The Metropolis watchdog says a deliberate cap on rent-to-own prices will place limits on the price of the product and accompanying credit score.

The Monetary Conduct Authority (FCA) stated the crackdown, first reported by Sky Information on Wednesday night and comparable in nature to that imposed on the payday lending sector, can be utilized from April.

Its proposals, if enacted following a session, would collectively save customers – a lot of them essentially the most financially susceptible within the UK – virtually £23m yearly, the regulator stated.

The principles would imply credit score prices not exceeding the price of the product.

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The cap will cowl the quantities that may be charged for family home equipment purchased on credit score

To assist guarantee costs are honest, rent-to-own suppliers should benchmark the price of gadgets towards the costs charged by three different retailers.

The FCA stated it had recognized “very excessive costs” within the sector – with add-on insurance coverage and warranties in some instances that means clients paying as much as 4 occasions the typical retail value for gadgets similar to TVs, washing machines and cookers.

Its report discovered solely a 3rd of rent-to-own clients are in work, most are on low incomes of between £12,000 and
£18,000 and have been prone to have missed a invoice cost within the final six months.

FCA chief govt Andrew Bailey stated the necessity for a cap was evident.

He stated: “We need to cease customers having to pay many multiples greater than the worth of a product on the excessive avenue.

“These adjustments construct on the measures we’ve got already taken throughout the high-cost credit score sector.”

The regulator stated that along with the cap and its accompanying guidelines it could additionally introduce a two-day cooling off interval for the sale of prolonged warranties.

This may successfully ban companies from promoting these warranties on the level of buy from 22 February.

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