Price Caps to Prevent Worst Case Rip Offs in Rent-to-own Sector
March 5, 2019
Price caps are to be introduced to prevent companies within the UK’s rent-to-own sector from being able to charge their customers many times the retail value of items they’re offering.
The aim of the price cap is to better protect consumers who use the services of rent-to-own companies and find themselves paying out large sums of money to eventually buy household goods such as TVs, laptop computers, cookers and washing machines.
The price cap will mean that service providers in the sector can only provide credit worth up to 100 per cent of the retail value of the goods being rented, with many people in recent years having ended up paying out more than four times as much money as their items are really worth.
New rules on the issue are being brought in by the Financial Conduct Authority (FCA) from April 1st 2019, with the effectiveness of the price cap to be reviewed a year later.
The FCA has said that the rules affecting rent-to-own operators build on those introduced in recent years in relation to the payday lending sector.
Expectations are that the introduction of a price cap on rent-to-own deals will save individuals hundreds of pounds over the lifetime of their purchasing arrangements.
On a collective basis, the price cap is set to save UK consumers in the region of £23 million per annum across the rent-to-own sector as a whole.
“This price cap has been designed to target some of the most excessive prices in the rent-to-own market,” explained Christopher Woolard, executive director of strategy and competition at the FCA.
“The actions we are taking today build on our wider work on high-cost credit and will save some of the most vulnerable consumers in the UK millions of pounds.”
The FCA has explained that its consultations with a variety of relevant parties on the issue of rent-to-own markets left its experts in no doubt of the need for more regulations and a price cap to protect consumers.
“Feedback from consumer groups in particular showed strong support for a price cap, which they believe would address the harm caused by high prices,” the organisation said after announcing its plans.