Rent-to-own crackdown will help vulnerable most
The Financial Conduct Authority has acted this week to limit the amount of interest that can be charged on rent-to-own purchases.
Christopher Woolard, executive director of strategy and competition at the FCA, said: “The actions we are taking 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 rentto-own market.
“The measures come into force from April 1 and we will be keeping a close watch on firms’ compliance.
“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.”
There has been widespread agreement from consumer groups that the cap will help low-income families. Gillian Guy, chief executive of Citizens Advice, said: “This cap, which we’ve campaigned for, is a win for those struggling with the runaway costs of rentto-own agreements.
“The FCA has recognised the massive harm caused by the crippling interest rates on rent-to-own deals. This cap will stop people from paying over the odds compared to similar products on the high street and falling into further debt when costs spiral out of control.
“Where these credit products cause more harm than good, for example doorstep loans, the FCA should move to introduce similar protections.”
Peter Tutton, from StepChange Debt Charity, reckons that while this move is a good start, more needs to be done.
He said: “Rent-to-own and other high-cost credit will continue to put a strain on low income households who have little choice but using credit to pay for essential goods.
“So we are pleased that the Government is looking at the feasibility of a no interest loans scheme for the most hard-pressed households.
“This important intervention by the FCA still needs to be accompanied by better affordable alternatives to rent-to-own”.
● There is less than a month left in this tax year to top up pension contributions. ● From April 1, a limit will apply to the interest charged on rent-to-own goods.