of those end up in lawsuits, drawing attorneys into the fray. Most lawsuits—95 percent of them or so—get settled before trial. Lawsuits are expensive for everybody and people generally do not like being in them. § Among those cases that do not settle and ultimately get decided by a judge or jury, a handful get appealed by the loser and the appeals court "reports" its decision. That means the appeals court writes down its decision and the reason for deciding the way that it did and makes it part of the public legal record. The idea is that if people know how courts have ruled in the past, they will be able to shape their future behavior accordingly, since—they realistically suppose—courts, when confronted with similar situations, will rule similarly. That is how "precedent" works and its use is intended to give the law stability and predictability. § Some of the cases that make it through the legal pipeline are noteworthy because of the rulings that the courts make. Some offer fascinating details that you just could not make up. Most, happily, demonstrate, one way or another, that justice does, indeed prevail. All offer lessons for us. Here is a sampling of cases that involve a rent-to-own store, rent-to-own customer or rent-to-own employee in one way or another. They offer insights and perspectives into the world in which we live. Some are old; some are new. The lessons offered are timeless.

The Check Indeed Was in the Mail, but It Wasn't Hers

In Georgia, a rent-to-own customer, one of the accomplices in this tale, called her local RTO store and asked if she could cash a check for $300 for a friend—the defendant in this case—whose purse and ID had been stolen. To persuade the rent-to-own store, the customer told the employee on the phone that she intended to make a payment with part of the money. The woman had been a customer for a few months and was current. The two women went to the store with a stolen money order that the defendant endorsed. The store cashed it for her and got a $50 rental payment out of the transaction. The store employee who cashed the money order later picked the defendant out of a police line-up. The defendant happened to live in the same apartment building as the payee on the money order, a few doors down from the mailboxes—the same street address to which the money order was originally mailed. At trial, the defendant offered various alibis in an attempt to prove that she was not the person in the store who forged the money order. She told the jury that she had been with her boyfriend. The boyfriend testified that she was, indeed, with him, when the incident occurred. However, a third accomplice, another woman friend of the rental customer, testified that she was in the defendant's apartment when they all heard the mailman arrive. The defendant went out to the mailboxes with a butter knife and came back with her neighbor's mail, which contained the money order. The third accomplice testified that the defendant suggested that the three women cash the money order and split the proceeds.

The defendant was convicted of forgery in the first degree. She appealed, claiming, among other things, that the prosecutor had tainted jury deliberations by calling her a liar repeatedly during closing argument. The court affirmed the conviction. She was, after all, a liar—and a forger to boot. We do not know what kind of sentence she got, but she spent some time in the big house.

Lessons: Lying can be dangerous; forgery even more so. Rent-to-own employees should not cash checks for people they do not know, even on the say-so of good customers.

In Texas, two delivery men drove to the defendant's house to swap out some bedroom furniture that the defendant's stepdaughter had rented from the rent-to-own store. On the way to the bedroom to pick up the old stuff, both men noticed a .30-30-caliber rifle leaning against the wall. The rental guys removed the old furniture and asked both the defendant and the stepdaughter about her brother, who was a skip on another transaction. Both parties denied any knowledge as to the whereabouts of the brother and insisted that none of the brother's rented property was in the house. The defendant invited the delivery guys to have a look around if they wanted.

The delivery men then informed the stepdaughter/customer that her account for the bedroom furniture was 10 days past due and that, if she could not bring the account current, they would not deliver the new furniture, which was, in fact, in the truck. The stepdaughter replied that she did not have any money, while the defendant picked up the .30-30, aimed it at the delivery guys and ordered them to deliver the new furniture before he started "putting holes in things." One of the delivery guys got permission to call the store and the store manager told his employees to deliver the new furniture then beat a hasty retreat. The delivery guys did just that, all at gunpoint, and were allowed to leave.

