Rent-to-own cap could save consumers £276

The charity has modelled the impact its proposed total cost cap in the rent-to-own sector would have. The Financial Conduct Authority (FCA) has indicated it will implement a cap by April 2019 and is currently looking at what form this will take.

Citizens Advice found its suggested cap, of 100 percent, on the cost of a typical washing machine, purchased from a rent-to-own retailer, could save people £174 (30 percent).

The new analysis compared the cost of household products available from the major rent-to-own providers, with the same items purchased upfront from a typical high street retailer.

Credit Strategy interviewed BrightHouse’s chief executive Hamish Paton and chief risk officer David Poole, in its latest issue.

Citizens Advice is calling for the FCA to commit to its April 2019 deadline and implement its proposed 100 percent cost cap in the rent-to-own sector that:

• Makes rent-to-own products more affordable: By limiting the upfront cost of the item, plus installation/delivery fees and interest, the outstanding levels of debt held by rent-to-own clients would be reduced;

• Limits late payment charges at £15 per agreement per year: Nearly 60 percent of rent-to-own clients are charged late payment fees. These charges commonly amount to £72 over the course of a loan.

The charity said a cap will give people a clear idea of the total amount they are expected to repay, helping families to manage their money. It found 25 percent of people who had purchased a product didn’t know the total amount they would have to repay.

Gillian Guy, chief executive of Citizens Advice, said: “By 1 April 2019, it will have been 853 days since the FCA launched its high-cost credit review. Until a cap is introduced, consumers will continue to pay over the odds for these high-interest products.

"Caps can work, we’ve seen this with payday loans where thousands of consumers have been protected by the FCA and are now better off as a result.

"The FCA has recognised the massive harm caused by the high interest rates on tempting rent-to-own deals. It should now stick to its own deadline to implement a cap. No one should have to pay more than double what they borrow.”

Credit Strategy previously analysed the FCA’s high-cost credit review findings, which found cash prices quoted by rent-to-own firms were on average 45 percent more expensive than high street equivalents.

Citizens Advice will now respond to the FCA’s further consultation proposals, including on extended warranties, doorstep loans and overdrafts, ahead of the August 31 deadline.