Published on March 6th, 2019 | by The GC Team0
FCA confirms introduction of rent-to-own price cap
The Financial Conduct Authority has confirmed that the price cap to protect customers of rent-to-own retailers will be introduced from 1 April 2019 and will apply to any new products RTO firms introduce to the market for the first time.
In some cases, RTO customers are currently paying in total more than four times the retail price of some goods. The FCA said the cap will save UK consumers up to £22.7 million a year.
The FCA confirmed in a Policy Statement that the following measures will apply to the RTO sector:
- setting a total credit cap of 100%
- introducing a requirement on firms to benchmark base prices (including delivery and installation) against the prices charged by three mainstream retailers
- preventing firms increasing their prices for insurance premiums (e.g. theft and accidental damage cover), extended warranties, or arrears charges, to recoup lost revenue from the price cap
Christopher Woolard, Executive Director of Strategy and Competition at the FCA said the price cap has been designed to target some of the most excessive prices in the rent-to-own market and his organisation 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,” he commented.
The move to introduce the price cap follows the publication of the FCA’s Consultation Paper in November 2018, which outlined the organisation’s intentions to protect vulnerable consumers from the high prices being charged in the RTO sector.
The FCA has committed to carry out a further review in April 2020 to assess the impact of the price cap.
The FCA’s previous work has resulted in redress packages worth nearly £16 million in total for around 340,000 consumers of RTO firms BrightHouse, PerfectHome and Buy As You View.