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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.

RAINBOW RENTALS
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies: .......

(2) Aggregate number of securities to which transaction applies: ..........

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............

(4) Proposed maximum aggregate value of transaction: ......................

(5) Total fee paid: .......................................................

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid: ...............................................

(2) Form, Schedule or Registration Statement No.: .........................

(3) Filing Party: .........................................................

(4) Date Filed: ...........................................................

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[RAINBOW RENTALS LOGO]

April 16, 2001

Dear Fellow Shareholder:

It is a pleasure to extend to you a cordial invitation to attend the
2001 Annual Meeting of Shareholders of Rainbow Rentals, Inc. This year's annual
meeting will be held on May 17, 2001.

Shareholders will be asked to approve the election of Directors and to
ratify the appointment of auditors. In addition, we will present a report on the
operations and activities of the Company. Following the meeting, management will
be pleased to answer your questions about the Company.

Please carefully review the Proxy Statement and then complete and sign
the Proxy and return it promptly to the Company in the enclosed self-addressed
stamped envelope.

I hope you will be able to attend this meeting in person. Whether or
not you expect to attend, I urge you to sign, date and return the enclosed proxy
card so that your shares will be represented.

I look forward to seeing you on May 17th.

Sincerely,

Wayland J. Russell
Chairman of the Board and Chief Executive Officer

RAINBOW RENTALS, INC.
3711 Starr Centre Drive
Canfield, Ohio 44406

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 17, 2001

The Annual Meeting of Shareholders of Rainbow Rentals, Inc., an Ohio
corporation (the "Company"), will be held at the Holiday Inn - Boardman, 7410
South Avenue, Boardman, Ohio on Thursday, May 17, 2001 at 10:00 a.m.

The purpose of the meeting will be to:

1. Fix at six (6) the number of Directors and to elect six (6)
Directors for a term expiring in 2002.

2. Ratify the appointment of KPMG LLP as auditors of the Company
for the year ending December 31, 2001.

3. Transact such other business as is properly brought before the
meeting.

Only holders of shares of Common Stock of record at the close of
business on March 30, 2001 will be entitled to notice of and to vote at the
meeting. A list of such shareholders will be open for examination by any
shareholder at the meeting.

ALL SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. TO ENSURE
YOUR REPRESENTATION AT THE MEETING, HOWEVER, PLEASE MARK, DATE AND SIGN YOUR
PROXY AND RETURN IT WITHOUT DELAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. Any
shareholder present at the meeting may withdraw his or her proxy and vote
personally on each matter brought before the meeting.

By Order of the Board of Directors

Michael A. Pecchia
Secretary

Canfield, Ohio
April 16, 2001

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RAINBOW RENTALS, INC.
3711 STARR CENTRE DRIVE
CANFIELD, OHIO 44406

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS

SOLICITATION AND REVOCABILITY OF PROXIES

This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Rainbow Rentals, Inc. (the "Company")
for use at the Annual Meeting of Shareholders to be held at the time and place,
and for the purposes, set forth in the accompanying Notice of Annual Meeting of
Shareholders (the "Annual Meeting"). It is anticipated that the proxy statement
together with the proxy and the 2000 Annual Report to Shareholders will be
mailed to the Company's shareholders commencing on April 16, 2001.

Pursuant to the Ohio General Corporation Law, a person has the power to
revoke its proxy at any time before it is exercised by (1) attending the Annual
Meeting and voting in person, (2) executing and delivering a proxy bearing a
later date, or (3) delivering written notice of revocation to the Secretary of
the Company prior to the Annual Meeting.

The Company will bear the cost of this solicitation of proxies,
including the charges and expenses of brokerage firms and others for forwarding
solicitation materials to beneficial owners of the Company's shares of Common
Stock (the "Common Shares"). In addition, proxies may be solicited by mail,
personal interview, telephone or telegraph by Directors, officers or employees
of the Company without additional compensation therefor.

