Rent-to-buy cap ‘flop’
FCA proposals to stop poor being ripped off on high street are not enough…
PLANS to cap what high street rent-to-own firms charge customers for household appliances will save our poorest just a few pence a week, a report reveals.
Consumer rights campaigners, including actor and activist Michael Sheen, are calling on the Financial Conduct Authority to ensure it delivers its promise to stop these companies making over the odds.
Tomorrow marks the closing date for responses to the FCA’s consultation on the issue, which could see a cap on what firms like BrightHouse and Perfect home can ask for washing machines, fridges and cookers.
The FCA proposed a maximum 100% interest charge and a limit on prices in November after it found people on low incomes could pay as much as four times the amount they would pay elsewhere on the high street if they had cash to buy goods outright.
But research from the Centre for Responsible Credit has revealed the cap would only save someone buying a washing machine from BrightHouse a pathetic 37p per week.
Centre director Damon Gibbons said: “We were delighted when the FCA announced it was going to be capping prices in this market.
“People on very low incomes have been ripped off for years by companies who inflate the costs of essential items and then charge a small fortune in interest on top.
“But having looked at the detail of the FCA’s proposal, the price controls it is suggesting are a real flop. They basically make it OK for companies to charge pretty much the same as they are doing now.”
The Centre’s figures show a Samsung washing machine from BrightHouse is currently advertised as having a ‘product price’ of £965.51, before the additional costs of credit, and insurance against theft and accidental damage are added in.
With credit factored in, the total cost over 156 weeks rises to £2,028, (£2,355 with insurance). At John Lewis, the same washing machine costs £590. And when compared with TEN other retailers, the average (median) product price is £674.
If the FCA proposals forced BrightHouse to use THIS price as a ‘benchmark, it would mean the cost of buying the Samsung machine would be capped (before insurance costs) at £1,460 (£674 plus delivery cost of £55, plus interest at 100%).
This is still high, but much better than the £2,028 people are currently paying.
But the FCA’s proposals are not wide ranging enough. It only requires firms like BrightHouse to benchmark against:
the highest of just THREE prices from mainstream retailers, or
the median of just THREE prices from retailers, where a maximum of one retailer can be a catalogue retailer (who provides revolving retail credit).
This would allow BrightHouse to continue to charge a ‘product price’ of £930 for the washing machine. Just £36 less than it does now.
These unfair charges are one of the reasons we have launched our Daily Mirror Fair Credit for All campaign, teaming up with Hollywood star
Michael Sheen, who founded the End High Cost Credit Alliance in 2017. Our aims are fair and affordable credit for everyone. Michael said: “The details of the FCA’s final rules will be very important.
“This is a real opportunity to deliver fairer credit, but only if they respond to concerns that this could end up being a cap in name only.
“Legitimising the currently extortionate prices firms charge would be unforgiveable. “I really hope the FCA is listening – as they have to date to Alliance calls to action – and will come forward with rules that make a real difference to people’s lives.”
A BrightHouse spokesman said: “At BrightHouse we are proud to offer a choice to customers who can’t buy household goods outright because they aren’t lucky enough to have savings and are excluded from mainstream credit.”
A Financial Conduct Authority spokesperson said: “The price cap we’re consulting on is expected to save some of the most vulnerable people in the UK up to £22.7m per year.
“We are consulting and welcome all comments on our proposals.”
Find out more about our campaign at: mirror.co.uk/debtcampaign
Email us to get involved or to tell us about firms and organisations offering fairer credit at: money@mirror.co.uk (with ‘Fair Credit for All’ in the subject field).