Advertisement
Housing

The long-awaited rent-to-own price cap will be coming into force in April

The Financial Conduct Authority measures aim to save consumers £22.7m every year by protecting them from unscrupulous high-cost lenders

The rent-to-own price cap will be coming into force in April to offer more protection for those in poverty who are forced to turn to unscrupulous high-cost credit lenders.

The Financial Conduct Authority (FCA) has confirmed that the long-mooted cap will arrive in a couple of months, promising to save customers who have been ripped off by lending firms up to £22.7m a year.

The cap will ensure that lenders cannot charge more than 100 per cent of the value of a product – cracking down on firms such as BrightHouse which was ordered to pay £14.8m in compensation to 249,00 customers in 2017 after breaching FCA lending rules.

A consultation paper on a price cap, released in November, found that BrightHouse and other firms in the rent-to-own sector charge up to four times what a product is worth with skyrocketing repayments driving vulnerable customers into further poverty.

And that’s why the cap will introduce benchmark base prices compared across three mainstream retailers to stop consumers being exploited.

Advertisement
Advertisement

The new measures will also prevent firms from passing on the cost of the cap to the customer by hiking up the price of insurance premiums, extended warranties or arrears charges.

“The actions we are taking today build on our wider work on high-cost credit and will save some of the most vulnerable consumers in the UK millions of pounds,” said Christopher Woolard, executive director of strategy and competition at the FCA.

“This price cap has been designed to target some of the most excessive prices in the rent-to-own market. 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.”

Debt charity StepChange has welcomed the new rules but warned that the watchdog may need to go further to protect those on the breadline.

“We welcome the fact that the price cap will apply both to the cost of credit and to the underlying cost of goods that can make these agreements expensive, even compared to other types of high cost credit,” said Peter Tutton, StepChange’s head of policy.

“However, 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.”

Our social investment arm, Big Issue Invest, knows the value of such alternatives. That’s why they invest in fair credit firms like Moneyline, Street UK and Fair For You to stop vulnerable consumers having to turn to rip-off high-cost credit firms.

https://twitter.com/GillianGuy_CAB/status/1102862611375362048

Citizens Advice chief executive Gillian Guy wants to see the price cap rolled out further. She added: “Our evidence has repeatedly shown well-designed caps can reduce the harm high-cost credit can cause.

“Where these credit products cause more harm than good, for example doorstep loans, the FCA should move to introduce similar protections.”

Advertisement

Change a vendor's life this Christmas

This Christmas, 3.8 million people across the UK will be facing extreme poverty. Thousands of those struggling will turn to selling the Big Issue as a vital source of income - they need your support to earn and lift themselves out of poverty.

Recommended for you

Read All
'We must remove the shackles of stigma': Five ways Labour wants to shake-up Right to Buy
Labour deputy prime minister abd housing secretary Angela Rayner
Right to Buy

'We must remove the shackles of stigma': Five ways Labour wants to shake-up Right to Buy

Rents in UK are rising at highest rate in decades. Will they keep going up?
rents uk
Renting

Rents in UK are rising at highest rate in decades. Will they keep going up?

Mum-of-three hit with 'revenge eviction' after asking for repairs: 'It felt like the end of the world'
Hazell and her three kids faced homelessness until Shelter stepped in
Renting

Mum-of-three hit with 'revenge eviction' after asking for repairs: 'It felt like the end of the world'

Housing minister admits Labour's 1.5 million homes promise will be 'more difficult than expected'
Labour housing minister Matthew Pennycook
Housebuilding

Housing minister admits Labour's 1.5 million homes promise will be 'more difficult than expected'

Most Popular

Read All
Renters pay their landlords' buy-to-let mortgages, so they should get a share of the profits
Renters: A mortgage lender's window advertising buy-to-let products
1.

Renters pay their landlords' buy-to-let mortgages, so they should get a share of the profits

Exclusive: Disabled people are 'set up to fail' by the DWP in target-driven disability benefits system, whistleblowers reveal
Pound coins on a piece of paper with disability living allowancve
2.

Exclusive: Disabled people are 'set up to fail' by the DWP in target-driven disability benefits system, whistleblowers reveal

Cost of living payment 2024: Where to get help now the scheme is over
next dwp cost of living payment 2023
3.

Cost of living payment 2024: Where to get help now the scheme is over

Citroën Ami: the tiny electric vehicle driving change with The Big Issue
4.

Citroën Ami: the tiny electric vehicle driving change with The Big Issue