The defendant was arrested for the offense of deadly conduct, and, after a jury trial, was convicted and sentenced to 90 days in jail and a $1,000 fine. The defendant appealed, arguing that his use of deadly force was justified under the circumstances. In affirming the conviction, the court of appeals told him it was not justified. The court noted that there was no discussion, no negotiation, not even any verbal threats by the defendant before he went for the rifle.

Lesson: It is still the Wild West in parts of west Texas. The store manager and delivery guys all remained calm and exercised good judgment—not always the easiest thing to do when staring down the barrel of a rifle held by an angry man. Have you talked to your employees lately about how to act when unavoidably involved in a doorstep confrontation?

The defendant was an 18-year-old rent-to-own employee in Illinois with a ninth-grade education. He was hired as a delivery person and was friends with the store manager who had hired him. During the store manager's tenure, there had been numerous thefts of cash and furniture from the store. The defendant knew of his friend's involvement in these thefts, but kept quiet. One day, perhaps feeling the heat, the store manager proposed giving the defendant a VCR from inventory in exchange for which the defendant would burn down the store to cover up the evidence of the thefts. The defendant agreed to the scheme!

Early one morning, the defendant doused the store with gasoline, lit it and left. The fire department responded to the blaze and an assistant fire chief was killed when a roof and wall collapsed on him as he attempted to open a door to get to the fire. Days later, the store manager made good on his deal and gave the defendant a VCR.

Eight months later, the defendant confessed to the crime. The store manager was convicted of murder and sentenced to 24 years in the penitentiary. In a separate trial, the defendant was convicted of aggravated arson and, likewise, sentenced to 24 years. (The sentencing range for aggravated arson in Illinois is six to 30 years.)

The defendant appealed, arguing that mitigating factors— his age and the fact that he had no prior criminal record— outweighed the aggravating factors, one of which was that the defendant, "by the duties of his office or his position, was obliged to prevent the particular offense committed." The defendant argued that he had no office or position in the company. The appeals court agreed, noting that "he had no managerial or supervisory authority. Nor does it appear that he was assigned duties to guard the business, prevent fires, report crime or otherwise provide security." The court sent the case back to the trial court for another sentencing hearing.

There was a dissent. The dissenting judge wrote, "[Whatever the office or position], it is fundamental to the employer/ employee relationship that an employee not spread gasoline around the employer's store, light a fire and leave. An employee has an absolute duty to his employer to prevent his own misconduct." The dissenting judge went on to note that the law recognized certain kinds of employee conduct as aggravating factors: "soliciting his employer's customers for himself, enticing co-workers away from his employer or appropriating his employer's personal property." The judge suggested adding to this list, "burning down the employer's place of business."

Test: Who is stupider: a) the defendant; or b) the court of appeals judges? Lesson: What we learn from this case is that there is stupid stupid and highly educated stupid loose in the world. Try not to hire—or elect—either kind.

In the middle of a weekday afternoon in a small town in Tennessee, a rent-to-own delivery driver parked the company van at the loading dock in the back of the store and left the keys in it. The driver went into the store for 10 minutes and when she went back outside, lo and behold, the van was gone. Immediately, the store notified the police that the van was missing.

At 1 a.m. the next night, the police stopped the van because of a bad brake light, ran a license-plate check, discovered that the van was reported stolen and arrested the defendant, who was driving the vehicle. The defendant had a revoked driver's license and a crack pipe on the center console in the van.

The defendant's alibi was that he was at a party at a motel and was chosen by the group to make a beer run. The defendant had no car at the motel, so he "rented" the van from another partygoer for $50. After he got the beer for the party, he intended to use the van to drive to another town to visit a woman. The defendant admitted using the crack pipe at the party, but denied that it was his, saying that it belonged instead to the owner of the van. When arrested, the defendant had no money on him.

After a jury trial, the defendant was convicted of grand theft, possession of drug paraphernalia and a second offense of driving with a revoked license. He was sentenced to six years in the state pen, but appealed the sentence as too harsh in light of his having post-traumatic stress disorder from combat duty in Iraq, as well as suffering from depression and bi-polar disorder. He testified that he was not in treatment and instead was "self-medicating." The appeals court affirmed the conviction and the sentence.

