DFPI enters into a settlement with a rent-to-own furniture provider

State Issues DFPI State Regulators California Settlement CCFPL Rent-to-Own Enforcement

On January 10, the California Department of Financial Protection and Innovation (DFPI) announced a settlement with a Los Angeles-based rent-to-own furniture provider for allegedly failing to comply with the Karnette Rental-Purchase Act (Karnette Act) in connection with its subscription agreements. This settlement constitutes the first action against a rent-to-own firm for violating the California Consumer Financial Protection Law (CCFPL). According to the settlement, in addition to charging excessive late fees, the company failed to: (i) disclose whether the property subject to the rental-purchase agreement is new or used; (ii) clearly and conspicuously provide the Karnette Act’s mandated contractual disclosures; and (iii) adhere to the Karnette Act’s prescribed formula for calculating the maximum cash price, among other things. As part of the settlement, the company must desist and refrain from violating the CCFPL, refund customers late fee overcharges, offer its rent-to-own products and services in compliance with the Karnette Act and applicable consumer laws, and report on its activities semi-annually to the DFPI. According to DFPI Commissioner Clothilde V. Hewlett, the consent order “reminds California businesses and consumers that the DFPI will be exercising its expanded authority under the new law.”