Attorney General Kamala D. Harris Reaches $28.4 Million Settlement With Rental Business over Spyware, Unfair Business Practices

LOS ANGELES – Attorney General Kamala D. Harris today announced a $28.4 million settlement with Aaron’s, Inc., the second largest rent-to-own business in the nation, to resolve allegations that the company violated California consumer protection and privacy laws.

“Aaron’s concealed its illegal privacy and business practices from customers in a deceptive attempt to avoid California’s robust consumer protection laws and increase its profits,” Attorney General Harris said. “This settlement provides millions of dollars in restitution to consumers and requires Aaron’s to make significant changes to its business practices.”

The settlement requires Aaron’s to refund $25 million to California customers who signed lease agreements between April 1, 2010 and March 31, 2014 and to pay $3.4 million in civil penalties and fees.

Approximately 100,000 California customers will be eligible for restitution.

The complaint alleges that Aaron’s violated California’s Karnette Rental-Purchase Act, which is the strongest rent-to-own law in the country, by charging improper late fees, overcharging customers who paid off contracts early, and omitting important contract disclosures.

In addition, the complaint alleges that Aaron’s violated California state privacy laws by permitting its franchised stores to install spyware on laptop computers rented to its customers. A feature in the spyware program called ‘Detective Mode’, which was installed without consumers’ consent or knowledge, allowed the Aaron’s franchisees to remotely monitor keystrokes, capture screenshots, track the physical location of consumers and even activate the rented computer’s webcam. The installation of this software without customer consent violated California law.

Aaron’s, which is headquartered in Atlanta, GA, rents household merchandise, including furniture, appliances and electronics for a monthly or semi-monthly fee. The company operates approximately 75 stores across California (http://www.aarons.com/storelocator.aspx).

According to a Federal Trade Commission report on the rent-to-own industry, nearly all rent-to-own customers have a household income below $50,000 and the vast majority have attained a high school education or less.

Customers who are eligible for restitution will receive notice at their last known mailing address. Customers who believe they are eligible for restitution can also proactively submit a claim by visiting www.rent-to-own-settlement.com or calling 877-449-8548.

It is expected that restitution notices and payments will be mailed in early 2015 and individual restitution payments will vary based on each consumer’s contract.

As part of a stipulated judgment filed this week in Los Angeles County Superior Court, Aaron’s has agreed to full compliance with the Karnette Act in all respects and is prohibited from using or installing spyware on rented computers.

The Los Angeles County Department of Consumer Affairs provided assistance with the investigation.

Tips for consumers regarding rent-to-own businesses:

• Know your rights. Under California law, you have many important protections if you enter into a rent-to-own agreement.  For example, you may be entitled to a reduction in the amount of your lease payment if you suffer a hardship like losing your job. For more information: http://www.dca.ca.gov/publications/legal_guides/s-10.shtml.

• Read your contract carefully before signing. Make sure you understand your obligations under the agreement, including the length of time specified in the contract, and not just the cost of your monthly lease payment.

Copies of the complaint and stipulated judgment are attached to the online version of this release at www.oag.ca.gov/news.