PURPOSES OF ANNUAL MEETING

The Annual Meeting has been called for the purposes of (1) fixing at
six (6) the number of Directors and electing six (6) Directors whose term of
office will expire in 2002; (2) ratifying the appointment of KPMG LLP as
auditors of the Company for 2001; and (3) transacting such other business as may
properly come before the meeting.

The three persons named in the enclosed Proxy have been selected by the
Board of Directors and will vote Common Shares represented by valid Board of
Directors' Proxies. They have indicated that, unless otherwise indicated in the
enclosed Proxy, they intend to vote for the election of the Director nominees
named herein and in favor of the proposal listed in Item 2 above.

VOTING SECURITIES

The close of business on March 30, 2001 has been fixed as the record
date for the determination of holders of record of the Common Shares of the
Company entitled to notice of and to vote at the Annual Meeting. On the record
date, 5,925,735 Common Shares were outstanding and eligible to be voted at the
Annual Meeting. A quorum for the transaction of business at the Annual Meeting
is a majority of the outstanding Common Shares. Votes cast by proxy or in person
at the Annual Meeting will be tabulated by the election inspector appointed for
the Annual Meeting. The election of Directors and the proposal to ratify the
appointment of auditors require approval only by a plurality of the votes cast.
Abstentions and broker non-

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votes will not be counted in determining the outcome of the vote with respect to
election of directors or appointment of the auditors.

PROPOSAL ONE
ELECTION OF DIRECTORS

The business of the Company is managed under the direction of the
Company's Board of Directors. The number of Directors is currently fixed at
five. The board of Directors has submitted a recommendation to the shareholders
to increase the number of Directors to six (6). Each of the Directors hold
office until the next annual meeting or the election and qualification of their
respective successors.

The Board of Directors has nominated Wayland J. Russell, Lawrence S.
Hendricks, Michael J. Viveiros, Brian L. Burton and Ivan J. Winfield to stand
for reelection as Directors and Robert A. Glick as a new Director until the 2002
Annual Meeting of Shareholders.

At the Annual Meeting, the Common Shares represented by valid Proxies,
unless otherwise specified, will be voted to elect the Directors. Each
individual nominated for election as a Director of the Company has agreed to
serve if elected. However, if any nominee becomes unable or unwilling to serve
if elected, the Proxies will be voted for the election of such other person as
may be recommended by the Board of Directors. The Board of Directors has no
reason to believe that the persons listed as nominees will be unable or
unwilling to serve.

The Board of Directors recommends that each shareholder vote "FOR" the
Board of Directors' nominees.

NOMINEES FOR TERMS TO EXPIRE IN 2001

PRINCIPAL OCCUPATION PAST FIVE YEARS, DIRECTOR
NAME OF DIRECTOR AGE OTHER DIRECTORSHIPS SINCE
- ---------------- --- ------------------- -----

Wayland J. Russell 49 Chairman of the Board and Chief Executive Officer of the 1986
Company since February 1997, having previously served as the
Company's President since its inception in 1986.

Lawrence S. Hendricks 43 Chief Operating Officer of the Company since February, 1997, 1986
having previously served as Vice President for Store
Operations since the Company's inception in 1986.

Michael J. Viveiros 45 President of the Company since February 1997, having 1986
previously served as Vice President since the Company's
inception in 1986.

Brian L. Burton 60 President of Vertical Merchandising Systems, a division of 1998
Wesco, Inc., a distributor of impulse merchandising systems
to supermarkets, for over five years.

Ivan J. Winfield 66 Associate Professor at Baldwin-Wallace College, Cleveland, 1998
Ohio, and business consultant since September 1995. Prior
thereto, Mr. Winfield was Managing Partner of Coopers &
Lybrand, Cleveland, Ohio from 1978 to 1994. He is a director
of Boykin Lodging Co., HMI Industries, Inc., and OfficeMax,
Inc.