Lesson: You never know who may be wandering around behind the store—or in front of it, for that matter. Don't leave your keys in the car, not even for a minute. Ever!

A Florida rental company decided to hire an employee on a contract basis to collect hard accounts. The employee used an alias, "United Rental Recovery," on the phone and in correspondence as he pursued the skips and stolens. He called the plaintiff at her work, where she answered telephones for a busy car dealership. He told her that he had a warrant for her arrest for grand theft, because of a debt that she owed to the rent-to-own store. Surprised, she exclaimed, "Arrested!" loudly in the showroom and everybody heard her. She requested that the collector fax her the documentation; he faxed her a "request" for a warrant for her arrest. The plaintiff asked for time off from work immediately and spent the rest of the day and night talking to the police and lawyers, where she learned that no warrant was outstanding. She later testified that her children—ages 4, 7 and 9—were listening to her on the phone as she talked anxiously to the police and lawyers and her kids asked her if she was going to jail.

The faxed letter indicated that she owed $700 and cited that infraction as a third-degree felony punishable by up to five years in prison or a $5,000 fine.

The plaintiff testified that for the next two months, she was afraid to answer the telephone and that she quit answering her home phone altogether. She feared that if she was arrested, she would lose custody of her children and possession of her home. She sued for statutory damages under the federal Fair Debt Collections Practices Act—failing to disclose the actual identity of the collector—and for actual damages stemming from her humiliation and emotional distress. The defendant did not appear at trial and the court awarded the plaintiff $22,000 in actual and punitive damages.

Lesson: It does not pay to be less than candid when collecting—and it may cost you a bundle.

Skips and Stolens Are Not Worth Much. Who Knew?

The plaintiff, a publicly traded debt-buying company, purchased several thousand charged-off accounts from a rent-to-own company—the defendant—for a few million dollars. Although the calculations are not in the record, one might suppose that the plaintiff paid a nickel or less on the receivable dollar, thinking that it could put its ace collectors on those accounts and harvest some big returns.

Not surprisingly—to rental dealers, certainly—the ace collectors failed miserably and were unable to accomplish what the rental company itself had already demonstrated that it could not do. Chagrined at having made a bad deal, the plaintiff sued the rental company for breach of contract and fraud. The plaintiff expressed great surprise that when it mailed letters to skipped rental customers, they all came back "undeliverable." When collectors with this company called the telephone numbers in the customers' files, either the numbers were wrong or the phones had been disconnected.

The trial court ruled in the rental company's favor and the appeals court affirmed the ruling. Here's why: The contract stipulated that the "[Plaintiff] acknowledges that the Assets [rental agreements, customers files, computer records, etc.] may have limited or no liquidity and [Plaintiff] has the financial wherewithal to own the Assets for an indefinite period of time and to bear the economic risk of an outright purchase of the Assets and a total loss of the Purchase Price of the Assets. [Plaintiff] acknowledges that the Assets may be Unenforceable Assets."

Elsewhere, it also read that "the assets are being sold 'As Is' and 'With All Faults'.... [The rental company] makes no representation as to the number of Unenforceable Assets which may be included in the sale."

Finally, there was this language: "[Plaintiff] has relied solely on its own investigation and it has not relied upon any oral or written information provided by [the rental company]... and acknowledges that no employee or representative of [the rental company] has been authorized to make and that [Plaintiff] has not relied upon, any written statements other than those specifically contained in this Agreement."

There was another provision that gave the plaintiff 150 days after closing to flag unenforceable assets and the rental company agreed to replace each account so flagged with another bad account in their system. The plaintiff quickly discovered that the replacement accounts were no more collectible than the original bad accounts and abandoned the effort to seek replacement accounts, seeking relief in court instead. The plaintiff got none.

Lesson: Rent-to-own companies know what skips and stolens are worth. If they can't get the money or the television back, nobody can.

