Price caps may soon be imposed on so-called ‘rent to own’ businesses that enable cash-strapped consumers to spread the cost of items such as household appliances over a number of years.
The three largest firms in the sector are Brighthouse, Perfect Home and Buy As You View.
Following the successful introduction of a price cap in the pay day loan market, the Financial Conduct Authority has today called for evidence of how effectively the high cost, short term, credit market is working and how fairly customers are being treated.
According to Citizens Advice, problems are widespread. In a new report, also published today, the charity claims customers of rent to own firms are being plunged into debt by a combination of high interest rates and fees, poor affordability checks and inflexible debt collection practices.
In January 2015 the FCA introduced caps to the payday loan market, restricting the rates of interest payable on loans as well as the level of fees. Since then Citizens Advice has reported 45% fewer cases with payday loan problems.
- Struggling with unaffordable payday loans? You may be due a refund
“More consumer protections are needed”
Gillian Guy, chief executive, at Citizens Advice says: “Payday loan problems have fallen, but other high cost credit products are causing problems for thousands of borrowers. Our new report on the rent to own market highlights specific problems within this industry including inadequate checks to make sure people can pay back what they borrow and poor treatment when payments are missed.
“By turning its attention to the wider high cost credit market, the FCA has an opportunity to build on the success of tackling the payday loan industry, by extending the price cap and introducing more protections for consumers.”
In a survey of rent to own customers, Citizens Advice found that one third have missed payments, more than half have taken further loans to help them repay their debts, including taking loans from doorstep lenders. More than half (52%) of those who missed payments claimed to have been treated unfairly and 45% said the terms made it more difficult to repay what they owed.