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PRINCIPAL OCCUPATION PAST FIVE YEARS, DIRECTOR
NAME OF DIRECTOR AGE OTHER DIRECTORSHIPS SINCE
- ---------------- --- ------------------- -----

Robert A. Glick 54 Chairman and Chief Executive Officer of Dots, Inc., a New
retailer of women's apparel. He is a director of National Nominee
Retail Federation and Chairman of the Advisory Board of the
Shannon Rodgers and Jerry Silverman School of Fashion Design
and Merchandising at Kent State University.

BOARD OF DIRECTORS MEETINGS AND COMMITTEES

The Board of Directors of the Company held four meetings in 2000. The
Board of Directors has an Audit Committee and a Compensation Committee, each of
which held two meetings in 2000. All of the current Directors attended all of
the Board and applicable committee meetings held during 2000.

Audit Committee. The committee consists of Messrs. Russell, Burton and
Winfield, operates pursuant to a written charter (a copy of which is attached as
Appendix A to this Proxy Statement), and is responsible for monitoring and
overseeing the Company's internal controls and financial reporting processes, as
well as the independent audit of the Company's consolidated financial statements
by the Company's independent auditors, KPMG LLP. Nasdaq Stock Market rules
require that by June 2001, the Company and other listed companies have an Audit
Committee comprised of three independent directors. It is anticipated that Mr.
Glick, following his election as a director, will replace Mr. Russell on the
Audit Committee. Messrs. Burton and Winfield are each, and Mr. Glick will be, an
"independent Director" as defined in the Nasdaq rules. As part of fulfilling its
responsibilities, the Audit Committee reviewed and discussed the audited
consolidated financial statements for 2000 with management and discussed those
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees) with the Company's independent auditors.
The Audit Committee received the written disclosures and the letter required by
Independent Standards Board Standard No. 1 (Independence Discussions with Audit
Committee) from KPMG LLP and discussed that firm's independence with
representatives of the firm.

Based upon the Audit Committee's review of the audited consolidated
financial statements and its discussions with management and the Company's
independent auditors, the Audit Committee recommended that the Board of
Directors include the audited consolidated financial statements for the fiscal
year ended December 31, 2000 in the Company's Annual Report on form 10-K filed
with the Securities and Exchange Commission.

Ivan J. Winfield, Chairman
Brian L. Burton
Wayland J. Russell

Compensation Committee. This committee, chaired by Mr. Russell, reviews
and approves the Company's executive compensation policy, makes recommendations
concerning the Company's employee benefit policies, and has authority to
administer the Company's stock option and other management compensation plans.

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COMPENSATION OF DIRECTORS

During 2000, the Company's policy was to pay each outside Director a
fee of $10,000 for attendance at up to four meetings per year, together with
reimbursement of out-of-pocket expenses incurred in connection with the
Directors' attendance at such meetings. In addition, each outside Director
receives $2,500 per meeting for each meeting attended in excess of four per
year. As of January 1, 2001, the Company will pay each outside Director an
annual retainer fee of $15,000 in addition to the $10,000 fee for attendance at
up to four meetings per year. In addition, each outside Director will receive
$1,000 for each meeting attended in excess of four per year. No additional
compensation is to be paid for committee meetings held on the same day as a
Board of Directors' meeting. Officers of the Company who are also Directors will
receive no additional compensation for serving as Directors.

Each current outside Director of the Company upon their election
received a stock option to purchase 10,000 Common Shares at $10 per share. Mr.
Glick will automatically receive a 10,000 share option grant upon his election
as a director; the option exercise price will be the fair market value of the
Company's Common Stock on the date of the shareholders' meeting. All directors'
options vest ratably over a period of three years and expire ten years from date
of grant.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of March 30,2001
with respect to the beneficial ownership of the Common Shares. Unless otherwise
indicated below, the persons named below have the sole voting and investment
power with respect to the number of Common Shares set forth opposite their
names. All information with respect to beneficial ownership has been furnished
by the respective Director, Director-Nominee, officer or 5% or greater
shareholder, as the case may be.