Honor Thy Father and Thy Mother— It's a Commandment

The plaintiff's son was a rent-to-own store manager in South Carolina. His refrigerator went out suddenly and he needed an immediate replacement to avoid losing a lot of food. He applied for an employee rental-purchase deal, but all employee deals had to be approved by the regional manager, who was unavailable as the food sat spoiling. The son did not want to violate company policy, so he filled out a rent-to-own agreement in his parents' names to be used on an interim basis until the regional manager got to town and could approve his employee deal. The store delivered the refrigerator and the son's wife signed the delivery receipt with her name and her mother-in-law's name. The son did not inform his parents of their seemingly temporary involvement in his refrigerator agreement. They were former customers of the rent-to-own store and, at the time of the refrigerator transaction, had filed a Chapter 13 bankruptcy proceeding, which was pending. Ten days after the refrigerator was delivered, the regional manager made it to town, approved the employee deal for the son and the agreement made out in his parents' names was marked "cancelled." Computer records in the store noted that the refrigerator was "returned by customer request."

Some time later, the parents learned of the deal and sued the rent-to-own company for a slew of violations, including: the Fair Credit Reporting Act (FCRA), claiming that the bogus agreement had dinged their credit and the company had not played by the law's rules; the Truth in Lending Act (TILA), for disclosure violations in their bogus rental agreement; South Carolina's Unfair Trade Practices Act (UTPA), because the agreement with their names on it was bogus; and their common-law right of privacy. The rent-to-own company sued the store manager and his wife for conversion and breach of fiduciary duty.

A bankruptcy judge ruled that the rent-to-own company did not violate the FCRA, because it was not a credit-reporting agency, nor did the bogus agreement affect the parents' credit. The rent-to-own company did not violate the TILA, because it was not a "creditor" as defined in the law, nor are rent-to-own transactions "credit sales." There was no evidence of identity theft by the company and, if there was any identity theft, it occurred when the son's wife signed her in-law's signature. The rent-to-own company did not violate the state UTPA statute either, because the isolated incident of temporarily having a bogus agreement in the system with the parents' names on it was unlikely to be repeated and, therefore, had no impact on the public interest. The rental company did not wrongfully appropriate the parents' good name and right to publicity, either, because it did not profit from the momentary use of the parents' names on the rental agreement.

The judge threw out all of the parents' claims because they were unable to show any damages at all from the bogus agreement: "...the Court cannot find a scintilla of evidence of harm to the debtors..." In the record, the son is listed as "a former employee of the rent-to-own company."

Lesson: Do not put other people's names on rental contracts—not even your parents, not even for a little while, not even if the meat spoils and especially if they are bankrupt and looking for some easy money, thanks to an aggressive, but misguided, lawyer. They will not get the money and you will not get to keep your job.

No Matter How Well You Think You Know Your Business Partner, Get It in Writing

In Alabama, the plaintiff, a veteran rent-to-own employee, approached the defendant about going into business together and opening their own RTO store. The plaintiff would provide the sweat—running the store—and the defendant would provide the equity and finance the operation. The plaintiff wanted a 50/50 deal, but the parties eventually shook hands on a 25 percent/75 percent deal, with the added agreement that the plaintiff could earn another 2 percent interest in the partnership each year for five years, up to a 35 percent interest in the company. The parties never put anything in writing.

The defendant started writing checks and the plaintiff leased space and proceeded to get the doors open on a new rent-to-own store. The plaintiff and his wife both worked fulltime in the store, from the opening date, with the defendant's full knowledge. Each drew a salary. Three months before the store opened, the defendant incorporated the business, making himself the sole shareholder. The defendant told the plaintiff of the incorporation, but explained that he was doing it for tax purposes and that the plaintiff need not worry.

The plaintiff and his wife operated the store for the next 10 months. There is no evidence in the record as to the store's performance. During that time, the plaintiff's wife rented some furniture and appliances from the store for their house.

