Rent-to-own firms face clampdown on high fees
The financial watchdog has proposed putting a price cap on the rent-to-own (RTO) sector and has vowed to crack down on extra charges that are harming some of the most financially vulnerable people in the UK.
The Financial Conduct Authority said some customers are paying as much as four times the average retail price for essential household goods such as washing machines or cookers, due to extra charges such as addon insurance and warranties. According to the FCA, only a third of customers who use these companies are in work, most are living on low incomes of between £12,000 and £18,000, and they are likely to have
missed a bill payment in the last six months.
Andrew Bailey, chief executive of the FCA, said: “Today’s measures are designed to bring down very high prices in the rent-to-own sector, which is used by some of the most financially vulnerable in our society.
“A cap will prevent firms charging over the odds for essential everyday items like cookers or washing machines. We believe a cap is the only intervention that will effectively tackle the highest prices. If implemented it will save consumers up to £22.7m a year from excessive charges.”
Mr Bailey added: “We want to stop consumers having to pay many multiples more than the price of a product on the high street. These changes build on the measures we have already taken across the highcost credit sector.”
The FCA is also introducing a two-day cooling off period for the sale of extended warranties. This will effectively ban firms from selling these warranties at the point of purchase. This will come into force on 22 February 2019. Firms such as Brighthouse, PerfectHome and Buy as You View will be affected by the proposed price cap. The FCA said its previous work had resulted in redress packages totalling £16m for about 340,000 consumers who used these companies.
The bulk of that redress came from BrightHouse, which paid £14.8m to 249,000 customers last year after the regulator said it had not acted as a responsible lender. In the same year, the Queen was also revealed to be a small investor in the firm.
Yesterday a BrightHouse spokesperson said: “BrightHouse has been working closely and constructively with the FCA over a number of years. This comprehensive process has led to many changes in the way we operate as a business and serve our customers. We’re going to carefully consider today’s announcement, while continuing to offer those excluded from mainstream credit ways to get the household goods they need.”