The Federal Trade Commission announced that it reached a $175 million settlement with Progressive Leasing to resolve claims that the company misled consumers about the prices of its rent-to-own plans.  

Progressive Leasing is a rent-to-own company that markets and sells payment plans to consumers through online and brick and mortar retailers.  At retail stores, the company promotes its rent-to-own payment plans through signage, including banners, posters, table tents, and brochures, as well as through in-person sales pitches.

The FTC alleged that Progressive Leasing induced consumers to enter into these payment plans by misrepresenting to consumers that, if they entered into the plans, they would still pay the retail or "same as cash" price.  The FTC alleged that consumers were also told that the rent-to-own plans were "interest free."  The FTC alleged, however, that consumers would actually pay substantially more than the retail price -- and typically they would pay twice as much.  The FTC also charged that the company did not adequately disclose the total price that consumers would actually pay. 

Pointing to more than 15,000 complaints that the company received, the FTC alleged that Progressive Leasing was well aware of "widespread consumer confusion" about the company's pricing terms.  

In addition to the whopping $175 million payment, which will be used to provide refunds to consumers, as part of the settlement the company agreed to not misrepresent the cost of its plans in the future, to clearly and conspicuously disclose the total price that consumers will pay, and to get consumers' express, informed consent before charging or billing them. 

The Commission's vote to enter into the settlement was 3-2, with Commissioners Rohit Chopra and Rebecca Kelly Slaughter dissenting.  In a statement, Commissioner Slaughter said that, "The conduct here, however, is so egregious and its cumulative impact on families so corrosive that I do not believe the complaint and order are sufficient."  

Specifically, Commissioner Slaughter found FTC's order insufficient in three areas.  First, she said that she believed that the order did not adequately remediate the harm -- which she believes is closer to $1 billion.  Second, she said that the complaint and order should have also named the company's CEO as well.  She said, "Where the facts provide a legal basis to do so, naming senior leaders in a complaint and including them as parties to a consent order can go a long way towards increasing accountability and achieving a deterrent effect."  Third, she said that the complaint did not fully allege all of the laws that Progressive Leasing had violated.  She said, "Whenever the Commission files a complaint, we have an opportunity to send a signal to industry regarding what conduct we consider to be a law violation." 

Here are few, important things to take away from the FTC's action:

  • There's almost nothing more important to consumers than the amount that they have to pay.  No matter what you're advertising, and no matter what type of payment terms or promotion you're offering, it's absolutely critical that you make sure that it is clear to consumers what the actual, out-of-pocket price is.  
  • You're never going to convince the FTC that subtle disclosure cues will solve any confusion.  A little question mark or an arrow is highly unlikely to save the day.  If there's important information -- such as the total purchase price -- that you need to convey to consumers, you need to make sure that the price is clearly and conspicuously disclosed.  If you're not sure whether your disclosure is "clear and conspicuous," ask yourself whether it's unavoidable and whether you're confident that consumers will see it, read it, and truly understand it.
  • One of the things that will define the work of the current FTC is the ongoing, very public disagreement among the Commissioners about the FTC's approach to advertising enforcement and whether the relief that the FTC is seeking is tough enough.  We're going to continue to see at least two Commissioners pushing for bigger damages, tougher relief, and a harder stance against advertising that crosses the line.