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Britain’s financial watchdog is introducing a rent-to-own price cap

The Financial Conduct Authority will also ban the sale of extended warranties on the spot in a crackdown that it estimates will save consumers £22.7m per year

The Financial Conduct Authority (FCA) has announced it will introduce a price cap on the rent-to-own sector in a bid to protect the country’s most financially vulnerable.

The rent-to-own sector can see customers charged more than four times the value of products like electronics and white goods.

The FCA has stepped into introduce a price cap that will ensure that the charge for credit does not exceed the cost of the product on April 1 next year to halt this practice. Firms will have to benchmark the price against three other retailers under the proposed plans, which are expected to save consumers £22.7m per year.

Rent-to-own firms like BrightHouse have come under fire from the watchdog before – it was ordered to repay £14.8 million to 249,000 customers last year after breaching FCA rules on lending affordability and collecting.

The firms have long since marketed to society’s poorest with only a third of rent-to-own customers currently in work with most on low incomes between £12,000 and £18,000.

Statistically, customers are likely to have missed a bill payment in the last six months before they sign up to agreements that often contain additional insurance and warranties that bloat the final cost.


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The FCA has also targeted these add-ons and has pledged to introduce a two-day cooling off period for the sale of extended warranties, banning firms from coercing customers to buy them on the spot. This rule will come into force on February 2019.

“Today’s measures are designed to bring down very high prices in the rent-to-own sector, which is used by some of the most financially vulnerable in our society,” said Andrew Bailey, chief executive of the Financial Conduct Authority.

“A cap will prevent firms charging over the odds for essential everyday items like cookers or washing machines. We believe a cap is the only intervention that will effectively tackle the highest prices. If implemented it will save consumers up to £22.7m a year from excessive charges.

The consultation on the price cap and benchmarking proposals will be open until January 17 2019.

Responding to the announcement, Centre for Responsible Credit (CfRC) has been critical of the FCA’s measures, insisting that there must be a price cap extended to high-cost credit lenders to protect vulnerable consumers.

“When it says it has designed a ‘bespoke’ cap for rent-to-own firms, the FCA really means it has designed one which is much less effective than that which already exists for payday lenders,” said CfRC director Damon Gibbons. “The FCA is taking a piecemeal approach to regulation, and moving at snail’s pace, when what is needed is bold action to provide a consistent level of protection for low income households right across the consumer credit market.  It is now time for politicians to act.”

However, Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, has welcomed the move.

“This price cap for rent-to-own firms is very welcome news, and I am pleased the FCA has listened to the advice sector’s concerns on this form of borrowing,” she said. “Following its successful intervention in the payday loan market, this is another sign the regulator is taking problems with high-cost-credit seriously.”