#1514 1986 · Rent-A-Center (now Upbound Group) · Lease-to-own retail
Rent-A-Center lends furniture to people banks won't score — returnable any week
the problem
Customers with no credit history can't finance a sofa; defaults can't be collected anyway
background
Furniture and appliances are big-ticket purchases for exactly the customers conventional finance excludes: thin-file or no-file borrowers whose defaults a lender cannot realistically collect through courts. The pawn and credit worlds offered either collateral or refusal — neither fits a household that needs a refrigerator now and pays in cash weekly.
Rent-A-Center's rental purchase agreement inverts the loan: the customer rents the item, paying weekly or monthly in advance, and owns it after continuous renewal for a period of seven to 30 months (by product type) or an early purchase option — with no credit investigation at all, only verification of residence, income and references.
what everyone would do
Offer store credit with co-signers and collections — underwriting costs the margin on customers whose defaults arrive anyway, now with legal overhead attached.
what they saw
You cannot collect from customers who have nothing, so stop lending — rent. Return-anytime turns default into repossession, payment-in-advance turns risk into revenue, and ownership becomes an option the customer earns.
the move
The return-anytime clause is the credit model: because the customer can terminate without penalty and the store simply takes the item back, the 'default' is self-curing repossession — no collections, no courts, no loss beyond cleaning and re-renting. Payments in advance (in store, kiosk, online or by phone) mean service stops the day money stops, and revenue is recognized as rental received, not as a receivable that can go bad.
why it works
The structure prices risk into the product instead of screening it: high total rental cost over the ownership term compensates for the losses of customers who return early, so no underwriting department is needed — verification of residence and income replaces credit history the customers don't have. Advance payment means the store is never owed money, only future occupancy of the sofa, and instant repossession (the customer returns the item voluntarily, since it's a rental) beats any collections process. The weekly cash rhythm also matches how the unbanked actually get paid.
the payoff
No credit checks and penalty-free return at any time anchor the model; payments collected in advance are the primary revenue source
where it breaks
The total cost of ownership is a multiple of retail — the model's economics depend on customers who pay long past the point a cash buyer would have stopped, drawing permanent regulatory and ethical scrutiny. High early-return rates mean merchandise cycles through re-renting at real cost; delivery and repossession logistics are labor-heavy, and state LTO laws cap terms and margins. Where wages formalize and credit files thicken, the customer base migrates to conventional finance.
what came after
Lease-to-own became a durable national channel for unbanked big-ticket consumption, and the return-anytime structure is studied as credit risk management by contract design rather than by screening.
references
- [1]Rent-A-Center, Inc. Annual Report on Form 10-K, fiscal year 2014US Securities and Exchange Commission, 2015sec.gov