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.”