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The Financial Conduct Authority (FCA) are consulting on introducing a price cap in the rent-to-own (RTO) market to address harm to vulnerable consumers from high prices.
The proposed price cap on RTO products, which are rented by consumers and paid off gradually, would come into effect on 1 April 2019 and is designed to control prices by limiting both the cost of the product and the charge for credit.
Under the proposed cap, credit charges cannot be more than the cost of the product, and RTO firms would need to benchmark the cost of products against the prices charged by three other retailers.
The FCA’s rules would also prevent firms increasing their prices for insurance premiums, such as theft and accidental damage cover, extended warranties or arrears charges in order to recoup lost revenue from the price cap.
A statement by the group read: “We are proposing that the draft rules apply from 1 April 2019 to any new products RTO firms introduce to the market for the first time. For products that RTO firms are already offering, the rules will apply either at the point the RTO firm makes a price change or once the rules have been in force for 3 months (whichever date is sooner).”