After 10 months, the defendant came into the store, accused the plaintiff of embezzling money and ordered him and his wife to leave the premises immediately. The defendant fired the plaintiff and his wife and then filed a criminal complaint against the wife for "fraudulent leasing." The wife was arrested, but soon thereafter, the matter was presented to the grand jury and it refused to indict her. The criminal charges were dismissed.

The plaintiff then sued the defendant for fraud and breach of contract. His wife sued the defendant for false arrest, malicious prosecution, slander and false imprisonment. The defendant counter-sued, alleging breach of a non-compete agreement and conversion of money and equipment from the business. The first trial ended in a hung jury. At the second trial, the jury found in favor of the plaintiff and his wife and awarded him $110,000 and her $30,000 in damages.

The defendant raised a host of issues on appeal and the case eventually made it all the way to the Alabama Supreme Court. One of his arguments was that one witness' answer to a question about the defendant's reputation in the community was inadmissible and prejudicial—the witness had stated that, "from all indications that I had from those who had been in business dealings with him, it was not the most favorable." The Alabama Supreme Court agreed that the trial court erred in admitting that testimony, but that it was not finally prejudicial, as there was plenty of other evidence to support the plaintiff's claims. The court affirmed the money judgments.

Lessons: Be careful with whom you do business. Partnerships are like marriages. Good ones are made in heaven; bad ones end up in hell. And do you really need reminding to get it in writing? It is simply foolish not to do so.

What Influences Image?

In this issue, we conclude our three-part examination of rent-to-own's image. First (RTOHQ: The Magazine, September–October 2010), we reviewed the results of APRO's latest Potential Rent-to-Own Customer Survey and addressed the marketing image of our business—how we are perceived by customers and potential customers. Next (November–December 2010), we offered some public relations do's and don'ts. Now we look at the association's broader image-enhancing strategies and address how "influencers"—those who create and can alter public opinion: legislators, the media, economists, analysts and the like—perceive rent-to-own. Our existing customers, in general, love the business. Potential customers barely know that rent-to-own exists and, according to surveys conducted over the past two decades, they think rent-to-own is a "rip off." But what do public opinion makers think of rent-to-own?

APRO's campaign to polish the industry's image in the eyes of public opinion makers began as a reaction to legislative attempts to dismantle rent-to-own. As we recalled in the past two issues, the U.S. Congress wanted rent-to-own eliminated from the business landscape in the 1990s. Many media outlets—both in print and on television— echoed the call for the industry's demise. They commenced sensationalist investigations, wrote catchy headlines ("RTO=Rip Them Off") and promoted consumer groups' negative view of rent-to-own. In 1993, APRO created its first public relations committee to shore up this tarnished image and prove the value of the rent-to-own transaction. It was, and continues to be, a challenging goal.

In building a sustainable rent-to-own industry, passage of rental-purchase state laws was a crucial first step, but consumer advocates touted such legislation as "loan-shark laws," bought and paid for by lobbyists. It's one thing to be able to exist legally; it's entirely something else to prove your worth in the court of public opinion. If the public opinion pendulum veered too far in opposition to rent-to-own, state laws could be overturned or usurped by an anti-RTO federal law.

In the 1990s, Congress and various members of the media were working to shift the court of public opinion against the industry, telling the story of rent-to-own with a decidedly negative slant. The RTO industry needed to tout its value to the consumer to counter the charges being levied against it. Those best suited to testify on behalf of our industry were, and are, our customers. Customers helped convince legislators that rent-to-own was a worthwhile business and Congress listened—not every member of Congress, but enough to keep rent-to-own on the map during that tumultuous period. Still, Congress wasn't the only hurdle in shifting the negative opinions of rent-to-own toward a more positive image.

Satisfied customers convinced Congress to back off from its pursuit to rid the world of rent-to-own. If Congress has been persuaded to acknowledge both sides of the RTO issue, winning over the hearts and minds of those in the media has been a more difficult and enduring challenge. Like all successful business men and women, those in rent-to-own aspire to control all aspects of their business, but with the media, such control is impossible. You can pay to tell your RTO story—it's called advertising—and you get what you pay for; but the media is a different animal. It gets to choose what stories it wants to hear and what stories it wants to tell—and when it comes to rent-to-own, in the past, most often the stories the media told were critical.