Names and, where necessary, Number of Shares
Addresses of Beneficial Owners (1) Beneficially Owned Percentage
- ------------------------------ ------------------ ----------

Wayland J. Russell 2,534,375 42.1%

Lawrence S. Hendricks 548,240 9.1%

Michael J. Viveiros 255,620 4.3%

Ivan J. Winfield 8,667 (2) *

Brian L. Burton 9,667 (2) *

Robert A. Glick 0

Michael A. Pecchia 40,000 (3) *

All Directors, Director-nominees and
Executive Officers of the Company (7 Persons) 3,396,569 (4) 56.8%

*Less than one percent

(1) Unless otherwise indicated, the address of all persons listed above is
c/o Rainbow Rentals, Inc., 3711 Starr Centre Drive, Canfield, Ohio
44406

(2) Includes 6,667 shares subject to options that are currently
exercisable.

(3) Includes 40,000 shares subject to options that are currently
exercisable.

(4) Includes 53,334 shares subject to options that are currently
exercisable.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Act of 1934 requires the Company's
Directors, executive officers, and persons who own 10% or more of the Company's
Common Shares to file reports of ownership and changes of ownership with the
Securities and Exchange Commission and the Company. Based upon a review of these
filings and written representations from such individuals, the Company
understands that all such filers have adhered to all applicable filing
requirements.

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EXECUTIVE OFFICERS' COMPENSATION

The following table sets forth certain information with respect to the
compensation earned during the years ended December 31, 2000, 1999, and 1998,
respectively, by the Chief Executive Officer and all other named Executive
Officers of the Company whose annual salary and bonus exceeded $100,000:

SUMMARY COMPENSATION TABLE

Annual Compensation Long Term Compensation
------------------- ----------------------

Other Annual Option All Other
Name and Principal Position Year Salary Bonus Compensation(1) Awards(#) Compensation(2)
- --------------------------- ---- ------ ----- ------------ --------- ------------

Wayland J. Russell 2000 $322,008 $51,200 $15,147 0 13,878
Chief Executive Officer 1999 322,138 50,000 22,368 0 13,156
1998 306,075 -0- 31,779 0 1,844

Lawrence S. Hendricks 2000 243,000 38,500 12,747 0 5,388
Chief Operating Officer 1999 243,016 37,500 18,526 0 4,388
1998 229,556 -0- 19,841 0 1,478

Michael J. Viveiros 2000 243,000 45,000 12,718 0 5,776
President 1999 243,016 37,500 19,405 0 5,033
1998 229,556 -0- 23,508 0 1,490

Michael A. Pecchia 2000 98,000 19,750 19,615 0 1,673
Chief Financial Officer 1999 98,000 15,250 18,908 0 1,308

(1) Includes the value of perquisites reported as taxable wages, including for
2000 amounts for the Company's annual business meeting (cruise) and personal use
of automobiles and country clubs. For Messrs. Russell, Hendricks, Viveiros, and
Pecchia the value of the foregoing perquisites were as follows: Annual meeting
- -- $5,547, $5,547, $5,518 and $4,689, respectively; Automobile -- $5,596,
$2,199, $2,749 and $8,140, respectively; and Country Club -- $9,600, $7,200,
$7,200 and $6,784, respectively.

(2) Included in this column are contributions to the Company's defined
contribution plans to the Executive Officers as well as amounts paid by the
Company for life and disability insurance coverage for the benefit of the
Executive Officers. Contributions to the defined contribution plan to Messrs.
Russell, Hendricks, Viveiros and Pecchia were $805, $840, $840 and $0,
respectively. Life and disability insurance premiums paid on behalf of Messrs.
Russell, Hendricks, Viveiros and Pecchia were $13,073, $4,548, $4,936 and
$1,673, respectively.

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STOCK OPTIONS

No options were granted to any of the Executive Officers listed in the
Summary Compensation Table pursuant to the Company's 1998 Stock Option Plan
during 2000.

