Credit Is Splitting In Two and That's How Rent To Own Benefits

Credit is changing right under our feet, and if you run a rent-to-own store, you’re going to feel the impact before most people can even name it. Phones get quieter, shoppers take longer to decide, and deals feel harder to close. That doesn’t automatically mean demand is gone. It can mean the paths customers used to rely on are closing, and they’re about to look for the one door that still says yes.

We walk through the hard signals behind the shift: banks tightening standards for subprime lending, what the Fed’s Senior Loan Officer Opinion Survey is really telling us, and why “I got turned down” is becoming a normal customer story again. Then we dig into buy now, pay later and the regulatory pressure hitting BNPL, from repayment checks to concerns about loan stacking. When the shortcut stops working, people still need furniture, appliances, and the basics to run a household, and they need a realistic way to pay.

You’ll also hear why a K-shaped credit market matters so much for RTO dealers: prime borrowers keep getting access, while the bottom half faces more scrutiny and fewer approvals. That’s our customer, and the job market staying steady means many of them have income but not access. We close with practical moves you can take immediately, from making “no credit needed” a clear marketing headline to training your team to meet these shoppers with confidence.

Subscribe for more RTO strategy, share this with your team, and leave a review so more dealers can find it. What’s the biggest credit shift you’re seeing in your market right now?

Transcript

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Why RTO Needs Better AI Info

Pete Shau 0:10

You've probably asked your favorite AI question lately. So have your customers. And increasingly, so have journalists, policymakers, and people trying to understand rent to own. That's why APRO launched this Generative Knowledge Initiative, a nationally recognized and award-winning effort to make sure that when AI talks about rent-to-own, it has accurate, credible, industry-authored information to learn from. APRO is building a stronger digital foundation for RTO through industry research and data. The RTO 101 Knowledge Base, decades of digitized industry history, customer and employee stories, and resources designed specifically for an AI-driven world. Why does it matter? Because if we don't define our industry online, someone else will. But April can't do it alone. Every member website, customer story, piece of local content, and accurate explanation of rent to home adds another credible voice to the digital conversation. Ready to get involved? Visit rtohq.org forward slash AI. There you'll find April's GEO Toolkit, AI Best Practices, AI implementation playbook, and more practical resources built specifically for RentOHome. That's rtohq.org forward slash AI, your starting point to help make sure the future of RTO is informed by the people who know it best. Us.

Why Sales Feel Hard Right Now

Pete Shau 1:33

Hello and welcome to the RTO show. I'm your host, Pete Xiao, and today we're talking cycles. Now, if you've been in this business for any amount of time, any amount of time at all, you know the feeling of patience. Now, especially now, the phones in your area, the phones in your store might be quieter than they should be. Well, the good customers are shopping around more than usual, right? They're kind of taking their time, they're looking around, they're looking at prices, and they're checking to see what's the best deal. And the ones who do walk into the store, they're a little harder to sell right now. Probably harder than ever, to be honest. You've been working twice as hard for the same number of deals. And what am I talking about? Well, I'm talking about credit. Credit, the big C-word, who has it, who's losing it, and who has access to it, and why this shift is about to matter to your store than almost anything else in the industry that is going on right now. Now, I'm gonna walk you through some numbers, and these numbers are not new to what's going on, but they might be new to you. Some of it's going to sound like straight economics. Maybe a little dry at first, and I do apologize. But what I want you to get is something very important. But stick with me because by the end of this episode, I want you walking away seeing something that I genuinely believe. This is RTO's moment. Right now. This is RTO's moment. Not someday, not soon, now. Now, if we position ourselves right, we're about to become the answer for millions of people who thought that they had other viable options. And now they're finding out that those options are closing on them pretty quickly. So let's start with where the industry actually stands right now. Because I think a lot of us have been so heads down fighting for every single deal that we've lost sight of the bigger picture. Now, April put out their 2026 Industry Health survey recently. And here's what it has to say, or at least part of it. Rent to Own did $11.8 billion in revenue last year. $11.8 billion. And we've served 6.7 million households across the country. Now, if you're an RTO dealer who's been grinding through a rough stretch of customer acquisitions, and I know a lot of you have, because I hear about it every single week, especially because I run the podcast and I talk to dealers every single day. You know, I know what it's like. Now that number might surprise you. It surprised me a little too, actually, and if I'm honest, because on the ground it's felt it's felt really tight. It felt like these new faces walking

