Rent-to-own cap a victory for struggling families, Citizens Advice says
The FCA has proposed a 100% price cap on rent-to-own companies in a clampdown on “excessive charges” expected to save 300,000 vulnerable customers up to £22.7m a year.
High interest charges levied by firms such as BrightHouse, which sell household appliances and electrical goods on credit, mean items can cost four times the average retail price, when insurance and warranties are included, the Financial Conduct Authority said.
The financial regulator noted that only a third of rent-to-own customers are in work, most are on low incomes between £12,000 and £18,000, and are likely to have missed a bill payment in the last six months.
The FCA’s decision to cap the cost of rent to own goods will help hundreds of thousands of people who use the high-interest agreements, says Citizens Advice.
The charity has also welcomed the decision by the regulator to place restrictions on other charges, such as warranties, insurance and arrears.
Previous research from Citizens Advice found that people who were at the time signed up to a rent-to-own agreement could save £62 million on 245,000 products if a cap was enforced.
In the 2017-2018 financial year, Citizens Advice North Tyneside helped 154 local residents with 326 issues relating to rent-to-own products, each of who owed an average of £2,089 in payment arrears.
The cap will come into force on 1 April 2019.