City watchdog slaps cap on stores

A CRACKDOWN on extortionate rates charged by firms flogging rent-to-own products is being brought in by the City watchdog.

The Financial Conduct Authority found 400,000 people are paying an extra £23million a year on goods such as TVs and fridges due to overpricing and excessive interest charges.

The FCA is bringing in a cap on interest charges. From April people will not pay more in interest than the cost of the item.

The price will also be limited – as rent-to-own shops will have to benchmark costs against three other stores.

The Sunday Mirror highlighted the issue in the run-up to Black Friday, revealing customers of rent-to-own chain BrightHouse face paying twice as much for a “bargain” and forking out until 2021.

Andrew Bailey, FCA chief executive, said: “The rent-to-own sector is used by some of the most financially vulnerable.” Sometimes people are paying up to four times the average price, such as a £300 cooker that ends up costing £1,576 and a £300 iPhone costing £1,065 over the term.

Joanna Elson OBE, chief executive of Money Advice Trust, said: “This is very welcome news.”

Andrew Hagger, from Moneycomms, added: “The measures are long overdue and will help but you have to question whether a 100% mark-up is acceptable.”

The main providers of rent-to-own are BrightHouse and PerfectHome.

BrightHouse said: “We have been working closely with the FCA over a number of years.” And PerfectHome said: “As an FCA-authorised lender, PerfectHome is committed to responsible lending.”

Gill Furniss, Shadow Consumer Minister, welcomed the move, saying: “Rent-to-own companies have ripped consumers off for too long.” COST Sunday Mirror story