AGGREGATED OPTION EXERCISES
IN 2000 AND YEAR-END OPTION VALUES

Shown below is information with respect to the unexercised options to purchase
the Company's Common Shares under the Company's Stock Option Plan held by the
Executive Officers listed in the Summary Compensation Table at December 31,
2000. None of the Executive Officers listed in the Summary Compensation Table
executed any stock options during 2000.

Number of Securities Value of Unexercised
Underlying Unexercised In-the Money Options
Options at 12/31/00 (#) At 12/31/00 ($) (1)
----------------------- -------------------

Shares
Acquired Value
On Exercise Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- --------- ----------- ------------- ----------- -------------

Wayland J. Russell 0 0 0 0 0 0
Lawrence S. Hendricks 0 0 0 0 0 0
Michael J. Viveiros 0 0 0 0 0 0
Michael A. Pecchia 0 0 40,000 20,000 0 0

(1) Calculated in the basis of the fair market value of the underlying
securities at December 31, 2000, minus the exercised price.

COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors is generally
responsible for determining the nature and amount of compensation for Executive
Officers. The Board of Directors approves all decisions made by the Committee.
This report documents the basis of executive compensation for 2000.

Compensation Policy. The objectives of the Company's executive
compensation policy include retaining, and as necessary, attracting highly
qualified executive talent; motivating executive officers to achieve corporate
performance objectives; rewarding individual performance and contributions; and
aligning the interests of the executive officers with those of the Company's
shareholders. The Company's executive officers own a significant number of
shares of the Company, which provides additional long-term incentive for
maximizing shareholder value.

Base Salaries. The Committee reviewed the salaries of the Company's
Executive Officers and there were no changes made in 2000 from 1999 base
salaries.

Incentive Compensation. The Company has not established a formal
incentive bonus plan for the Company's Executive Officers. The Company's
Executive Officers receive a portion of their compensation through incentive
bonus compensation, which is based on the individual contributions of the
Executive Officers. Based upon their individual contributions for 2000, the
Committee approved bonuses for the Executive Officers, which are included in the
Summary Compensation Table.

Compensation of Chief Executive Officer. The committee used the same
procedures and applied the same philosophy described above for all executive
officers in setting the annual salary and bonus for the Company's Chief
Executive Officer.

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Wayland J. Russell, Chairman
Brian L. Burton
Ivan J. Winfield

CERTAIN TRANSACTIONS

The Company's headquarters facility is leased from an entity owned by
Messrs. Russell, Hendricks and Viveiros under a ten-year triple-net lease, with
three two-year options. In 2000, the rental amount was $120,000. The Company
believes that the rental is at market rate and that the other provisions of the
lease are on terms no less favorable to the Company than could be obtained from
unrelated parties.

For several years, the Company has made significant contributions to
charitable organizations, including organizations for which directors and
officers serve or have served as trustees or officers. The aggregate amount of
charitable contributions were approximately $468,000; $355,000; and $230,000 in
2000, 1999 and 1998, respectively.

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SHAREHOLDER RETURN PERFORMANCE PRESENTATION

Set forth below is a line graph comparing the cumulative total
shareholder return on the Company's Common Shares against the cumulative total
return of the Nasdaq U.S. composite index (the "Nasdaq of Composite Index") and
a group consisting of publicly-traded rental - purchase companies (the "Industry
Group") for 2000. The graph assumes that $100.00 was invested on June 5, 1998
(the date of the Company's initial public offering) in the Common Shares of the
Company, the Nasdaq Composite Index and the Industry Group and assumes
reinvestment of dividends. The Industry Group consists of Rent Way, Inc., Aaron
Rents, Inc. and Rent-A-Center, Inc. The stock price performance shown on the
following graph is not necessarily indicative of future price performance.

The stock price performance graph below shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into and filing under the Securities Act of 1933, as
amended or under the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by reference
and shall not otherwise be deemed filed under such Acts.

