Nicole Hennegan purchased a used television through a rent-to-own store. The set, which would have cost not much more than $300 new, would have cost her almost $1,000. But after missing her fourth $80 payment, the set was repossessed, and she lost the $240 she had already paid.

Here's how life works for the working poor - the people without credit cards or cash savings - when the washing machine breaks, the kids need a bed, or the family wants a television.

They do what Nicole Hennegan did: Go to a nearby rent-to-own store, where, for $80 a month, she picked out a used television for herself and her 7-year-old son.

Of course, the payments would continue for a year. In the end, it would cost almost $1,000 for a used 36-inch TV and stand that sells for not much more than $300 new at Kmart.

"I didn't have the money to buy it in cash," Hennegan said.

It's another cost of being poor.

"People know that they're getting ripped off. They just don't know how much," said Peter Dellinger, an attorney at Rochester's Empire Justice Center.

The Buffalo News reviewed the cost of items at three rent-to-own chains operating locally - Rent-A-Center, Aaron's Sales & Lease Ownership and Rentway - and then checked the cost of the same or comparable items online or at retail stores.

Here's what The News found:

A washer and dryer, selling for less than $660 at Best Buy or Lowe's, sold for as much as $2,000 if purchased over 24 months at Rentway.

A refrigerator, selling for $430 at Sears or $448 at Lowe's, costs up to $1,700 when purchased over 24 months at Rentway.

A Dell desktop computer, selling online for $559, costs nearly $3,500 when purchased over 21 months at Rent-A-Center.

A 27-inch JVC television, selling for $215 on Amazon.com, costs nearly $1,000 over 15 months at Rentway.

"Rent-to-owns is just a real troubling industry," said Daniel J. Burns, president of M&T Bank Corp.'s Rochester region and head of a United Way program to dissuade consumers from using rent-to-own stores.

Rent-to-own stores dot the American landscape, with nearly 60 in the Buffalo area.

Most are in poor neighborhoods, many in Buffalo, where store owners and managers boast of giving people with no credit or savings the ability to buy large household goods with low payments over time.

"This is a unique and valuable combination of goods and services that a growing segment of the American public finds valuable," said Mary Gazioglu, a spokeswoman for Rent-A-Center, the No. 1 rent-to-own chain.

"We're giving them new products at fair prices and a good shopping experience," added Gilbert L. Danielson, chief financial officer for Aaron Rents, the No. 2 national chain.

But critics - including consumer lawyers and officials from the state attorney general's office - say the industry preys on those who can least afford its excessive fees.

Yet, the state attorney general's office says the prices - horrifying to consumers - are legal under New York's 20-year-old "rental-purchase" law.

"The law is written poorly since it gives rent-to-own stores very wide discretion to set prices," said Jim Morrissey, assistant attorney general in Buffalo. "They may not need to engage in outright deception, because the law grants them such latitude in what they may charge."

But consumer advocates are skeptical. The Empire Justice Center - a statewide consumer advocacy group - sued the rent-to-own industry at least eight times on behalf of individual consumers. The suits alleged the stores overcharged consumers, violating the intent, if not the specific language, of the state rental-purchase law.

All eight cases were settled out of court, so the industry practices were not tested before a judge or jury.

"You're stuck paying $20 a week, and by the time you're done paying for it, you've paid three times what it's worth," said East Side activist Michelle Johnson. "It's robbery."

That was the experience of Hennegan. And of Mary Hayward, Alma Medina and others.

Medina moved back to Buffalo from Puerto Rico last September with no furniture and no job. But she couldn't have her children sleeping on the floor. So the 24-year-old single mother agreed to pay Rent-A-Center on Grant Street $189 a month over 15 months for two metal-framed beds. That's more than $2,800 for a set that would cost less than $1,000 in a department store.

Hayward, 66, lives in a housing project, has no car and takes care of her twin grandsons along with her granddaughter. When her dryer broke during a snowstorm, she couldn't wait for layaway at Sears. She also wanted a computer for her 17-year-old granddaughter for school.

She turned to Rent-A-Center, agreeing to pay $184 a month for both, or more than $3,700 over 20 months for items that together sold for less than $1,000 in regular retail stores.

"It makes me feel sick. They're terrible," she said. "They're charging too much."

State regulated

Rent-to-own is a growing industry, with some 8,300 stores nationwide serving about 2.7 million people. It generates $2.35 billion in fees and $6.6 billion in revenues annually.

The stores allow customers to buy brand-name appliances, furniture and electronics under long-term payment plans while using the items immediately. They don't check credit.

The customer can rent for as little as one week or make weekly or monthly payments until completing the contract, usually after 12 to 24 months, when the items become theirs. Or the customer can buy the item at any time, paying a lesser "cash price" early in the contract.

