Aarons 2014 Annual Report Download - page 23

13
Unlike transactions with traditional retailers, where the customer is committed to purchasing the merchandise, our sales and
lease ownership transactions are not credit installment contracts. Therefore, the customer may elect to terminate the transaction
after a short, initial lease period. Our sales and lease ownership stores offer an up-front “cash and carry” purchase option and a
120 day same-as-cash option on most merchandise at prices that are competitive with traditional retailers. In addition, our
Progressive business provides a 90 day cash price option on lease-purchase solutions offered through traditional retailers.
Government Regulation
Our operations are extensively regulated by and subject to the requirements of various federal, state and local laws and
regulations. In general such laws regulate applications for leases, late fees, other finance rates, the form of disclosure
statements, the substance and sequence of required disclosures, the content of advertising materials and certain collection
procedures. Violations of certain provisions of these laws may result in material penalties. We are unable to predict the nature
or effect on our operations or earnings of unknown future legislation, regulations and judicial decisions or future interpretations
of existing and future legislation or regulations relating to our operations, and there can be no assurance that future laws,
decisions or interpretations will not have a material adverse effect on our operations or earnings.
A summary of certain of the state and federal laws under which we operate follows. This summary does not purport to be a
complete summary of the laws referred to below or of all the laws regulating our operations.
Currently, 47 states and the District of Columbia specifically regulate rent-to-own transactions, including states in which we
currently operate Aaron’s Sales & Lease Ownership and HomeSmart stores, as well as states in which merchant partners of our
Progressive business maintain operations. Most state lease purchase laws require rent-to-own companies to disclose to their
customers the total number of payments, total amount and timing of all payments to acquire ownership of any item, any other
charges that may be imposed, and miscellaneous other items. The more restrictive state lease purchase laws limit the total
amount that a customer may be charged for an item, or regulate the “cost-of-rental” amount that rent-to-own companies may
charge on rent-to-own transactions, generally defining “cost-of-rental” as lease fees paid in excess of the “retail” price of the
goods. Our long-established policy in all states is to disclose the terms of our lease purchase transactions as a matter of good
business ethics and customer service. We believe we are in material compliance with the various state lease purchase laws in
those states where we use a lease purchase form of agreement. At the present time, no federal law specifically regulates the
rent-to-own industry. Federal legislation to regulate the industry has been proposed from time to time.
There has been increased legislative attention in the United States, at both the federal and state levels, on consumer debt
transactions in general, which may result in an increase in legislative regulatory efforts directed at the rent-to-own industry. We
cannot predict whether any such legislation will be enacted and what the impact of such legislation would be on us. Although
we are unable to predict the results of any regulatory initiatives, we do not believe that existing and currently proposed
regulations will have a material adverse impact on our sales and lease ownership or other operations.
In a limited number of states, we utilize a consumer lease form as an alternative to a typical lease purchase agreement. The
consumer lease differs from our state lease agreement in that it has an initial lease term in excess of four months. Generally,
state laws that govern the rent-to-own industry only apply to lease agreements with an initial term of four months or less. The
consumer lease is governed by federal and state laws and regulations other than the state lease purchase laws. The federal
regulations applicable to the consumer lease require certain disclosures similar to the rent-to-own regulations, but are generally
less restrictive as to pricing and other charges. We believe we are in material compliance with all laws applicable to our
consumer lease program. Whether utilizing a state-specific rental purchase agreement or federal consumer lease form of
agreement, it is our policy to provide full disclosure to our customers of all fees they will be charged in their transactions.
Our sales and lease ownership franchise program is subject to Federal Trade Commission, or FTC, regulation and various state
laws regulating the offer and sale of franchises. Several state laws also regulate substantive aspects of the franchisor-franchisee
relationship. The FTC requires us to furnish to prospective franchisees a franchise disclosure document containing prescribed
information. A number of states in which we might consider franchising also regulate the sale of franchises and require
registration of the franchise disclosure document with state authorities. We believe we are in material compliance with all
applicable franchise laws in those states in which we do business and with similar laws in Canada.