[GRAPH INSERTED HERE]

TOTAL RETURN TO STOCKHOLDERS
(ASSUMES $100 INVESTMENT ON 6/5/98)

TOTAL RETURN ANALYSIS
- -----------------------------------------------------------------------------------------------------
6/5/98 12/31/98 12/31/99 12/29/00
- -----------------------------------------------------------------------------------------------------

RAINBOW RENTALS, INC. $ 100.00 $ 98.75 $ 71.43 $ 52.17

- -----------------------------------------------------------------------------------------------------
PEER GROUP $ 100.00 $ 105.07 $ 87.11 $ 120.69

- -----------------------------------------------------------------------------------------------------
NASDAQ COMPOSITE $ 100.00 $ 123.27 $ 229.43 $ 139.29

- -----------------------------------------------------------------------------------------------------

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PROPOSAL TWO
INDEPENDENT AUDITORS

The Board of Directors, upon the recommendation of the Audit Committee,
has selected KPMG LLP as auditors for the year ending December 31, 2001. The
Board of Directors requests the ratification of the appointment of KPMG LLP by
the shareholders at the Annual Meeting. The Board of Directors recommends that
each shareholder vote "FOR" ratification of KPMG LLP as auditors for 2001.

Aggregate fees billed by KPMG LLP for the audit of the Company's annual
financial statements and quarterly reviews of the financial statements in 2000
were $110,000.

All non-audit aggregate fees billed by KPMG LLP for professional
services rendered during fiscal year 2000 relating to an IT and Accounting
Assessment and assistance in compliance with SEC reporting requirements were
$70,000. The Audit Committee has considered whether the provision of services
for these fees is compatible with maintaining the independent accountants'
independence and has determined that such services have not adversely affected
KPMG LLP's independence.

KPMG LLP has audited the Company's financial statements for each year
since the year ended December 31, 1991. Representatives of KPMG LLP are expected
to be present at the meeting with the opportunity to make a statement if they
desire to do so, and are expected to be available to respond to appropriate
questions.

OTHER MATTERS

The Board of Directors of the Company is not aware that any matters
other than those listed in the Notice of Meeting is to be presented for action
at the meeting. If any of the Board's nominees is unavailable for election as a
Director or any other matter should properly come before the meeting, it is
intended that votes will be cast pursuant to the Proxy in respect thereto in
accordance with the best judgment of the person or persons acting as proxies.

SHAREHOLDERS' PROPOSALS

The deadline for shareholders to submit proposals to be considered for
inclusion in the Proxy Statement for the 2002 Annual Meeting of Shareholder is
expected to be December 16, 2001.

MICHAEL A. PECCHIA
Secretary

By Order of the Board of Directors
April 16, 2001

APPENDIX A

AUDIT COMMITTEE CHARTER

The Audit Committee ("the Committee"), of the Board of Directors (the "Board")
of Rainbow Rentals, Inc. (the "Company"), will have the oversight
responsibility, authority and specific duties as described below.

COMPOSITION
- -----------

The Committee will be comprised of three or more directors as determined by the
Board. The members of the Committee will meet the independence and experience
requirements of the NASDAQ Stock Market, Inc. The members of the Committee will
be elected annually at the organizational meeting of the full Board held in May
and will be listed in the annual report to shareholders. One of the members of
the Committee will be elected Committee Chair by the Board.

RESPONSIBILITY
- --------------

The Committee is a part of the Board. Its primary function is to assist the
Board in fulfilling its oversight responsibilities with respect to (i) the
annual financial information to be provided to shareholders and the Securities
and Exchange Commission (SEC); (ii) the system of internal controls that
management has established; and (iii) the internal and external audit process.
In addition, the Committee provides an avenue for communication between the
independent accountants, financial management and the Board. The Committee
should have a clear understanding with the independent accountants that they
must maintain an open and transparent relationship with the Committee, and that
the ultimate accountability of the independent accountant is to the Board and
the Committee. The Committee will make regular reports to the Board concerning
its activities.

While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
the determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditor. Nor is it the duty of
the Audit Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations and the Company's business conduct guidelines.

