“Rent-to-own” retailers such as BrightHouse will be banned from charging vulnerable customers over the odds for household goods under new rules proposed by financial regulators on Thursday.
Rent to own involves customers obtaining products such as washing machines or electronics under hire-purchase agreements before taking ownership when they have completed all the payments.
Under the proposed rules, which will come into force in April, firms will be banned from charging more than 100 per cent interest on items, and will have to set prices based on a benchmark of high street retailers.
FCA chief executive Andrew Bailey said RTO as used by “some of the most financially vulnerable in our society”, and said “we believe a cap is the only intervention that will effectively tackle the highest prices”.
The FCA estimated the changes, which are part of a broader crackdown on high-cost credit products including overdrafts, would save customers up to £22.7m a year.
An earlier FCA price cap on payday loans contributed to a sharp fall in the number of providers, and the regulator acknowledged that the latest move could leave some vulnerable customers struggling to access any form of credit.
The watchdog would work with the government and charities to support lower-cost alternatives, and take steps such as cutting its fees for credit unions and community finance organisations.