Industry Growth Numbers That Surprise

Pete Shau 4:05

through the door have been harder to come by than they used to all the time, actually. But let's take a zoom back. Let's zoom out a little bit. And the industry isn't really shrinking. It's not struggling. Actually, it's growing and it's serving more households than ever before. So hold on to the number because I'm about to explain why the last year and a half has felt hard and exactly why I think it's about time to change and for the better. So here's why. The traditional lenders, banks, subprime lenders, the whole ecosystem that a lot of your customers have leaned on when they wanted something other than RTO, well, they're tightening up. Okay. And I don't want you to just take my word for it. I want to talk to you a little bit about it and where it comes from. I want to show you where this is coming from. Every quarter, the Federal Reserve runs something called the Senior Loan Officer Opinion Survey. That's a long mouthful, but just hear me out. Everybody in the industry just calls it slows. S-L-O-O-S. Slows. It's exactly what it sounds like. The Fed literally goes out and asks loan officers at the banks across the country, hey, um, are you tightening your standards? Are you loosening them? What's actually happening on the ground when somebody applies for credit? Now, you would think it's it's the other way around, that it would dictate it, but no, they're actually calling them and they talk to them directly. Now it's about as close to a

Banks Tighten Subprime Credit Standards

Pete Shau 5:30

direct pulse check in the banking system as you can literally get. I mean, this is directly from the people who do it. And in April of 2026, Slows confirmed in black and white, banks have tightened their standards specifically on subprime lending. Now, it might sound a little bit off key, but I want you to follow me here because it wasn't eased, it was tightened. That means that if you've got shakier credit, low end credit, low tier, you're walking into a bank right now, it's harder than it was a year ago. KPMG dug into the data, and at the end of last year, they found the same story. Banks pulling back on lending across the board, businesses of every single size. Now that trend has carried straight into this year. And this isn't a blip on the radar. It's a pattern that's been building for over a year now. So when you talk to someone and they say, I tried to get a loan and I got turned down, that's not bad luck. That's the entire banking system moving in one direction. And that's a direction that pushes people towards rent to own. Now, let's talk about the other big alternative that your customers have been reaching for uh as of late and quite a bit, and that's buy now, pay later. Now, BNPL exploded over the last few years because it felt easy. Now, all you have to do is split a purchase into four payments, no hard credit check, done in 30 seconds at checkout, extremely easy. For a lot of people, it became the workaround to spending and to traditional RTO. Well, that easy money era is coming to a close and it's closing for a completely different reason than the banks. This time it's the regulator stepping in. The regulators have seen a problem and they're really diving deep into what BNPL is. Now, New York passed a law as part of their 2025-2026 state budget that requires BNPL lenders to actually check whether someone can repay. Imagine that. And that is before extending them the credit. Well, let's think about that. Now, for years, that credit check basically didn't exist in any meaningful way, especially the way we do it for

