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FCA puts forward rent-to-own price cap

The Financial Conduct Authority (FCA) has proposed a price cap for the rent-to-own sector, which, subject to consultation, will come in from April 1, 2019.

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The price cap on rent-to-own products is designed to control prices by limiting both the cost of the product and the charge for credit.


Under the proposed cap, credit charges cannot be more than the cost of the product. In addition, rent-to-own firms would need to benchmark the cost of products against the prices charged by three other retailers.


The rules would also prevent firms increasing their prices for insurance premiums (for example, theft and accidental damage cover), extended warranties or arrears charges in order to recoup lost revenue from the price cap.


The FCA is proposing that the draft rules apply from April 1, 2019, to any new products rent-to-own providers introduced to the market for the first time. For products that rent-to-own providers are already offering, the rules will apply either at the point the rent-to-own firm makes a price change or once the rules have been in force for three months, whichever date is sooner.


StepChange head of policy Peter Tutton said: “We are pleased that the FCA is addressing rent to own, where the high cost of goods and add-on warranties can make agreements expensive even compared to other types of high cost credit. The most financially vulnerable households cannot be left with no choice but the highest price on the high street. Fundamentally, we also need better alternatives for households who struggle to afford household needs, such as the cost of mending or replacing necessary household appliances.”


Joanna Elson OBE, chief executive of the Money Advice Trust, said: “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. Following its successful intervention in the payday loan market, this is another sign the regulator is taking problems with high-cost-credit seriously.


“While a 100 percent price cap will offer greater protection to people who use this market – who are often vulnerable and usually on low incomes – the FCA should consider going further by also capping late payment fees, which can escalate quickly."

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