The Financial Conduct Authority (FCA) has confirmed it will introduce a total credit cap of 100% meaning customers will not pay more than the price of the product, including delivery and installation, in interest.

The cap will come into force from 1 April and will save consumers up to £22.7m a year, the FCA said.

Rent-to-own firms allow people to get products such as fridges and washing machines up front but pay in instalments plus interest.

Firms often charge extortionate prices. The FCA found examples of customers paying more than four times the average retail price.

Clampdown

Under the new rules, firms such as BrightHouse and PerfectHome, will have to benchmark prices against the prices charged by three mainstream retailers.

They will also not be allowed to increase their prices for insurance premiums (e.g. theft and accidental damage cover), extended warranties, or arrears charges, to recoup lost revenue from the price cap.

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 FCA will review the impact of the price cap in April 2020.

A BrightHouse spokesperson, said: “We remain committed to offering our customers, who are excluded from mainstream credit, great service and the best prices possible for the products they require. Over the coming months we will fully implement the changes that have been confirmed today.”