Rent-to-own firms face price cap from April but customers could still be charged double the value of the product

5 March 2019

The UK financial watchdog is introducing a price cap on rent-to-own firms to protect vulnerable customers

Many customers of such firms end up paying pay extortionate costs for household goods such as televisions and fridge freezers.

The cap will be introduced from 1 April and will save consumers in the UK up to £22.7 million a year, the Financial Conduct Authority (FCA) says.

Rent-to-own firms allow consumers to pay smaller instalments over one to three years rather than a lump sum. However, they often end up paying considerably more than the original price of the item due to the high interest rates charged.

The FCA says that rent to own customers are the most vulnerable in society, with only a third in work and most earning between £12,000 and £18,000.

Despite this, rent to own firms often charge these customers more than other retailers for essential household goods such as a washing machines or cookers.

The regulator will carry out a further review to assess the impact of the price cap in April 2020.

Christopher Woolard, executive director of strategy and competition at the FCA says: "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."

How much will rent to own firms now charge?

Under the cap, rent-to-own firms will not be able to charge credit at more than the cost of the product. In addition, they will need to benchmark the cost of products against the prices charged by three other retailers.

Rent-to-own firms will also be prevented from increasing their prices for insurance premiums, extended warranties, or arrears charges, to recoup lost revenue from the price cap.

This means that shoppers won't be charged more than 100% above the actual value of the product they buy.

However, customers could still end up paying double for the original product. For example, if a freezer costs £300, the customer could pay a maximum of £600, including charges.

The FCA published a consultation In November 2018 on it plan to introduce a price cap to the rent-to-own market.

It found that in some cases customers can pay up to four times the average retail price when add-on insurance and warranties are included.

The three biggest rent-to-own firms in the UK are BrightHouse, PerfectHome and Buy As You View, which account for 90% of the market.

A BrightHouse spokesperson says: “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.”

Citizens Advice welcomed the introduction of the cap.

Gillian Guy, chief executive of Citizens Advice, says: “The FCA has recognised the massive harm caused by the crippling interest rates on rent-to-own deals. This cap will stop people from paying over the odds compared to similar products on the high street and falling into further debt when costs spiral out of control.

“Our evidence has repeatedly shown well-designed caps can reduce the harm high-cost credit can cause. Where these credit products cause more harm than good, for example doorstep loans, the FCA should move to introduce similar protections.”

How to avoid rent-to-own

Rent-to-own pricing models are a tempting way for many to purchase expensive items, as it spreads the cost into manageable monthly payments. But in reality, it makes the cost of such products significantly higher.

Here are some tips on how to avoid resorting to these kinds of deals:

1. Think about whether you really need to buy it. Often an expensive purchase, such as a cooker or fridge will be unavoidable as they are an essential household item. But others such as the latest big-screen TV or games console are not, so think about whether you can do without.

2. Save up to pre-empt emergencies. Moneywise will always recommend in the first instance to try and squirrel away money for a big purchase, or even to have a rainy-day savings fund in case an appliance breaks unexpectedly. This can, though, be easier said than done. Schemes such as the governments Help to Save come with very generous bonuses of up to 50p for every pound saved.

3. Use a 0% purchase card. While credit cards are not cheap ways to spend, you can apply for a card that comes with a 0% purchase rate over a set period. This is a great way to make a big purchase that can then spread the cost over a fixed period of time. Check our guide to the best 0% purchase cards for more. Always use a credit card affordability checker before you apply as a rejection will harm your credit rating.

4. Try your local credit union. Credit unions can often have cheaper ways to borrow cash, and will often help people who don’t have the best credit ratings. Check websites such as to track down your nearest provider.


In reply to by anonymous_stub (not verified)

Probably falling on deaf ears as the people I know who rent-to-own, mostly youngsters, think credit is the same as earned income.

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