AUTHORITY
- ---------

Subject to the prior approval of the Board, the Committee is granted the
authority to investigate any matter of activity involving financial accounting
and financial reporting, as well as the internal controls of the Company. In
that regard, the Committee will have the authority to approve the retention of
external professionals to render advice and counsel in such matters. All
employees will be directed to cooperate with respect thereto as requested by
members of the Committee.

MEETINGS
- --------

The Committee is to meet at least twice annually and as many additional times as
the Committee deems necessary. Content of the agenda for each meeting should be
cleared by the Committee Chair. The Committee may meet in separate executive
sessions with the chief financial officer or independent accountants when
considered appropriate.

ATTENDANCE
- ----------

Committee members will strive to be present at all meetings. As necessary or
desirable, the Committee Chair

13
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may request that members of management or representatives of the independent
accountants be present at Committee meetings.

SPECIFIC DUTIES
- ---------------

In carrying out its oversight responsibilities, the Committee will:

1. Review and reassess the adequacy of this charter annually and recommend
any proposed changes to the Board for approval. This should be done in
compliance with applicable NASDAQ Audit Committee Requirements.

2. Review with the Company's management and independent accountants the
Company's accounting and financial reporting controls. Obtain annually
in writing from the independent accountants their letter as to the
adequacy of such controls.

3. Review with the Company's management and independent accountants
significant accounting and reporting principles, practices and
procedures applied by the Company in preparing its financial
statements. Discuss with the independent accountants their judgments
about the quality, not just the acceptability, of the Company's
accounting principles used in financial reporting.

4. Review the scope and general extent of the independent accountants'
annual audit. The Committee's review should include an explanation from
the independent accountants of the factors considered by the
accountants in determining the audit scope, including the major risk
factors. The independent accountants should confirm to the Committee
that no limitation have been placed on the scope or nature of their
audit procedures. The Committee will review annually with management
the fee arrangement with the independent accountants.

5. Inquire as to the independence of the independent accountants and
obtain from the independent accountants, at least annually, a formal
written statement delineating all relationships between the independent
accountants and the Company as contemplated by Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees.

6. Have a predetermined arrangement with the independent accountants that
they will advise the Committee through its Chair and management of the
Company of any matters identified through procedures followed for
interim quarterly financial statements, and that such notification as
required under standards for communication with Audit Committees is to
be made prior to the related press release or, if not practicable,
prior to filing Forms 10-Q. Also receive a written confirmation
provided by the independent accountants at the end of each of the first
three quarters of the year that they have nothing to report to the
Committee, if that is the case, or the written enumeration of required
reporting issues.

7. At the completion of the annual audit, review with management and the
independent accountants the following:

- The annual financial statements and related footnotes and
financial information to be included in the Company's annual
report to shareholders and on Form 10-K.

- Results of the audit of financial statements and related
report thereon and, if applicable, a report on changes during
the year in accounting principles and their application.

- Significant changes to the audit plan, if any, and any serious
disputes or difficulties with management encountered during
the audit. Inquire about the cooperation received by the

14
16

independent accountants during their audit, including access
to all requested records, data and information. Inquire of the
independent accountants whether there have been any
disagreements with management, which, if not satisfactorily
resolved, would have caused them to issue a nonstandard report
on the Company's financial statements.

- Other communications as required to be communicated by the
independent accountants by Statement of Auditing Standards
(SAS) 61 as amended by SAS 90 relating to the conduct of the
audit. Further, receive a written communication provided by
the independent accountants concerning their judgment about
the quality of the Company's accounting principles, as
outlined in SAS 61 as amended by SAS 90, and that they concur
with management's representation concerning audit adjustments.

If deemed appropriate after such review and discussion, recommend to
the Board that the financial statements be included in the Company's
annual report on Form 10-K.

8. After preparation by management and review by independent accountants,
approve the report required under SEC rules to be included in the
Company's annual proxy statement. The charter is to be published as an
appendix to the proxy statement every three years.

