You are here: Home - Household Bills - News -

Cap on rent-to-own goods could save shoppers hundreds of pounds

Written by: Paloma Kubiak
A cap on the cost of rent-to-own household goods - such as washing machines and TVs - would save consumers up to 30% per item, a charity suggests.

Rent-to-own firms provide customers with household goods such as washing machines, fridge freezers and TVs on a hire purchase agreement. They usually target low income families and those with poor credit scores.

The Financial Conduct Authority (FCA) is looking to implement a price cap by April 2019, but it is still deciding exactly what form this will take.

Charity Citizens Advice suggests a 100% cost cap, including on interest and charges associated with the products which could save consumers up to £62m on 245,000 goods.

It wants to see rent-to-own goods become more affordable. By limiting the upfront cost of the item, plus installation, delivery fees and interest, the outstanding levels of debt held by rent-to-own customers would be reduced, it said.

Around 400,000 people have rent-to-own debt in the UK and last year Citizens Advice helped more than 5,000 people with problems relating to these loans. The average amount of rent-to-own debt was £972.

But a total cost cap on items like washing machines, fridge freezers and televisions could save consumers £276 (28%) per product, Citizens Advice found.

It also wants to see limits on late payment charges at £15 per agreement per year. Nearly 60% of rent-to-own customers are charged late payment fees, commonly amounting to £72 over the course of a loan.

Gillian Guy, chief executive of Citizens Advice, said: “By 1 April 2019, it will have been 853 days since the FCA launched its high-cost credit review. Until a cap is introduced, consumers will continue to pay over the odds for these high-interest products.

“Caps can work, we’ve seen this with payday loans where thousands of consumers have been protected by the FCA and are now better off as a result.

“The FCA has recognised the massive harm caused by the high interest rates on tempting rent-to-own deals. It should now stick to its own deadline to implement a cap. No one should have to pay more than double what they borrow.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

How your monthly bills could rise as the base rate reaches 1.25%

The Bank of England has raised the base rate to 1.25% as predicted – the fifth consecutive rise in just six ...

Low-income pensioner? You could gain £3k top-up

Hundreds of thousands of retirees struggling with a low income are missing out on Pension Credit worth £3,300...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week