So, as we related in the previous article, why deal with the media? Isn't it best to avoid the calls, to put a clipboard in front of your face when a reporter and cameraman walk into your store? And by all means, don't be proactive and actually contact anyone in the media about your business! When you have no control over the outcome, the risk is not worth it. The problem with that "logic," though, is that the media are going to tell the story anyway. Thus, in the 1990s, the industry's policy toward the media began to change. A new strategy was developed: answer every media call, agree to interviews and store visits by reporters and consumer groups. Do not just answer them, but do so with a smile, open arms, open doors and the facts about how rent-to-own really works.

APRO's public relations leaders—including Ernie Lewallen, Gary Romine, Shannon Strunk, Geron Vail, Sidney Burton and Larry Carrico—have defended and promoted this open-door media policy, and it has improved the industry's image to public opinion makers ever since. The open-door policy, however, is not fool-proof. A few years ago, APRO was very accommodating to an inquiring reporter from the Buffalo News, but regardless of how APRO members responded to him, the published articles sought to further tarnish rent-to-own's image, twisting and distorting rental dealers' responses along the way. In such cases, the best you can do is learn from the experience—hold the reporter at arm's length, with the motto, "burn me once, shame on you; burn me twice, shame on me."

While we have no control over what the media reports about the industry, we do have control over how we respond. For the past two decades, it is estimated that APRO's open-door media policy has stifled 85 percent of the potential negative stories. Today, the majority of news stories reporting on rent-to-own are balanced; a small percentage skew either predominantly negative or predominantly positive (although lately, stories have been leaning more toward the positive). Three years ago, then-APRO President Larry Carrico persuaded the association to go beyond simply reacting to the media with an opendoor policy. He urged APRO's public relations department to "push" positive news, generating press releases and e-mail blasts that promoted all things positive about rent-to-own, including charity drives, store happenings, customer-appreciation events and the like. This "push" garnered positive reports for rent-to-own on MSNBC, the Associated Press news wire and in dozens of newspapers across the country.

Another case of uncontrolled outcomes involves debate over whether or not APRO should assist independent researchers seeking to publish academic papers on rent-to-own. The issue arose in 2001 when two University of Massachusetts finance professors approached APRO looking for rent-to-own transaction data to include in an academic research paper they were writing. There were contentious discussions among APRO's leadership whether or not to help the professors in their efforts. Gary Romine, APRO's public relations committee chairman at the time, went toe to toe with RTO industry lobbyists who advised against any industry participation. Romine promoted APRO's participation and won the argument. Thus was born an enduring relationship between rent-to-own and academia—one that has proved fruitful in enhancing our image among the public opinion makers.

The research papers written by professors Michael H. Anderson and Raymond Jackson—A Reconsideration of Rentto- Own, published in 2001, and Rent-to-Own Agreements: Purchases or Rentals?, published in 2003—confirmed what rent-to-own dealers already knew. Analyzing hundreds of thousands of transactions, the data showed that rent-to-own is, first and foremost, a lease. Publishing this "revelation" in prestigious academic journals—papers that are vetted to make sure the research is sound—made for a more compelling rent-to-own story, especially to members of Congress, the media and the courts. This academic research is now some of the most powerful public relations ammunition in APRO's arsenal.

In another academic paper, Understanding the Asset-Limited, Income-Constrained (ALIC) Consumer, published in 2007, Clemson sociology professors Jim Witte and John Mittelstaedt cited rent-to-own as a logical choice for the asset-limited, income-constrained consumer in America. Their premise is that such customers choose, desire and enjoy rent-to-own because it fits their socio-economic lifestyle. Recently, U.S. Representative William Lacy Clay (D–Missouri) cited the ALIC consumer article when asking fellow members of Congress to support his RTO-friendly legislation.

