CFPB Rent-A-Center Affiliate Acima Lawsuit Claims Illegal Lending Practices

The Consumer Financial Protection Bureau (CFPB) has accused rent-to-own company Acima of tricking customers into high-cost financing agreements.

The CFPB on Friday (July 26) sued Acima — owned by Upbound, formerly known as Rent-a-Center — alleging that the company disguised many of its credit agreements as leases to get around consumer protection laws.

“Due to Acima’s deception and obstruction, many consumers did not understand they were agreeing to expensive markups, exorbitant finance charges, and having few ways to escape their contracts,” the bureau said in a news release.

“The CFPB is asking that the court order the defendants to forfeit the illegally obtained profits, give refunds to consumers, and halt their misconduct.”

According to the CFPB, Acima’s financing product lets consumers apply for financing for household goods. Shoppers pick the items they want, Acima purchases them from its merchant partners, and then finances the products back to consumers for 12 months.

But the agency says Acima “designed its credit product to ensnare vulnerable consumers with poor or limited credit into financial obligations that ended up costing many of them more than 200% of a good’s retail price.”

For its part, Upbound has filed its own suit against the CFPB, arguing the bureau has no authority to bring enforcement action against Acima, saying its transactions are already regulated by state laws covering lease-to-own transactions.

“Acima filed this action reluctantly, ultimately concluding the CFPB was not prepared to settle with Acima on acceptable terms after its long-standing cooperation,” the company said in a news release last week.

Upbound added that the CFPB’s investigation of Acima predates Upbound’s acquisition of the company in 2021.

This dispute is happening as the CFPB is getting ready to impose new regulations on the installment payments sector, classifying buy now pay later (BNPL) firms as credit providers.

Earlier this month, the American FinTech Council asked the CFPB to postpone the new rules until Jan. 1 of next year, noting. “the complexity and variation in business models, lender practices, and partnerships with merchants, as well as differences in the levels of preexisting compliance with the provisions enumerated in the Interpretive Rule by BNPL lenders.”

Meanwhile, recent research by PYMNTS Intelligence and Splitit finds that 79% of consumers say they are “very” or “extremely” satisfied with BNPL experiences.