BNPL Crackdown And Loan Stacking

Pete Shau 7:35

any of the products that we sell. Now, it's the law in one of the biggest states in the country. And the other interested states are actually watching closely. In December of last year, seven state attorneys general sent letters to BNL, excuse me, to BNPL providers. They sent them direct letters and they were demanding information about their practices, something that they don't usually do, but now are concerned about. And they're specifically checking whether they're complying with consumer protection law. Seven. Now, that's not one rogue state. That's a coordinated signal that regulators think something is wrong here. They want to protect the consumer, and it's not always been in our favor or always against, but this is something huge. And now, overseas, the UK's regulators are bringing BNL BNPL under full formal regulation, requiring the same kind of credit and affordability checks that traditional lenders have always had to do. Now, basically they're saying you've got to do your due diligence. Well, why is this all happening? Well, a big piece of this is something regulators call loan stacking. Keep that in your mind. I want you to think about that. Loan stacking. When a customer takes out multiple BNPL loans across different apps at the same time, that's loan stacking. So one for a couch, another one for a TV, maybe, uh, another one for a phone bill, and none of those apps can see what the other ones are doing. So if one has one and another has one, they can't tell. Now, nobody's tracking the whole picture except the customer. And a lot of them are in over their heads without even realizing it. Follow me here because when you have somebody who is extending their credit in one spot and extending it in another, and they don't talk, that can lead to a lot of problems. Regulators caught on, and now the walls are closing in on the entire model. BNPL, be careful. Now, here's a term that I want you guys to remember because you're gonna hear it more and more and more. And I want you a step ahead of everybody else in this industry. You know it because you're gonna hear it first at the RTO show. It's called the K-shape economy, or in this case, a K-shaped credit market. That's really the important part. Now, I want you to picture the letter K. Okay. You've got the K and you've got the part that comes up and you got the part that comes down. Now, it's got a line coming in and then it splits into two. As it goes up or as it goes down, that's exactly what's happening to credit right now. Transunion tracked this, and here's what they found. Okay. Personal loan balances just hit a record high. On paper, that might sound good to some, right? But more lending, more activity isn't always the best. When you take a closer look, that gross is almost entirely happening at the top of the K. Prime borrowers, uh, people with strong credit are getting bigger loans. Think about it, cars, homes, way more expensive than they used to be, easier approvals, and more access than ever before. But meanwhile, down at the bottom of that K, now you've got subprime borrowers. These folks have thinner, rockier credit, maybe not so well, and they're getting smaller loans, tighter controls, and a whole lot more scrutiny. So where you have the top of the K, they're getting actually bigger loans and it's easier. At the bottom of the K, smaller loans not so easy. So there's a lot more scrutiny before somebody says yes. And it's the same market. Two completely different experiences depending on which arm of the K that you're standing on. And the folks at the bottom of that arm, well, those are our customers. Those are the RTO customers that we serve every single day. Those are the people who have always made RTO work because we've never served the ones at the top of that K in the first place. Those are the people that can afford it. Those are the people that have credit available to them. Okay, so let's put all of that together because this is where I want you to keep the perspective. This is what I want you to really look at. For the last 12 to 18 months, a lot of us in the RTO industry have felt like new customer acquisition has been an uphill fight. Now, when I say new customer acquisition, not somebody who's been a customer before, went inactive, and then became active. We're talking about brand new customer acquisition. And I think now we know exactly why. Some of the customers who used to be ours went and tried something else. And the new customers haven't showed up yet. And these new customers, they tried stacking a few BNPL apps together, and it felt like a shortcut. It felt like it was easier. And for a while, it literally worked. It worked well enough that they didn't need R2 in the same way that they used to, or so they thought. But here's the thing that I really want you to understand. Their needs have never changed. They still need a couch for the new apartment. They still need tires to get to work. They still need a refrigerator that actually keeps food cold.

The K Shaped Credit Market

Pete Shau 12:10

Well, that demand never really went anywhere. It's still there and it's always going to be there. But what's really changed is that the other roads that they've been using to get the products and services, well, they're closing up one by one by one. And it's happening right in front of the RTO industry. And this is why it matters the most because we can take a look at it and take advantage. Banks are pulling back because of risk. BNPL, well, they're pulling back because regulators have finally caught up to it. Now, you have so many BNPLs that are going one way or the other. And not that they're the enemy, just hard to really find out what's doing what. Now, for different reasons, it's the same result. And that result is that customers are getting funneled right back towards the door that's always stayed open for them. And guess what? That's rent to own. That's ours. And I don't think that's a coincidence. That lines up what APRO's numbers have showed at the top of this episode. I think that we're already starting to see it, to be honest with you. The growth is showing up in the data before this trend has even fully played out. They're tightening up. The bottom of the K has got some issues. They need someplace to go. Where are they going? To RTO. And that should tell you something really important. The turnaround, it really isn't a maybe. It's kind of already underway. And here's what really this is what really gets me all fired up because there's one more piece of this puzzle, and it's genuinely a good one. Well, all of the credit tightening has been happening. They're saying, nope, you can't do this. Nope, you can't do that. Cars are more expensive, homeowners are more expensive, products are becoming more expensive, appliances are getting more expensive. The job market has stayed steady. Okay. So the Bureau of Labor Statistics put out their August 2026 report. Super important because that just came out and it showed payrolls were up by 162,000 jobs. Nice. Unemployment is holding at a 4.1%. We kind of talked about that in the last episode, but the wages are up now too, somewhere between 2.5% and 3% year over year. Now, nothing explosive, nothing flashy, but real steady and very dependable growth. And that's where we want it to land. That's where we want it to be. And the matters that are more than most realize is because think about what that actually means for the person walking into your store. They have a job, they have a paycheck, they have income coming in regularly. What they don't have anymore is easy access to the credit products that they use to lean on to stretch that paycheck further. Now, that is not a problem for us. That's not a problem for rent to own. That's actually a problem for them. Credit stacking, loan stacking, not good. That is the single best setup for our industry that we could ask for. The customer has the means. What they're missing is the access. And access is exactly what we've built our entire business model around providing without ever needing a perfect credit score to say yes. They've never needed that in rent town. And they never will. So when I look at where we are right now, I genuinely don't see bad news. I genuinely see a customer with a steady income and a real need standing in front of two means of services that used to be wide open for them. Credit, right? No longer there. BNPL, that's an issue. And watching those doors swing shut and then turning around to find out that ours have been open this entire time. Rent to own, this is where we live. All right. This is an incredible position to be in, in my opinion. And if we're smart enough to see it, we can step into it. So here's what I want you to actually do with this information, starting right now. First, change how you talk about credit in your marketing. Stop treating it like

