As America’s affordability crisis worsens, predatory lenders are now targeting renters with misleading “rent now, pay later” options that extract additional fees every month and heighten the risk of eviction for 109 million renters.
A new investigative report, “Rent Now, Pain Later: How ‘Rent Now, Pay Later Loans’ Put Working People at Risk,” shares how these lenders are pushing loan products that involve hidden high costs, misleading claims and deceptive practices that push already-underpaid workers further into debt. Further, the fine print in these loans builds in abuses that deny consumers a legal right to challenge the fraudulent practices or to recover their hard-earned money.
“These shady financial products — designed to take advantage of desperate renters — appear to involve all kinds of potential lawlessness. Any true affordability agenda must involve taking on the predatory cottage industry sprouting up around our rental market,” said David Seligman, co-author of the report and executive director of Towards Justice, a nonprofit organization working to achieve economic justice in the workplace.
According to the report, “Rising rent is driving families into debt and financial predators are exploiting families’ hardship by harvesting junk fees and masking the true cost of credit. Over time, these junk fees and junk products, often with multiple payments, can cost working families thousands of dollars, entrenching a reality where affordability is always just out of reach.”
To evade state-enacted consumer protection laws, these lenders typically partner with banks that are willing to lend out their charters to the highest bidder, a practice also known as “rent-a-bank” agreements. Once the bank gets its fees for the deception, unsuspecting consumers are then left dealing with standalone companies that charge “membership” fees that disguise interest and fee costs equivalent to 180% annual percentage rates.
Many borrowers find that these lenders consistently fail to deliver their advertised services or basic customer support, leaving them facing imminent eviction.
The emergence of this new kind of predatory loan coincides with increasing financial stress experienced by many of today’s families. According to Realtor.com’s most recent update on rental costs, the average monthly rental cost in the nation’s top 50 metro areas last November was $1,693. Further, only one in five families in these areas could afford this cost.
Other findings from “Rent Now, Pain Later” reveal that from 1990 to 2025, the average cost of renting in an American city more than tripled. Updated estimates show that:
• More than half of renter households spend over 30% of their income on housing, affecting 22 million households, or about 55 million people;
• More than one in four renter households spend over half of their income on housing, affecting more than 12 million households, or about 30 million people;
• Renter households with incomes of $30,000 or less have only $250 left each month for all other daily living expenses after paying for housing.
Ben Kaufman, a senior fellow with Protect Borrowers (formerly known as the Student Borrower Protection Center) and the report’s co-author, said these findings are a call to action.
“With political leadership at the federal level sabotaging consumer protection, it’s critical that state and local lawmakers, policymakers and law enforcement take action to safeguard Americans from being pushed deeper into debt just from paying their rent,” Kaufman said.
The report recommends several ways federal and state governments can effectively address these practices:
1. Federal, state and local law enforcement officials should investigate and prosecute Rent Now, Pay Later firms for violating federal and state consumer protections.
2. Prudential regulators (as defined in the Federal Deposit Insurance Act) should supervise and, where necessary, enforce federal banking laws against banks engaged in Rent Now, Pay Later lending.
3. States should exercise their power under federal law to protect consumers from out-of-state predators; and
4. Federal and state lawmakers should ban corporate landlords from owning, operating, marketing and embedding Rent Now, Pay Later products on rent payment platforms.
“As costs continue to rise across the economy and a growing share of families are unable to afford basic necessities, the regulation of Rent Now, Pay Later loans must be a priority for government law officials at the state and local levels — particularly those able to fairly and aggressively enforce the law without fear or favor,” the report concludes.
Charlene Crowell is a senior fellow with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.