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FCA sets rent-to-own price cap

The FCA has decided to set a price cap in the rent-to-own market.

Rent-to-own arrangements lease anything from furniture and consumer electronics to cars and engagement rings for a weekly or monthly fee, granting the option to buy at a later date.

As part of its work on high-cost credit, the FCA says that a total credit cap of 100 per cent will help protect some of the most vulnerable customers in the UK and save consumers up to £22.7m a year.

The cap, which will come into force from 1 April 2019, also introduces a requirement on firms to benchmark base prices (including delivery and installation) against the prices charged by three mainstream retailers.

The FCA’s cap will only apply to household goods, for example furniture, appliance, eletricals and technology.

The FCA will also put in place measures to stop firms increasing insurance premium prices, for example those covering theft or accidental damage cover, extended warranties or arrears charges so they can make back the revenue lost through the price cap.

FCA executive director of strategy and competition Christopher Woolard says: “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. This price cap has been designed to target some of the most excessive prices in the RTO market.

“Currently, in some cases, RTO consumers are paying in total more than 4 times the retail price of some goods. The cap is intended to tackle those very high prices. Under the new rules, consumers will save hundreds of pounds on household products.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. More great work by Mr Woodard.

    We had one of these firms approach us for pension advice and they boasted about buying washing machines for £100 and selling them for £20 per week over twelve months.

    Credit Unions should really be in this market helping the most vulnerable avoid this very high cost borrowing.

  2. On face value this appears to be a good decision ?

    But……does this set a dangerous precedence, I mean we can guess where this will lead, if they (FCA) are allowed to get away with this, sure as eggs are eggs, this may well become a blanket stance right across the financial services.
    Is it right that the FCA has the power to restrict trade by way of a charges cap ?

    We are seeing this with utilities, and I certainly don’t want to be in a position where I have to go cap in hand to the FCA to ask if i can increase my charges (have a pay rise if you will)

    I took a huge risk and still do, to run my own business, to ensure its profitable, pay its bills and taxes, and yes abide by the rules and regulations, like so many, irrespective if its a one man band or a big company, we are already bound hand and foot by these rules and regulations, do you want financial slavery to be common place as well?

    I ask Woolard, Bailey et al, how they would feel, if the huge budget, salaries, bonuses, of the FCA was capped by a external source ? do not forget vulnerable people have to pay for this as well, namely our clients ! Do we think the salary bill of the FCA alone, which equates to over £101,000 per head, is right in this world of benchmark capping, and by golly I bet there are plenty of “have nots” within the FCA, so what does this tell us about those at the top of the tree ?

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