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New 'rent to own' rules will save customers £22.7m per year

Tuesday, 5th March 2019

The Financial Conduct Authority (FCA) have confirmed that a price cap on the rent to own sector will commence on 1 April 2019. Once implemented it will save around 400,000 consumers up to £22.7m a year from excessive charges.

In other words, the industry is to lose £22.7m a year which they receive for what some people say is exploiting the vulnerable.

The new rules on rent to own from 1 April 2019

Under the new cap:

  • credit charges cannot be more than the cost of the product itself. For example, if a washing machine cost £400 to buy then the cost of the credit including interest and credit charges must not exceed £400, making the total payable no more than £800
  • goods need to be priced (including delivery and installation) against the prices charged by three mainstream retailers
  • firms will not be allowed to increase their prices for insurance, extended warranties or arrears charges in an attempt to recoup lost revenue as a result of the price cap

What is ‘rent to own’ (RTO)?

Rent to own is a scheme whereby a customer can buy goods such as washing machines, cookers, tvs etc without having to pay all the money up front, instead they pay a small weekly or monthly sum until they own the product outright. This can take between one and three years after which they will then own the product.

The markets leaders for this type of trade are BrightHouse and PerfectHome, both operate online, and in stores.

BrightHouse ordered to pay 15m compensation to 249,000 customers

How do you fancy paying back your debts by watching television?

Mike Thomas, Founder of DebtWizard.com said:

"Many vulnerable members of society need credit for essential items, this could be for clothing, white goods such as fridges and washing machines but it is just not fair and responsible to charge these people exorbitant rates for credit, set up fees and warranty insurance.”

I note that the FCA estimates the saving to customers will be £22.7 million a year, I look it at another way, that’s a £22.7 million loss per year to the ‘rent to own’ industry, what with new restrictions being added on insurance and warranties, my question is how will the stores absorb such a loss, will we see some exit the market?

Well done with this cap, let's now see a cap for bank overdraft charges and credit card debts.”

You can read the full FCA press release here (external website)




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