In 2008, the William & Mary Law Review published an article by Jim Hawkins, a law student at the University of Texas, who defended the reasons why rent-to-own should exist as a lease. In Renting the Good Life: A Law and Economics Research Paper, he debunks consumer groups' legal arguments that rent-to-own should be regulated as a sale. Hawkin's paper was cited in newspaper articles and has served as additional enhancements of the rent-to-own image.

In 1999, the Clinton administration, at the behest of consumer groups, ordered the Federal Trade Commission to study rent-to-own customers. APRO leaders were concerned because the FTC is a regulatory body with jurisdiction over all kinds of consumer transactions, including rent-to-own. The FTC issued a report that was favorable, overall, to the industry and concluded that the government should be careful when regulating rent-to-own because customers know, understand and appreciate the transaction. Not only did a federal regulating body verify that rent-to-own should exist, it also demonstrated that opening doors to let the light in is better than hiding in the dark. Among other findings, the FTC noted that the barriers to entry into the rent-to-own business were low and that the industry is a competitive one, undermining the argument that RTO prices are artificially high.

Recently, business author Gary Rivlin contacted APRO regarding a book he was writing about the under-banked in America. He wanted to learn more about rent-to-own and was grateful for our candidness and willingness to help him with all of his requests. APRO referred him to dealers he could interview in New York and Texas. Periodically during the writing of his book, he contacted APRO headquarters for research and contact information. Rivlin's book, Broke USA: From Pawnshops to Poverty, Inc.: How the Working Poor Became Big Business, premiered with a lot of national promotion, but the book barely mentions rent-to-own. Several weeks prior to its publication, Rivlin contacted APRO to inform us that he was not going to publish a rent-to-own chapter in the book. He said it didn't fit his criteria. In a radio interview, Rivlin stated that rent-to-own didn't warrant the close scrutiny other industries should be given. Rent-to-own customers, he said, are satisfied and know full well how the transaction works.

One public relations initiative that has been the icing on RTO's image-improvement-campaign cake is the industry's charitable endeavors. As was the case with rent-to-own's cooperation with academia, so it was when industry leaders sought to launch a national charity campaign—that is to say, the debate among APRO strategists was heated. Some said it would be a waste of money. Others argued that it would come off as nothing but a mere publicity stunt and would backfire with the public and the media. Others were for it, "but only if it helps government relations"—in other words, first and foremost, make sure that members of Congress learn all about our good deeds. Finally, the majority decided that it was simply the right thing to do.

In 1997, APRO leaders chose to endorse Habitat for Humanity as the industry's national charitable campaign. Building houses seemed a perfect and natural fit. APRO donated 100 stoves to the annual Jimmy Carter Build in Houston, Texas. The association also helped coordinate contributions to Habitat builds across the country, culminating in the donation of hundreds of thousands of dollars worth of refrigerators, ovens, money and manpower to the cause.

In 2000, APRO's relationship with Habitat for Humanity hit its high mark in Austin, Texas. Under the leadership of Gary Romine, the association's public relations committee chairman at the time, the industry sponsored and built its own APRO Habitat for Humanity house in seven days. It was a moment of unity for the industry and showed that a charity can be as beneficial and meaningful to those giving as to those who receive. (Special accolades go out to APRO member David P. David who spent hours in a HasMat-like suit in 101-degree Texas humidity while he textured the inside of the house. David is considered APRO's volunteer of the century for sacrificing his body and suffering severe heat exhaustion in the service of the industry and Habitat for Humanity.)

Here again, though, was a public relations initiative with a degree of risk, where the circumstances and outcome were not fully in our control. Some Habitat for Humanity affiliates accused the rent-to-own industry of participating in Habitat builds as a cloaked campaign to recruit new customers. While the hundreds of families who benefitted from the industry's participation were eternally grateful, rent-to-own leaders rightfully felt betrayed.

