While other businesses have to use civil remedies when customers don't pay their debts, the rent-to-own industry has a special tool in Texas law that lets them file criminal charges, an investigation by the Texas Tribune and NerdWallet found.

When Melinda Sandlin walked out of Discount Furniture in Austin in late 2014, she was sure the store had put her on a payment plan to buy a new bedroom suite worth $2,750.

A year later, after realizing she had sent in more than $3,000 for her seven-piece set, she figured she was done. So Sandlin told the store clerk she wasn’t going to be making any more monthly payments.

“I already bought it out,” she recalls telling them. “And they're like, 'Oh no, read your contract. It's a rental contract. It's not a purchase contract.’ ”

That’s when her nightmare began.

Sandlin, 43, had signed a “rent-to-own” contract through a company called Acceptance Now — a division of Plano-based Rent-A-Center, one of the largest rent-to-own companies in the United States. Sandlin had no clue the company had embedded itself in regular furniture stores around the country.

Not only would Sandlin have to pay another $5,000 in order to keep her bedroom set — on top of the more than $3,000 she’d already paid — she found out the company has a legal hammer unique to the rental industry. And taped phone calls indicate the company threatened to use it on her.

“We have to get a payment,” the store’s rent-to-own manager, Minnie Tovar, told Sandlin during a tense phone call that Sandlin recorded. “We have to resolve this or we do file theft charges.”

Rental companies can avail themselves of a little-known law written decades ago by the rental industry lobby — in Texas and in many other states — that can turn a dispute over a love seat or big screen TV into a criminal offense report, a trip to jail and even felony theft charges.

In some cases, the customers have already paid thousands of dollars by the time they default, court records show. But if they don’t pay the remaining balance, they can face theft of service charges — even if they return the goods.

Luckily for Sandlin, a local lawyer agreed to help her free of charge. Once she gave the furniture back, her dispute ended without the involvement of law enforcement.

Others haven’t been so fortunate. A months-long investigation by The Texas Tribune and NerdWallet found rent-to-own companies have pressed charges against thousands of customers at police departments in Texas and in other states.

Policies and record keeping vary wildly even county to county, so it’s impossible to say for sure how many people have been arrested or prosecuted.

But in a single medium-sized county in central Texas — McLennan, where Waco is located — at least six rent-to-own companies pressed charges against more than 400 customers in the past three and a half years, police offense reports show. According to Waco Police Department records, more than half had sent in payments for at least two months, an analysis of the data shows.

Reginald Neal and Melissa Rodriguez weren’t even aware that the store they rented from, Aaron’s Inc., had turned them over to police.

“They filed a police report on us,” Rodriguez told Neal in disbelief after the Tribune showed her the complaint filed with the Waco Police Department.

“That’s fucked up,” Neal said.

Douglas Lindsay, president of sales and lease ownership at Aaron’s Inc. said the company had made “numerous attempts” to contact the couple. After getting a partial payment, the store “notified the authorities that the matter had been resolved.” He said all charges have been dropped.

Lindsay said the company tries to avoid exercising its option to pursue theft charges.

“It is our company policy to make every effort to work with our customers and prohibit the filing of criminal charges against customers as a practice,” he said. “Our culture is to work with each and every one of our customers to ensure every effort is made to bring them to full ownership if they desire.”

'It's debt collection by the police'

Rent-to-own customers who get charged with a crime may not realize they could be prosecuted for failing to adhere to the terms of their contracts. When they do, it’s generally a humiliating and life-altering experience.

In St. Petersburg, Florida, Otis Keels was arrested over a dispute involving a $1,320 set of custom wheels and tires he leased from Rent-N-Roll. Keels, a maintenance supervisor at an elementary school, spent three hours in jail after he was late on payments and did not return the rims. According to a police report, the company was demanding over $2,400 in unpaid rental installments.

Keels says he ended up paying nearly $4,000 including attorney’s fees and was required to take a shoplifting class as part of a plea deal with the county.

“It was one of the most humiliating experiences of my life,” he says. “I’m 63 years old and never stole anything in my life. Now I’m saddled with this record of me being a thief.”

Vince Ficarrotta, vice president of the franchise company, said Keels was turned over to police because he didn’t return the items.

“This isn’t because someone didn’t make payments,” Ficarrotta said. “It’s because someone thought they could just take someone else’s property instead of returning it.”

Ficarrotta also noted that Keels’ contract contains a state-required warning that criminal charges could be filed if he failed to return the items.

