NEWS that the Financial Conduct Authority intends to introduce price caps on the rent-to-own sector has been welcomed by Chris Ruane MP for Vale of Clwyd.
The announcement by the FCA comes just weeks after Mr Ruane, Ann Jones Vale of Clwyd AM and the Cambrian Credit Union joined forces to highlight the excessive costs of purchasing items from stores such as Brighthouse when compared to accessing financial services from credit unions.
The proposed cap, which is subject to consultation, will come into force on April 1 and it is thought that it could save consumers up to £22.7 million a year.
“This move by the FCA is excellent news,” said Mr Ruane.
“Sadly many people who use the Rent-to-Own sector to purchase items are among the most financially vulnerable.
“Figures by the FCA show that only one third are in work, most are on low incomes (between £12,000 and £18,000) and are likely to have missed a bill payment in the last 6 months.
“Earlier this month Ann Jones AM and I met with the local credit union to help highlight the unfair practices of companies such as Brighthouse so it is good news to hear of action being taken so soon afterwards.”
Ann Jones AM added: “This cap will help prevent companies from charging over-the-odds for household goods such as washing machines or cookers which, when insurances and warranties etc are added on, can cost customers up to four times the retail price if they purchase via Rent-to-Own companies.
“If you are looking to purchase a household item I would urge you to look at other options of funding such as the credit union rather than opt for the package offered by Rent-to-Own companies.”
In addition, the FCA is introducing a 2-day cooling off period for the sale of extended warranties. This will effectively ban firms from selling these warranties at the point of purchase and will come into force on February 22.
The consultation on the price cap and benchmarking proposals will be open until January 17 and if agreed the new rules will be implemented from April 1.
The consultation can be found at: https://www.fca.org.uk/publications/consultation-papers/cp18-35-rent-own-alternatives-high-cost-credit-feedback-cp18-12-consultation-price-cap
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