// Rent-to-own retailers will soon be imposed by a price cap from the FCA
// Cap is designed to protect the financially vulnerable and comes into affect April 1
// BrightHouse & PerfectHome are among those that will be forced to comply with the new rules
Retailers who specialise in rent-to-own goods will soon face price caps after a peak City regulator confirmed it would impose new regulations to stop them overcharging customers for household goods.
The cap will be introduced from April 1 and will save consumers in the UK a collective total of up to £22.7 million a year on everyday products such as fridges, cookers and TVs, the Financial Conduct Authority (FCA) said.
The FCA, which has previously consulted on the issue, added that credit charges cannot be more than the cost of the product and that the cap would provide protection for the financially vulnerable.
Retailers which will be forced to comply to the new regulations include BrightHouse and PerfectHome.
The FCA said that in some cases, rent-to-own customers were paying up to four times the average retail price for everyday household products, especially electricals and furniture.
The regulator said rent-to-own businesses will be required to benchmark prices, including delivery and installation, against the prices charged by three mainstream retailers.
“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,” FCA strategy director Christopher Woolard said.
“This price cap has been designed to target some of the most excessive prices in the rent-to-own market.”
The FCA will keep a close eye on rent-to-own retailers’ compliance with the new rules and it will review the price cap in 2020.
It added that it was prepared to intervene again if further work is needed.
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.
It added that rent-to-own retailers often charged financially vulnerable customers more than other retailers for essential household goods and with add-on insurance and warranties.
Treasury Committee chairwoman Nicky Morgan said: “In our report published last summer on household finances, the Treasury Committee urged the FCA to move forward with its proposals on high-cost credit – including a rent-to-own price cap – as quickly as possible. Today’s announcement, therefore, is welcome.
“This is a much-needed step in the right direction that will help households ensure that their finances are as resilient as possible.
“The FCA should now implement its proposals on other forms of high-cost credit urgently, including overdraft fees, doorstep lending and catalogue credit.”