Rental companies say theft of service laws covering rented items are needed to protect rental companies from unscrupulous customers who have no intention of paying for — or returning — items they lease.

“What are we supposed to do, just write off that each time a customer skips out on us?” said Darrell Perkins, store manager for Advantage Furniture in McLennan County. “Then people aren't making no money ‘cause you're giving all your merchandise away.”

Critics say the companies are using the criminal justice system as a collection agency against people with limited resources — threatening them to pay up lest they be locked up.

“It's just debt collection by the police,” said attorney Jonathan Sibley, whose firm has represented defendants who fall into the crosshairs of rent-to-own stores in Waco. “Other companies can't call and threaten prosecution to collect a debt.”

In the tiny town of Bellmead, adjacent to Waco, the volume of rent-to-own cases was so high earlier this year that the police department had to assign an investigator to them to take pressure off uniformed officers, said Sgt. Kory Martin, the department spokesman. After receiving only two such reports from 2011 to 2013, the department has seen 82 complaints by rent-to-own companies against their customers since 2014.

More than 70 percent of those complaints since 2014 have come from a single store, Advantage Furniture, located in a strip shopping center off Interstate 35. That’s where single mother Maribel Walker, 36, rented bedroom and living room furniture for her and her kids in April 2015.

Walker acknowledged that she stopped paying for the furniture after a few months and didn’t return it for more than a year. She said a string of personal calamities — she lost her job, got evicted from her home and briefly went to jail for driving with an invalid license — overwhelmed her and she forgot to make payments after she put the furniture into storage.

In February, Walker said she finally felt she was getting her life back together when she went to get her driver’s license renewed — and was promptly arrested on felony theft charges punishable by up to two years in jail.

“I was crying because, like I said, it was supposed to be my new beginning ... And to be taken away like that,” she said, fighting back tears. “I mean, it could have been solved a different way.”

Perkins, the store manager at Advantage Furniture, said he made attempts to reach Walker to get a payment or have the goods returned. Walker said she was never contacted after she moved.

Perkins confirmed that Walker returned the items after she was charged with felony theft. But even if he were to ask the DA to drop the charges, he said it’s too late to help Walker. He’s tried to do that with others his store has accused of theft, to no avail.

“They won't even talk to us about it. Once the warrant's issued, it's an active warrant,” Perkins said. “So they have to be arrested, and they have to go to the DA.”

If Walker were indebted to a credit card company or a car dealership — which look at a person’s creditworthiness before approving financing — she would have faced civil collection procedures such as lawsuits or a repossession.

But because rent-to-own companies can use criminal laws when customers default, Walker faces felony prosecution — and along with it the fear that a felony record will keep her from getting a job and providing for her family.

Walker’s case is still pending.

McLennan County District Attorney Abel Reyna did not respond to questions from The Texas Tribune.

The law makes it easy for rent-to-own companies to pursue theft charges against their customers. In Bellmead, the rental stores themselves provide the facts needed to establish a case and then turn them over to the police — usually several cases at a time.

“There really is no long-term investigative process. It’s, ‘What do you have?’ The evidence is pretty much bundled and presented to us,” said Martin, the police department spokesman.

Not every county is as active as McLennan, where 32 of 38 theft of service prosecutions since 2015 have involved rent-to-own customers. In Bexar County, where San Antonio is located, the district attorney’s office reported receiving no theft of service cases involving rent-to-own companies over the same period. In Tarrant County, home to Fort Worth, about one of every five theft of service cases involved rent-to-own companies in the past two and a half years.

Law written by lobbyists

The law that Bellmead and other authorities in Texas are using to prosecute rent-to-own customers was added to the Texas Penal Code in 1977. Only two people testified in favor of the bill at the time: a pair of lobbyists for the rental industry. No one opposed it.

One of the lobbyists, Travis Phillips, said he drafted the legislation at the behest of Texas equipment rental companies and got a Houston state senator, Walter “Mad Dog” Mengden, to carry it for them.

“Back in the ‘70s, you could rent a $10,000 compressor and never take it back and nothing would happen to you,” said Phillips, who is now retired.

Phillips said the rent-to-own industry barely existed at the time and had no involvement in the passage of the bill.

The solution didn’t seem radical at the time. Phillips wrote a new section of the penal code, under “theft of service,” just for rental companies. It’s in the same section of law that a hotel owner might use if a guest stayed the night and left without paying.