All prices - including the total - are spelled out. Many items are used. There's no penalty or obligation if customers return the item early. If a payment is missed, the item is reclaimed within a week with no refund.

Stores provide free delivery or pickup within a day, free service during the rental period and replacement merchandise if something breaks.

Currently, 47 states and the District of Columbia have laws to govern industry practices. Nine states limit total charges, but critics say most laws are weak and were written by the industry.

Industry officials said they sought state-by-state regulation in the 1980s, offering consumer disclosures in exchange for getting their transactions declared as leases and not loan sales, which are more restrictive.

Today, the toughest conditions are in Wisconsin, Minnesota and New Jersey, where courts view rent-to-own contracts as credit sales subject to stricter lending rules and disclosures. As a result, some major companies either won't do business there or us special systems.

Ripe for abuses

When New York's law was introduced in 1986, backed by Gov. Mario Cuomo, the total price for rent-to-own purchases was a sticking point.

Lawmakers considered limiting the total price to 125 percent of the "cash price" but later agreed to twice the "cash price" - 200 percent. The cash price is what the store would charge to sell the item outright rather than on a rent-to-own basis.

But the law lets the rent-to-own store set those cash prices, and the stores generally set them higher than what traditional retailers do.

That's the problem, say Dellinger and other consumer advocates. "That's clearly not the intent of the rent-to-own law," Dellinger said. "That's crazy."

Lawmakers, Dellinger contends, meant for the cash price to be based on traditional retail prices, set by merchants such as Sears or Orville's.

In fact, at the time the bill was being discussed, former State Attorney General Robert Abrams expressed concern about a "potential for abuse in creating fictitious cash prices."

But the rent-to-own industry says it has higher operating costs than traditional stores because there's more turnover of goods and more intensive customer service. They also say they pay higher wholesale prices for items because they generally lack the buying power of Sears, Best Buy or Wal-Mart.

"Is our transaction expensive? Sure, if you look at the end price on something," said Bill Keese, executive director of the Association of Progressive Rental Organizations, an industry trade group based in Austin, Texas. "But we do a lot of things that retailers charge extra for."

There's also more risk, they say, so the business model is different.

"They are in our stores because they're credit-constrained," said Danielson of Aaron Rents, parent of Aaron's stores. "You have to get a premium for that."

And they argue a consumer would pay almost as much at a traditional store, with interest, delivery charge and finance fees through a retail credit plan. Such interest often exceeds 25 percent a year.

"I don't think we're that far off," Danielson said.

But The News found that's not always the case.

The Dell computer sold online for $559 has a cash price of as much as $1,700 at Rent-A-Center. Even with 25 percent interest over two years, the retail cost would be closer to $720.

The refrigerator, with two years' interest, would cost $552 at a regular retailer. That's comparable to Aaron's, but less than the $730 cash price at Rent-A-Center and $831 at Rentway.

Limited options

Critics like Dellinger say New York's law must be changed.

But a spokesman for one of the law's key sponsors, State Sen. Dean Skelos, R-Rockville Centre, said that's unlikely.

"We have not received one complaint about this bill in 20 years," said spokesman Tom Dunham. "I don't think anybody's given the Legislature a reason to go back and revisit it."

And the rent-to-own industry vows to fight any attempt to stiffen state laws, said Keese of the industry group.

Over the past five years the industry contributed more than $21,000 to various candidates. Almost half went to Skelos, now deputy majority leader.

Nationally, the industry - with former House Majority Leader Richard Armey on Rent-A-Center's board - is pushing for federal legislation to overrule stronger state laws and provide consistent rules from state to state. That effort doesn't appear to be going anywhere.

Rent-to-own customers, meanwhile, are left paying their exorbitant bills.

"The poor have limited economic options. That's something people don't understand who haven't been poor," said Karen Nicolson, executive director of Legal Services for the Elderly, Disabled or Disadvantaged of Western New York.

Medina now owns her beds. Just over a month after she started paying, her children's father used his tax refund to buy the beds from the rent-to-own.

It cost him more than $1,520 - at least 50 percent more than at the mall.

Hayward, in contrast, plunked down more than $2,360 before paying off the computer. She still owes $120 on the dryer.

And Hennegan? The single mother, employed as a telemarketer, made three $80 payments to Rent-A-Center on the 36-inch used Philips television. But when she missed the next payment, the TV was repossessed within days. She lost $240 already paid.

"I didn't have the money to buy it in cash," she said. "To me it seemed like it went down the drain."

TODAY/DAY 2

With no credit or savings, low-income people are forced to shop at businesses that critics say prey upon the poor.

o The poor turn to rent-to-own stores - which often charge three to four times the price of traditional retailers. o Tax preparers give loans at astronomical rates.

ooo

Sunday: The working poor are hurt by a myriad of higher costs and fees - some excessive, some illegal.

Tuesday: Dream home turns into a financial horror.

Wednesday: What can be done.