A peak City regulator has announced plans to impose a new price cap to stop rent-to-own retailers overcharging customers for household goods.
The Financial Conduct Authority (FCA) said a cap would especially provide protection for those who are financially vulnerable.
It added that a cap could save customers up to £22.7 million per year, and that proposed restrictions on credit charges would ensure customers don’t pay more than the cost of the product.
The regulator said that in some cases, rent-to-own customers are paying up to four times the average retail price for products such as TVs, microwaves, washing machines and furniture.
The cap, currently subject to consultation, would come into force on April 1 next year and be imposed on high street chains such as BrightHouse and PerfectHome.
The FCA said it designed a bespoke price cap to fit the rent-to-own sector, limiting both the cost of the product and the charge for credit.
Rent-to-own retailers would also need to benchmark the cost of products against the prices charged by three other retailers.
The FCA said that among rent-to-own customers, only one third are employed, most are on low incomes of between £12,000 and £18,000, and are likely to have missed a bill payment in the last six months.
The regulator is also introducing a two-day cooling off period for the sale of extended warranties.
This will ban retailers from selling these warranties at the point of purchase and will come into force on February 22 next year.
The FCA said rent-to-own retailers often charged financially vulnerable customers more than other retailers for essential household goods and with add-on insurance and warranties.
“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,” FCA chief executive Andrew Bailey said.
“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.”
The consultation on the price cap and benchmarking proposals will be open until January 17.