Is 'purchase, return, renewal' a scam?

David DiCesaris looks like an all-American basketball player, which he was at California's Pomona College. With a smile and smooth speech perfected by years as a salesman, he extols a financial product called a "purchase, return or renewal," or PRR, lease.

But some call it a scam. A New York court called it "unconscionable" and ruled that law there bans it. Utah law, however, allows PRR-type leases (which go by many names and have many variations). At least four finance companies here offer them to customers nationally.

Sen. Curt Bramble, R-Provo, worries that is helping to worsen Utah's already shady reputation for business deals and may help Utah become a haven for deceptive equipment leasing practices. He is looking at ways to restrict them.

Also, state financial regulators are looking into wording used by some leasing companies that they worry might lead customers to mistakenly believe they are dealing with state-regulated banks.

DiCesaris, CEO of Utah-based Applied Financial, dismisses such criticism and concerns. He says customers enter the leases safely without deception to gain a variety of tax, low-payment or balance-sheet benefits that PRR-type leases can offer.

Customers may use them to help finance the purchase of equipment like computers or to obtain needed cash for growing businesses by using equipment they already own (such as office furniture) in "lease-back" arrangements.

"Some of the biggest and brightest people in this country . . . have provided hundreds of millions of dollars to me to fund this business. That doesn't happen if you are engaging in deceptive business practices," he says. "These people are smart enough to ferret that out."

But many companies have filed lawsuits over the past two decades saying they were not smart enough to see traps in the fine print of such leases. At least, not at first.

Victims?

SOS Staffing Services of Salt Lake City was one of them and became an example of how a PRR can lure the unwary into possibly inescapable, expensive and perhaps perpetual leases.

Company officials did not return phone calls from the Deseret Morning News, but court documents outline what SOS said happened with a PRR-type lease from Matrix Financing, a now-defunct Utah company for which DiCesaris was executive vice president.

SOS paid $1.8 million over four years on a lease for computer equipment. It said the contract allowed it three options at the end of that term: purchase the equipment, return it or renew the lease.