Jobs Steady While Credit Shrinks

Pete Shau 15:35

a no traditional credit check, like a quiet footnote at the bottom of an RTO ad. This needs to be upfront and sever. The fact that we don't have to have credit, the fact that we don't even use traditional credit, the fact that we don't even do a soft pull is super important. Make that the headline. Because right now, out there, there are people who just got turned down by the bank. There are people who just got turned down for that credit card, for the appliances or for the furniture. There are people who just need a little bit different than the BNPL because you know what? It might have actually declined them. Or they have one and can't get into another. And they are actively searching for this exact message. So be the loudest, clearest voice, and say back to them, no credit needed. Second, train your team members to recognize this customer when they walk in. Now, they might mention that they've tried to go somewhere else first, but remember, this is not a red flag. This is your best lead of the day. Teach your sales team to meet that moment with the RTO confidence that comes with what we give. You came to the right place. You very much came to where we're going to take care of you. You don't need credit. You don't have to worry about BNPL standards. We can make that happen. You came to the right place. And that should be the energy every single time. Third, this is the mindset shift that I really want you to leave with. Stop thinking of this as us playing defense. Try to hang on to whatever customers we get. That's not a way to think about it. Start thinking of this as playing offense. We are not waiting around hoping the market turns in our favor. The market is already turning. Banks are pulling back. BNPL is reined in in some states, and it's going even further, especially into the UK and other states are looking at it right now. The job marketing is giving people steady income to work with. Every piece of that is lining up in the rent-to-owned direction. We have it going on right now. This is where we stand. Whether we notice it or not, the only question left is whether we position ourselves to be standing in the right path when that retail wave hits. Or whether we let it roll past us because we were too slow to lean in on it. And I'm going to say this, and I believe this. You guys are way too smart for that. Now, I believe rent to own is about to have its moment. Another moment, it's a cycle, it's coming back. And I don't say that lightly, but I think right

Marketing And Sales Moves To Make Now

Pete Shau 17:50

now, I believe the data backs it up. The timing backs it up. And honestly, the fundamentals of what we have always done back it up. We aren't credit based. We service the customer. We take care of them. We don't have to worry about we give the approvals. That's what make RSTO so special. We give the approvals. Now, the rest of the market, it might start pushing them away a little bit where they, you know, a couple 12 to 18 months ago, they were bringing them all in. Now it's being a little bit more regulated. Well, RTO's stayed regulated. It's been regulated. So let's be ready for who comes in. Now make sure you smile, make sure you take care of them and tell them this is where we live. That's it for this episode. If this has got you thinking, share it with your team. Talk about it with your next meeting, and let's go capture the sales and get on top of that wave together. As always, get your collections low to get your sales high, and I'll see you next time. Thank you. You know, on this podcast, I don't just talk about any company. So when it comes to rent to own, we talk about what works. If you're an RTO retailer and you're still running your marketing and your CRM like it's 2020, you need to talk to WoW brands. I've had their CEO, Ryan Krass, right here on the show. And what his team has built is the real deal. A full digital ecosystem made specifically for rent-to-own. Websites and e-commerce that actually convert. A CRM built for our industry, not just bent to fit it. Vendor inventory management that keeps your ordering and pricing dialed in. WoWBrands isn't a general marketing shop dabbling in rent to own. This is their whole world, just like it's ours. Head to WoWBrands.com and tell them the RTO show sent you. That's Wowbrands.com.