Snap Finance has agreed to pay a $664 million settlement that includes canceling $662 million in lease-to-own payments. The announcement was made by Iowa Attorney General Brenna Bird on behalf of a coalition of 17 state AGs.
“Snap Finance misled Iowans to believe their lease-to-own finance option was a good as cash and would help their credit ratings,” said Bird in a press release. “The truth was not as simple. Iowans were stuck with a complicated contract with little-to-no way to get customer service, and in some cases, no way to cancel their contract.”
Snap Finance is a consumer financial services company that offers a lease-to-own (or “LTO”) agreement through merchant partners rather than through its own brick-and-mortar stores like traditional rent-to-own stores.
When a customer selects the Snap LTO option, Snap purchases the merchandise from the merchant, Snap takes the title or owns the merchandise, and then Snap leases it to the customer until the customer pays off the full cost of the lease under the agreement.
The attorneys general investigated Snap’s alleged violations of consumer protection laws. They said Snap used misleading disclosures about the nature of their leasing arrangements; Snap did not allow customers to view the full terms of their contracts; customers experienced extreme communication issues when they were trying to return products; and Snap’s payment terms were confusing to customers.
Snap agrees to restrictions
Snap has agreed to the following business practice changes to address the states’ concerns:
Advertising restrictions: Snap has agreed to not use misleading slogans such as “cash payoff,” “same as cash,” and “no additional fees required,” that potentially hid the true cost of the lease a customer was agreeing to.
Disclosure and transparency: Snap must ensure that customers are shown the full terms and cost of a lease in accordance with state law before the lease can be signed.
Servicing protections: Today’s settlement makes it clear when Snap must repair or replace property that a customer leases and ensures Snap will do so. Additionally, Snap is prohibited from threatening seizure of a product for non-payment of a lease when it has no intent to do so.
Disclosures about credit ratings: Snap’s is prohibited from misrepresenting that applying for a lease or utilizing Snap’s LTO product will help customers increase their credit score.
Lease termination and surrender: Snap is required to provide clear disclosure of the right to terminate a lease, and Snap is prohibited from interfering with that right. Additionally, the settlement requires practical ways for a customer to return property when terminating a lease while pausing payment accrual when termination requests are processed.
Merchant training and Compliance: Snap must meet certain initial and ongoing training requirements and provide annual compliance reports for three years.
Iowa and Nebraska led today’s settlement and is joined by the negotiating committee states of Florida, Idaho, Kansas, Kentucky, and West Virginia as well as the states of Arkansas, Georgia, Louisiana, Mississippi, Missouri, North Dakota, Oklahoma, Texas, Utah, and Wyoming.