This is from across the river, but it is near and dear to my heart nonetheless. As Monica Yant Kinney has been following, the New Jersey Supreme Court recently issued a stunning defeat to Rent-A-Centers in New Jersey. Why?

Well, the very short story is that a person comes into a Rent-A-Center (RAC), and "buys" a TV, by paying a monthly installment, under their "rent-to-own" plan. In reality, what they are doing is much closer to purchasing a product on Credit from the RAC. And if they don't pay even one month on time, their possessions are repossessed. Basically, they are getting a very high cost loan to buy a product. It is very similar to programs that Best Buy, Sears et. al. run, only Best Buy does not call them rent-to-own; they just acknowledge that you bought the product, and are borrowing the money from them and assign you an interest rate. And of course, if you don't pay, they can take the stuff back.

The New Jersey Court looked at that RAC program and said that if it looks like a sale, and acts like a sale, it is a sale, no matter what the RAC calls it. Why is this such a big deal? Because if you declare it a sale with a loan, then the RAC has to abide by lending laws, and has to stop charging incredibly high fees for the products. In short, it gives working people the protections of federal laws. The Rent-A-Centers don't really like that idea, and so, they have hired John Ashcroft's former top gun, and appealed the case to the Supreme Court.

Below I explain more, and give my prediction on why consumer's will lose, even if they should win.

First of all Kudos to Yant-Kinney for covering this story. RAC's are something that people like me in the middle class never even have to think about. For someone with less money, however, they seem like the only attainable way to get something. The reality is that they are a way for big companies to leech money from inner-cities. I saw a presentation a few years ago by someone at Fannie Mae, on how much money is stripped out of inner-cities, and besides predatory mortgage lending, I think RAC's were number one. You basically take people who can afford to pay the least, and for those that do make all the payments, have them pay something like 800 dollars for a 300 dollar TV. (Similar work is found in the Brookings Study called Why the Poor Pay More, which showed that for even basic necessities, the poor pay more than the rich.) The total amount of money that is sucked out of inner-cities that heads straight to Wall Street is pretty sickening, when you combine the Rent-A-Centers, PayDay Lenders, Check Cashers and Predatory Lenders.

As Yant-Kinney noted, the RAC's are not taking this lying down:

It hired Theodore Olson, the nationally renowned appellate lawyer who won a little case you might remember called Bush v. Gore. Olson is bringing along an associate who once clerked for a judge named John Roberts - recently promoted to chief justice.

All this to take on Hilda Perez?

All the North Camden grandmother wanted was a decent deal on a living room set. Something comfy to stretch out on after being on her feet all day cooking at a child-care center.

Now her one-woman stand against Rent-a-Center is turning into a question of whether a company has a constitutional right to rip off the undereducated, underpaid masses.

Yeah, they hired Ted Olson, John Ashcroft's former Solicitor General, who has argued case after case in front of the Court. So, this is a big deal. Why? First of all, the NJ Supreme Court ruled that because the RACs were violating usury laws, they had to pay everyone who participated in the program a refund, dating back to 1999. So, they have asked the New Jersey Court to limit their decision to only the current plaintiff, Hilda Perez, because it will hurt their bottom line. (I think I just shed a tear.) But, as Yant Kinney notes, make no mistake, they hired Olson for one reason, and one reason only, to take this to the Supreme Court if they don't win.

What will happen in the Supreme Court if they hear it? Well, I am not exactly hopeful. Kennedy might be a swing vote on social issues, but on issues of "protecting the market," there is no similar split. The Court, led by people like Justice Breyer, generally side with big corporations. The logic seems to be "if there is a market for it, how can it be bad?!" And so, I expect that the sanctioning of the shafting of the poor will succeed.

The case will have huge implications, not just in NJ, but across the Country if it is successful. Because if somehow Ms. Perez wins, it is open season on rip-off artists like Rent-A-Center. Unfortunately, I am not confident that the SCOTUS will rule in her favor.