Since 2016, investigative reporters from the New York Times have catalogued the long history of abuse and consumer exploitation related to “rent-to-own” housing contracts, which blur the line between rental and sales and often leave lower-income families caught without the traditional protections available to purchasers and tenants. The Times’ latest installment—published on February 18, 2022 and titled “Bad Credit? No Savings? Unconventional (Maybe Risky) Ways to Buy a Home”—updates those earlier articles and quotes Reed Colfax, who is leading the Firm’s housing discrimination and consumer protection litigation against Rainbow Realty Group and related entities who, the complaint alleges, have “perpetrate[d] a predatory and unlawful ‘rent-to-own’ scheme” injuring a class of as many as 1,000 low-income households.
While identifying other “shared appreciation” models as potentially beneficial to some sophisticated consumers who cannot qualify for conventional mortgages, the Times article observes that rent-to-own programs have been associated with “a long history of predatory practices.” Noting that consumer protection groups are wary from past experience, the article then highlights the Firm’s Rainbow litigation—which is scheduled for trial later this year. Referencing the borrowers hurt by Rainbow’s practices and many other households of color who choose rent-to-own programs because they cannot get conventional financing, Reed notes that “[i]t’s a population primed for exploitation.”
Relman Colfax filed a federal court complaint on behalf of the Fair Housing Center of Central Indiana and five individual plaintiffs on May 30, 2017. The complaint alleges the homes are in such poor condition that one Defendant admitted under oath that they are not livable. It further alleges that the prices and interest rates charged by the Defendants are exorbitant, and the rent-to-own contracts are set up so that buyers have all the disadvantages of owning a home but none of the advantages. Plaintiffs claim that the Defendants have engaged in illegal “reverse redlining” by targeting this scheme at residents of minority neighborhoods. That is where the Defendants’ houses are disproportionately located, and where two of Defendants’ storefront offices are located.
The U.S. District Court for the Southern District of Indiana certified the matter as a class action on March 27, 2020, on claims under the Fair Housing Act, the Equal Credit Opportunity Act and the Truth in Lending Act. The parties are currently briefing summary judgment and trial is scheduled to begin on October 17, 2022.