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Cost of buying washing machines, fridges etc via pricey 'rent-to-own' firms to be capped

Vulnerable customers who use rent-to-own firms will not pay more in interest than the cost of the original item from April, as part of new rules announced by the financial regulator today.    

The Financial Conduct Authority (FCA) is introducing a price cap of 100% on the credit that consumers can be charged for rent-to-own items, which it estimates will save them up to £22.7 million a year.

Rent-to-own firms allow consumers to buy goods, usually white goods such as washers and fridge freezers, using smaller regular payments over a period of one to three years, rather than a lump sum. 

But as well as the goods usually being more expensive in the first place, the customers then pay high levels of interest, meaning they can end up paying more than four times as much, according to the FCA.  

Under the new rules, the FCA will also require firms to benchmark their prices, including delivery and installation but excluding any add-ons such as warranties, against three mainstream retailers. 

Firms will not be allowed to increase the prices of insurance premiums, warranties or arrears charges to offset the new price cap. 

The FCA unveiled proposals for a rent-to-own price cap last year, and is also consulting on banning fixed overdraft fees and requiring firms that offer store and catalogue cards to help customers avoid debt. It says it will make announcements about these areas in June. 

If you're struggling, our Debt Problems guide has full help.

Martin: 'It's perhaps the most visceral example of the poverty premium'

Martin Lewis, founder and chair of, said: "The rent-to-own sector is perhaps the most visceral example of the poverty premium in the UK. The fact that the most vulnerable with the least pay four times as much for their electrical and white goods as everyone else is simply unjust, and it's rightfully about time that the FCA cracks down on it.

"There has been a real inconsistency across the board, that payday loans – one form of high-cost lending – have had a total cost cap on them so that you cannot pay more than double what you originally borrowed, but with many other forms of high-cost credit, firms are free to charge what they like.

"With rent-to-own, you must remember the scale of the rip-off. Not only are you sometimes charged nearly double for the product itself, they then lend it at up to 100% APR, which means the costs aren't gradually exploding out of control, they've been out of control from the start."

When will the rules be introduced?

The cap will come into force from Monday 1 April, and will apply to any new products that rent-to-own firms introduce to the market after this date.

For products that firms already offer, the rules will apply from 1 July 2019, or at the point the rent-to-own firm raises the price (whichever is sooner). Businesses with fewer than 10 employees will have until 1 October 2019 to introduce the rules for existing products.

What does the FCA say?

Christopher Woolard, executive director of strategy and competition at the FCA, said: "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. This price cap has been designed to target some of the most excessive prices in the rent-to-own market. 

"The measures come into force from 1 April and we 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."

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