Dear Mr. Johnson:
I remember when I used to play basketball in high school and my father bought me a tape called Showtime. It was about your life and I must have watched it at least 100 times. Your story inspired me to no end and I was always motivated to practice that much harder, take a few extra shots, and become a student of the game. I didn't go on to play college basketball, but I thank God every day for those skills that I learned from the game because I use the same skills of work ethic, diligence, and determination today as an entrepreneur. Along with many who have assisted me, I owe a small part of my success simply from watching you.
When I became a business man, I began to follow your career and my respect for your business acumen began to grow tremendously. Your real estate development activities that provide housing for 100s in communities across the country; your purchasing of many Starbucks franchises in areas where there were traditionally none and creating employment; I have sat in your theater in Harlem many times and have heard great things about your other theaters; and I have heard tremendous reviews from the talks that you provide teaching others how to create wealth. I have always thought that you were a strong model of fiscal responsibility and wealth creation.
My admiration continued until, as someone who teaches financial literacy, I was doing research on financial predators and perusing the sites of various financial predators. I was shocked when I went to a Rent-A-Center site and heard a basketball bouncing. I recognized the sound and immediately thought, "What does basketball have to do with Rent-A-Center?"
I scrolled down to see you bouncing the ball wearing the large smile that I grew up with. Then I began to see your face on television and hearing your voice on the radio telling people how great Rent-A-Center was. I knew full well that Rent-A-Center was a financial predator but I decided to go my own research to learn more about Rent-A-Center. I figured that I must be misinformed because a man like you who has taught and exemplified ownership as a principle of wealth creation, there had to be something more to Rent-A-Center that I must have missed.
So I simply made a few calls to 6 Rent-A-Centers in the New York City area acting as if I was a customer to see what sort of great deals they were offering. What I found was quite disturbing.
The Sofa and Love Seat:
Mr. Johnson ... did you know that at your Rent-A-Center that they are pushing a sofa that retails for $900 and has a weekly payment rate of $19.99? Did you also know that if you stuck to the RAC schedule you would only own it after 78 weeks meaning that you paid $659 in interest at a rate of 80%?
Why would you promote this product when you could promote being responsible and saving $19.99 per week until you can purchase the same $900 sofa in just 44 weeks and save $659 in interest over 34 weeks?
The Leather Sofa and Love Seat:
Mr. Johnson, did you know that the leather sofa and love seat that RAC is promoting retails for about $2000 and under their payment plan you need to pay $30.99 per week for 78 weeks until you own it? This means that you would have to pay a very modest (using RAC standards) 26% interest rate and about $417 in interest.
Why would you promote this product when a family can own the same $2000 sofa outright if they just saved $30.99 per week for 63 weeks? This way they would save $417 in interest and would have 15 additional weeks that they could continue to put money away for a rainy day, retirement, etc.
The 26 Inch Sony Bravio Television:
Mr. Johnson, did you know that the company you are promoting is selling a 26 Inch Sony Bravio television that retails for about $550, and making those who want to own it pay $17.99 per week for 104 weeks? This means that if they wanted to own it the RAC way they would be paying out $1321 in interest at a 163% interest rate!
Why would you promote this when the same family could do what we did while growing up and just stuck with the black and white TV, with the hanger antennas, that we had to turn the channel using pliers for a while? While this family was making do with the cheap television they could save the $17.99 per week in a high yield savings account each week, do this until they can own the same $550 TV after only 30 weeks, and save $1,321 in interest payments over 74 weeks.
The 52 Inch Sony Bravio TV:
Mr. Johnson, I would think that you believe like I believe ... people who can't afford to purchase a TV shouldn't even think about buying a big screen television! In this consumer-oriented society why are you promoting extravagant, superficial items to people who can hardly even afford to pay bills on a monthly basis? Did you know that this television, under the terms of RAC, one can own after 116 weeks of paying $59.99 per week? The TV only retails for $1900 and if they pay for the full 116 weeks they would have paid out $5,059 in interest and a total of $6,959 total for a $1900 television! Seriously Mr. Johnson, were you made aware of this consumer abuse when you accepted the checks to promote it?
This same television, if someone saved $59.99 in a high-yield savings account per week, they could own this television in 31 weeks and save 85 weeks of payments and over $5000 in interest!
It doesn't stop at Rent-A-Center, Mr. Johnson, because I also have heard you on the radio promoting the refund anticipation loan as well through your endorsement of Jackson Hewitt. The refund anticipation loan plays upon the fact that many people are expecting to receive their tax return, can't wait for the money, so they created a way to make exorbitant profit from other peoples' misery. Let me give you a scenario:
A single mother in the inner city goes to get her taxes done and her tax preparer at Jackson Hewitt estimates that she should be getting a $1000 tax return. Then the preparer asks if she has any pressing bills that require her immediate attention. She thinks about the light bill, the gas bill, and the rent. Then she thinks about the fact that her son needs a new pair of shoes as his only pair of shoes have a hole in the bottom, they just increased the bus fair and the price of her monthly pass was increased by 15%, the day care just called and stated that their prices are also going up, and her job just announced that they were going through another round of layoffs. All of these things together make it sound much more responsible to get the refund much sooner than later.
However, the preparer left out a few details. The first detail that he left out was the fact that if she gets automatic deposit into her account the amount of time of which she would get the loan and her actual refund could be as little as a week a part. Also, there are a few fees that he rushed over. When one accounts for these fees along with the already high interest rate the woman may have to pay interest on the loan that could range from 100 - 500%! Lastly, if the woman decides to take the loan, the refund is an "estimate" of her actual return. If there was a wrong calculation and she only gets half of what she expected (which happens frequently), she is still on the hook for the entire amount of the loan AND the interest!
Mr. Johnson, do you really think that this is fair? Do you really believe that this action is empowering to the community? Did you know that those who have the least are targeted the most? According to IRS data, of the 8.7 million who received a refund anticipation loan in 2007, 67% received an Earned Income Tax Credit (EITC) while only 17% of the entire US population received the EITC in 2007. The EITC program is designed to assist the working poor, so when you see that 2/3rds of those who received an RAL came from only 17% of the population it is clear who those who are in the refund anticipation loan business are marketing to.
Mr. Johnson, I give you much praise and respect for all of your accomplishments. However, I cannot allow your recent endorsements of such predatory products to go without reproach. I do not deny the personal responsibility that exists in the people to be able to learn and implement principles of financial literacy. If someone goes to Rent-A-Center and pays exorbitant interest for a television or sofa, or if an individual pays 400% interest on a refund anticipation loan that should have never been applied for, the ultimate fault lies with the individual. However, even though your actions are not illegal, your support for these products is immoral and I implore you to take additional measures of consideration of the repercussions of your actions to those in communities across this country.
I would love to join with you in the teaching of the community to attempt to reverse the damage and loss of billions of dollars that communities across the country have lost to these financial predators. I look forward to and welcome your response.
Follow Ryan Mack on Twitter: www.twitter.com/ryancmack