UK markets watchdog caps rent-to-own prices
Britain's markets watchdog said on Tuesday it will cap prices people pay for televisions, washing machines and other household goods bought on "rent-to-own" credit from April.
Rent-to-own (RTO) firms charge a weekly sum for three years to consumers who typically end up paying several times more than the 'up-front' cash price of the item.
The Financial Conduct Authority said the cap will be set at 100 percent, meaning people should not pay more than double the average price charged by mainstream retailers, a step the watchdog said would save consumers up to £22.7 million a year.
There was no immediate comment from companies offering RTO agreements. But the watchdog said in its statement that "RTO firms did not agree with the rationale for the price cap and argued that we had not made a case that high RTO prices cause harm."
High-cost credit has come under intense political scrutiny after a decade of austerity as more people in work have started borrowing to pay their bills and using foodbanks.
"This price cap has been designed to target some of the most excessive prices in the rent-to-own market," said Christopher Woolard, the FCA's executive director of strategy and competition.
"We will review the impact of the price cap in 2020 and if further work is needed to protect these customers we are prepared to intervene again."
The cap means that credit charges can not exceed the cost of the product, and firms will need to benchmark the cost of products against prices charged by three "mainstream" retailers, including delivery and installation.
Two firms - BrightHouse and PerfectHome - account for more than 90 percent of outstanding balances on RTO agreements in a market that has shrunk to less than £400 million from £700 million in 2015, the FCA said last November when it flagged the cap.
Previous intervention by the FCA led to compensation worth nearly £16 million for 340,000 consumers who bought goods from BrightHouse, PerfectHome and Buy As You View.