Rent-to-own firms allow customers to pay for items in weekly instalments. However, the goods are often more expensive than other retailers, and have high levels of interest combined with additional charges e.g. add-on insurance and warranties. A customer can end up paying up to 4 times the average shop retail price.
From 1 April 2019 the Financial Conduct Authority (FCA) introduced a price cap on rent-to-own items to limit the cost of the item and the charge for credit.
• A cap of 100% on the credit that customers can be charged for rent-to-own items ie a customer will not pay more in interest than the cost of the original item.
• Rent-to-own firms will be required to benchmark their prices, including delivery and installation (but excluding any add-ons such as warranties) against three mainstream retailers.
• Rent-to-own firms will not be allowed to increase the prices of insurance premiums, warranties or arrears charges to offset the new price cap.
instead of a £400 washing machine costing a potential £1,600 or beyond, the maximum a firm can charge from April will be capped at £800.
The cap will apply to any new products that rent-to-own firms introduce to the market after 1 April 2019.
For products that firms already offer, the rules will apply from 1 July 2019, or at the point the rent-to-own firm raises the price (whichever is sooner). Businesses with fewer than 10 employees have until 1 October 2019 to introduce the rules for existing products.
In February 2019, the FCA also introduced a 2-day cooling off period for the sale of extended warranties, effectively banning firms from selling them at the point of purchase.