Fogie v. Thorn Americas, Inc.

95 F.3d 645 (8th Cir. 1996)

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Nature of the Case

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Facts

Thorn (D) operated a chain of stores under the business name of Rent-A-Center (RAC). Plaintiffs (P) are individual members of a certified class who entered into rent-to-own transactions with RAC on or after August 1, 1990. RAC leases household goods to its customers for a weekly or monthly basis. The lease may be renewed at the end of the term. RAC uses a standard form contract. The standard contract allows a class member to acquire ownership of the item by renewing the lease for a specific number of consecutive rental periods. The cash price of the item is set at 55% of the total payments necessary to purchase the item by renewing the agreement to ownership. The difference between the total payments needed for renewal to ownership and the cash price is called the “the cost of lease services.” Ps have successfully contended that the difference between the cash price and total payments is actually entirely interest. Ps took this action under the contention that D was in violation of state and federal usury laws and RICO. On September 28, 1995, the district court enjoined D from entering into credit sales transactions within the State of Minnesota, which bear interest in excess of that rate permitted under Minnesota law. It declared the rental-purchase contracts constituted unlawful debt as defined under RICO and declared all such contract void ab initio and set a formula for determining money damages. D appealed.