9. Discuss with the independent accountants the quality of the Company's
financial and accounting personnel. Also, elicit the comments of
management regarding the responsiveness of the independent accountants
to the Company's needs.

10. Meet with management and the independent accountants to discuss any
relevant significant recommendations that the independent accountants
may have, particularly those characterized as `material' or `serious'.
Typically, such recommendations will be presented by the independent
accountants in the form of a Letter of Comments and Recommendations to
the Committee. The Committee should review responses of management to
the Letter of Comments and Recommendations from the independent
accountants and receive follow-up reports on action taken concerning
the aforementioned recommendations.

11. Recommend to the Board the selection, retention or termination of the
Company's independent accountants.

12. Review with management and the independent accountants the methods used
to establish and monitor the Company's policies with respect to
unethical or illegal activities by Company employees that may have a
material impact on the financial statements.

13. Generally as part of the review of the annual financial statements,
receive an oral report(s), at least annually, from the Company's
general counsel concerning legal and regulatory matters that may have a
material impact on the financial statements.

As the Committee may deem appropriate, obtain, weigh and consider expert advice
as to Audit Committee related rules of the NASDAQ Stock Market, Statements on
Auditing Standards and other accounting, legal and regulatory provisions.

15
17

RAINBOW RENTALS, INC.
3711 Starr Centre Drive
Canfield, Ohio 44406

PROXY

The undersigned, a holder of shares of Common Stock of Rainbow Rentals,
Inc., an Ohio corporation (the "Company"), hereby appoints WAYLAND J. RUSSELL,
LAWRENCE S. HENDRICKS and MICHAEL J. VIVEIROS, and each of them, the proxies of
the undersigned, each with full power of substitution, to attend, represent and
vote for the undersigned, all of the shares of the Company which the undersigned
would be entitled to vote, at the Annual Meeting of Shareholders of the Company
to be held on May 17, 2001, and any adjournments thereof, as follows:

1. Fix at six the number of Directors and the election of six members to
the Board of Directors to hold office for a one-year term and until
their successors are duly elected and qualified, as provided in the
Company's Proxy Statement:

FOR ALL NOMINEES LISTED BELOW WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED BELOW
[ ] [ ]

(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, strike a line through or otherwise strike out his or her name
below)

Wayland J. Russell, Lawrence S. Hendricks, Michael J. Viveiros,
Brian L. Burton, Ivan J. Winfield and Robert Glick.

2. The ratification of the appointment of KPMG LLP as the Company's
auditors for the year ending December 31, 2001.

FOR AGAINST ABSTAIN

[ ] [ ] [ ]

3. Upon such other matters as may properly come before the meeting or any
adjournments thereof.

The undersigned hereby revokes any other proxy to vote at such Annual
Meeting, and hereby ratifies and confirms all that said attorneys and proxies,
and each of them, may lawfully do by virtue hereof. With respect to matters not
known at the time of the solicitations hereof, said proxies are authorized to
vote in accordance with their best judgment.

(Continued, and to be dated and signed, on the other side)

(Continued from the other side)

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH
THE INSTRUCTIONS ON THE OTHER SIDE HEREOF, IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE SIX DIRECTORS NAMED IN PROPOSAL 1, FOR THE
ADOPTION OF PROPOSAL 2, AND AS SAID PROXIES SHALL DEEM ADVISABLE ON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.

THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF A COPY OF THE NOTICE OF ANNUAL
MEETING AND ACCOMPANYING PROXY STATEMENT DATED APRIL 16, 2001 RELATING TO THE
ANNUAL MEETING AND THE 2000 ANNUAL REPORT TO SHAREHOLDERS.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.

Date: ___________________________, 2001

__________________________________________________
Signature(s) of Shareholder(s)

The signature(s) hereon should correspond exactly with
the name(s) of the Shareholder(s) appearing on the Share
Certificate. If stock is jointly held, all joint owners should
sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If signer
is a corporation, please sign the full corporate name, and
give title of signing officer.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF RAINBOW RENTALS, INC.