But when it comes to rentals, the 1977 provision turned the concept of “innocent until proven guilty” on its head. On a scratchy recording of the Senate committee hearing 40 years ago, Phillips can be heard explaining that the goal of the industry was to “put the burden on the person who is the actor in this case, the person who rented the property, to come forward and explain their failure to return the equipment.”

The result: People are presumed to have stolen rented items if they sign a rental contract, don’t return them as required and then don’t respond to a certified letter sent by the company. The law doesn’t require receipt of the letter — only proof that it was sent. There are similar provisions in many of the rental theft laws around the country.

“The Legislature, in this business-friendly environment ... was all too eager to allow commercial interests to use the criminal statutes to clean up bad decisions they may have made in entering into contracts with people,” said Tom Krampitz, who was assistant director of the Texas District and County Attorneys Association when the bill was passed. “The reason why the [rental] industry deserves a special deal, without sounding too jaded, is they had a good lobbyist.”

Four decades later, rent-to-own companies are using the Texas law far more aggressively than the equipment rental businesses that originally pushed for it.

In McLennan County, for example, rent-to-own disputes made up 98 percent of the theft of service complaints filed with the Waco and Bellmead police departments from 2014 through the first half of 2017, according to offense reports provided to the Tribune and NerdWallet under state freedom of information laws.

There wasn’t a single report of theft of rental equipment services.

At the Advantage Furniture store in Bellmead, store manager Perkins says the company has significantly increased its pursuit of alleged rent-to-own scofflaws in the past five years. It works “more so than anything we’ve ever done before,” he said.

“We've tried turning it in on people's credit ... over 20 years we tried several different things,” Perkins said. “I mean, it's my right to take advantage of those laws.”

Perkins said the company, in consultation with Bellmead police, doesn’t initiate complaints unless a customer has failed to make a payment or return the items for six months. If the person returns the merchandise before a warrant is issued, he said, the company asks the authorities to drop the charges.

He said most people he rents to leave as satisfied customers, happy to get their dream living room set or computer for monthly payments they can afford. A tiny number — 1 percent or less, he estimated — ever get turned over to the police. In the mid-2000s, about 4 percent of rent-to-own merchandise fell into the category of “skips and stolens,” according to an industry survey.

“It's not like we go out and file on somebody just ‘cause it's fun,” Perkins said. “I mean, there's a lot of paperwork involved in it.”

Sometimes just threatening arrest is all it takes to resolve a dispute, often ending when the customer hands over the items.

“People will actually return the property once they realize the police are involved,” said Martin, the Bellmead police spokesman. “In those instances ... it’s up to the business whether or not they want to continue with pursuing charges and what money they’re out and what kind of condition the property may be in.”

A nationwide phenomenon

Most states have laws allowing rental companies to pursue theft charges in certain circumstances, but the laws — along with their definitions of intent and standards of proof — vary greatly from one jurisdiction to the next.

Over the past decade in Florida — which has an industry-influenced statute similar to the one in Texas — prosecutors have filed criminal charges against more than 3,000 people for missing payments on rented merchandise they failed to return upon the companies’ request, according to state records obtained by NerdWallet.

At least eight states — including Florida and Texas — have laws that specifically make the theft of rental services a crime, according to the American Rental Association, or ARA. That’s the trade group for companies that rent out construction equipment, tools and event trappings such as banquet tables and tents.

ARA lobbyists actively promote the adoption of theft-of-service laws around the country, and the association isn’t shy about touting its success at getting new statutes enacted in Idaho, Illinois and Iowa in 2016 and 2017.

They’re just as quick to point out that they have no connection to — or contact with — the rent-to-own industry. Rent-to-own companies are nevertheless fueling many of the prosecutions — and controversy — under the laws ARA has pushed in state capitals.

The irony isn’t lost on the association’s director of state government affairs, Alysia Ryan.

“I would take advantage of statutes in my industry, too. I understand that, but we see ourselves as two very different industries,” she said. “I think we need to work harder to make that differentiation.”

The rent-to-own industry has its own trade group, the Austin-based Association of Progressive Rental Organizations, or APRO. But the association hasn’t made criminal statutes a priority. Instead, the group has fought off attempts in Congress and in state capitals to introduce new regulations that could limit how much the companies can charge and how they can collect debts.

APRO General Counsel Ed Winn III advises rent-to-own managers to tread carefully in the criminal arena, writing in a recent newsletter that the risks — from bad publicity to malicious prosecution lawsuits — often outweigh the potential rewards.

