Rent-a-Center took an accounting charge of $77 million to cover ’...

reserve this year (CED Feb 7 p3) after the U.S. Supreme Court rejected its petition for review. The chain had challenged a N.J. Supreme Court ruling that it fell under the N.J. Retail Installment Sales & Consumer Fraud Act, which caps at 30% a year interest on installment deals. Hilda Perez sued RAC in 2003, claiming she paid $8,000 toward interest of about 80% on furniture, a TV, a washing machine and other appliances. The suit seeks to include aggrieved customers with 294,000 rent-to-own contracts entered into April 23, 1999-March 17, 2006. RAC also is expected to pay $4.95 million this month to settle allegations it violated Cal. wage & hour laws. It reached a preliminary deal with former store managers Jeremy Burdusis and Israel French and other former employees. The 2001 suit claimed RAC violated Cal. law on overtime, lunch and work breaks. RAC promised overtime but didn’t pay it, the suit said. The settlement will be paid to 6,250 people who worked for the chain Aug. 1998-Nov. 9, 2006. Meanwhile, CE products brought 33% of RAC’s $2.1 billion in store rental revenue in fiscal 2006, behind furniture and accessories (37%), but ahead of appliances (16%) and PCs (14%). Furniture maker Ashley and Whirlpool accounted for 16% and 14.3% of RAC merchandise buys in 2006, against 16.6% and 14.9% a year earlier, the company’s 10-K filing with SEC said. RAC will spend about $75 million on capital projects in 2007, down from $84.4 million in 2006. RAC will finish building a new hq in Plano, Tex., this year and add financial services, including payday loans, to 350-400 stores. It has financial services at 150 stores in 14 states, including at 34 of 112 locations in Tenn., the chain said. It had spent $21.5 million building the hq by Dec. 31 and will incur $8.5- $10.5 million more in costs during Q1, the company said. RAC spent $657.3 million on 37 corporate transactions in 2006, including $622.5 million to buy 782-store Rent-Way. It since has merged about 160 Rent-Way stores into its own locations. A minimum 18-month term is required for a RAC customer to own a product and 25% of RAC contracts go to term, the chain said. The average life of a product at RAC is 19 months and 86% of its contracts carry a weekly term, it said. The average weekly past-due percentage was 6.58% of contracts in 2006, down from 6.76% a year earlier, RAC said. Charge-offs for goods stolen by renters was 2.4% of store rental revenue in 2006, down from 2.5% a year earlier. RAC had 3,406 stores Dec. 31. It also had 282 ColorTyme franchise locations, down from 299 a year earlier.