Some charitable initiatives have had a more enduring impact. In 2001, Shannon Strunk, APRO's public relations chairman at the time, proposed a permanent educational scholarship fund, one that would award college scholarships every year. Recently, APRO's Educational Scholarship Foundation reached its goal of $100,000, which enables awarding multiple scholarships each year. The recipients of the scholarships must be APRO employees or their children—a charitable initiative that strengthens the backbone of our industry: rent-to-own employees.

APRO's Education Foundation also contributes to the annual Congressional Black Caucus Spouses Foundation. In 2001, APRO members began donating products and money for the CBC's annual silent auction. The donations raise money for student scholarships throughout the country. In 2009, APRO became the official sponsor of the foundation's silent auction with a $50,000 contribution. APRO's 10-year participation in the CBC's silent auction was recognized last year when then-APRO President Tiger John Cleek was presented a notebook of handwritten thank you letters and pictures from students in the Cleveland area. The notes conveyed their appreciation for the new computers they'd received, courtesy of the rent-to-own industry. The notebook was presented to Cleek by the son of late Congresswoman Stephanie Tubbs Jones in front of hundreds of attendees at the Congressional Black Caucus' silent auction, including members of Congress and their families. Jones had been a vocal critic of rent-to-own, but now her family told the audience that they are "forever grateful" to the RTO industry.

APRO's Education Foundation also includes the "Computers for Kidz" program, which launched in 2008. APRO dealers and state associations contribute computers to deserving junior high and high school students.

Rental dealers have been enthusiastic about participating in charitable causes. They do it out of sense of compassion and kindness—not to solicit public glorification. Yet, these events have created some very positive press nationwide and demonstrate to an ever-widening audience that the rent-to-own industry wants to help.

Last but not least, there is one academic paper that APRO had no control over, nor knowledge of, until years after its publication. In 2001, the association learned that its public relations responses to the congressional threat in 1993 and the media blitz that followed have been chronicled as a college textbook case study for business students, thanks to a paper, The Rent-to-Own Industry, written by Rice University professors Doug Schuler and Gerry Keim. Each year, Schuler assigns graduate students to study rent-to-own from 1993 to the current year. By doing so, Schuler hopes to demonstrate to students the importance between a business' public relations efforts and its government relations.

How does the rent-to-own industry's image stack up when it comes to public policy makers? It's been a long and tough journey that continues and evolves—but, we can honestly say, it's one for the textbooks. Business students across the nation now study how APRO members helped write the chapter on how to manage an image crisis. We are getting better with the public relations message every year. More people know about rent-to-own than ever before and what they know is mostly good these days.

Shaping Image: What Influences the Public opinion makers?

There are five key strategies for shaping the industry's image in the eyes of those who affect public opinion:

State Legislators. In 1983, there were no positive state rent-to-own laws on the books. In 2011, there are 47. Congress. In 1994, following an investigative hearing in the U.S. House Banking Committee, legislation was introduced to run rent-to-own out of business. In 2002, positive rent-to-own legislation passed the U.S. House of Representatives. In 2010, 126 House members co-sponsored industry-supported legislation. More than 100 House co-sponsors is considered a significant threshold to cross. The Media. In 1994, The Wall Street Journal published an article about rent-to-own with headlines "The $5,000 VCR" and "Couch Payments." In 2009, The Wall Street Journal published an article reporting how rent-to-own serves a valuable need during the credit crisis. Dozens of news stories followed, featuring rent-to-own as a credit-free alternative. Academia. In 1997, there were dozens of negative studies and reports criticizing rent-to-own used in legislative debates, media campaigns and court cases. In 2011, there are nine independent academic studies positively reflecting how rent-to-own serves the economy and customers. Now, these studies are used in legislative debates, media reports and court cases. The Community. Before 1996, the rent-to-own industry as a whole did not participate in a nationwide charity initiative. In 2010, APRO charitable campaigns contributed hundreds of thousands of dollars to Habitat for Humanity, Computers for Kidz, the Congressional Black Caucus Educational Foundation, the RTO Disaster Relief Fund and created its first permanent Educational Scholarship Foundation.