In an interview, he acknowledged that a handful of rent-to-own businesses go overboard in pursuing cases in which they believe a theft has occurred.

“A few rental dealers prefer playing cops and robbers to making money,” he said.

Threats work

The threat of arrest certainly got the attention of Sandlin, the Austin woman who was warned about the possibility of criminal charges over the phone by the representative from a division of Rent-A-Center.

Sandlin said she never intended to rent furniture. In October 2014, after moving into a new house, the suburban mom was looking for a bedroom set and actually had enough money to buy one. But she thought paying for it over time would help her establish a credit history.

So she went to Discount Furniture in Austin and picked out the seven-piece set.

“We were discussing the payment options, and I had asked if I could just pay it upfront because I had the cash to pay for a whole bedroom set at that time. And they told me, 'If you want to improve your credit, you need to make at least three or four payments,'” she recalled.

Sandlin said she never would have signed the contract if she’d known she was actually doing business with a rent-to-own company.

She wasn’t aware that Rent-A-Center’s Acceptance Now division caters to middle-class Americans just like her. Nearly 1,300 retailers, including Rooms to Go and Ashley Furniture, now offer lease-to-own arrangements through Acceptance Now representatives or kiosks in their stores.

“If I wanted to rent, I would have gone to an Aaron's, I would have gone into an actual Rent-A-Center store,” Sandlin said. “They never once mentioned to me that I was going to be renting it, not once.”

Tovar, the Acceptance Now manager at Discount Furniture, disputed Sandlin’s account and said the contract has “'lease agreement' all over it.”

“She's an educated woman. She wasn't going to sign anything she didn't understand,” Tovar said. “We gave her plenty of opportunities to pay, and she refused ... We explained everything to her. She got a copy of everything that she signed.”

Sandlin acknowledged the lease language is in the “Rental-Purchase” contract she signed. But she believes she was misled, and by the the time she realized she had signed a rent-to-own contract, it was too late.

After Sandlin had paid more than $3,000, Rent-A-Center was still demanding more than $5,000 — a total of more than $8,000, nearly three times what the furniture was worth. Sandlin said she’d paid enough and refused to hand over the furniture, prompting Tovar to call Sandlin’s mother and warn the company was going to press charges.

“I felt threatened at that point,” Sandlin said. “I decided I need to do something, and I need to do it quickly because I have a certain amount of time before they take this to court.”

An Austin consumer lawyer agreed to help her. In the end, she said Rent-A-Center received more than the cash price for the furniture — then got the items back.

Sandlin said she wanted to share her story with The Texas Tribune and NerdWallet so that others don’t expose themselves to criminal prosecution by unwittingly signing rent-to-own contracts in otherwise traditional furniture stores.

“See what you're actually signing,” Sandlin said. “Because once you sign a contract, there's no getting out of it.”

An official from Rent-A-Center said the company pursues criminal charges as a “last resort.”

“We take this action in extremely limited circumstances, only when the intent to commit theft is apparent, e.g., the individual is trying to pawn our merchandise or refuses to make additional rental payments or refuses to return the merchandise after only one or two payments,” the official said.

Changing the laws

So what would happen to rent-to-own companies if they couldn’t hold the threat of arrest over the heads of their customers?

Not much, said Winn, the head lawyer for the industry’s trade group. He noted that in South Carolina, which took rent-to-own transactions out of the the state’s theft of service law in 1984, financial losses are no worse than in states that have it.

Winn said it wouldn’t bother APRO if Texas and other states follow suit.

“We’re not concerned about it one way or the other,” Winn said. “If they did away with the law tomorrow, life would go on. Businesses would have the same profitability as it does today. We'd be a little more careful upfront who we rent TVs to.”

That approach would suit state Rep. Gene Wu, a Houston Democrat, just fine. Wu remembers taking a dim view of rent-to-own theft cases as a former Harris County prosecutor and he said he’s now mulling legislation to tweak the law when the Texas Legislature meets again in 2019. He said if the rent-to-own industry doesn’t resist it, he expects “an easy lift.”

“If somebody got something and they end up not able to to pay because they lost their job or they gave them more credit than could afford, that should be a purely civil matter,” Wu said. “The police should not be involved at all.”

NerdWallet investigative reporter Brad Wolverton contributed to this story, which was provided by the Texas Tribune.