Rent-A-Center’s Acima fintech unit under investigation in 39 states
- The business practices of Rent-A-Center’s Acima unit are under investigation by the Nebraska Attorney General, along with a coalition of attorneys general from 38 other states.
- In its latest 10-Q, the company revealed that Acima received a letter from the Nebraska Attorney General on November 1 stating that subpoenas or requests for a civil investigation related to the state’s human rights protection laws. consumers would be coming.
- Rent-A-Center completed the acquisition of Acima, which specializes in virtual capital lease financing, in February. Acima is also under investigation by the Federal Bureau of Consumer Financial Protection, which filed a civil investigation request for documents and data prior to the acquisition of Rent-A-Center.
Not even a year has passed since Rent-A-Center struck a deal worth nearly $ 1.3 billion in cash, plus the company’s stock, to acquire Acima. The deal was to expand Rent-A-Center’s reach as a partner with other retailers, as it looks beyond its own showrooms and tries to transform itself into a rental-platform. widespread buying.
“Their scale enhances our ability to compete for high-value national retail accounts,” Rent-A-Center CEO Mitchell Fadel said of Acima in February, according to a transcript from Seeking Alpha. “Their underwriting is best in class with a high performance decision engine that supports a wide range of verticals. They bring extensive data and digital expertise and superior back-end infrastructure.
Founded in Salt Lake City in 2013, Acima’s revenue grew from $ 97 million to nearly $ 1.3 billion in 2020. It has partnered with many big name retailers including Best Buy, Overstock, Bob’s Discount Furniture, Mattress Firm and Ashley HomeStore.
It is not known exactly what the state and federal investigations into Acima relate to. At the time of disclosure, Rent-A-Center said it had yet to receive a specific request or subpoena from attorneys general.
The Consumer Financial Protection Bureau The investigation led to further requests for information from the company, following the initial civil investigation request of October 1, 2020. Rent-A-Center said it was responding to the additional requests. and that the Consumer Financial Protection Bureau has not yet made specific claims.
Acima’s name appears more than 600 times in the Consumer Financial Protection Bureau’s consumer complaints database, most relating to credit reports and debt collection. of Acima the former owners have agreed to compensate Rent-A-Center for certain losses related to the civil investigation request, with $ 50 million frozen at the close of the case.
The rental activity with an option to buy has historically been accompanied by a social, regulatory and legal background. As Acima acknowledges to its users, the option-to-buy rental model inflates the ticket price of the items. The idea of making low-income or low-credit people pay more through a leasing arrangement has long been problematic.
As one activist investor put it a few years ago, Rent-A-Center’s “Achilles heel” was the company’s public perception as a “predatory lender” who “[takes] benefit a financially troubled customer by locking them into expensive obligations that perpetuate a “debt cycle”. “
Rent-A-Center and its peers say they are providing financing to a segment of consumers who would otherwise not be able to make these purchases at all. This has been a profitable business for Rent-A-Center, which has an operating margin of over 20% at its eponymous business.