Credit Crackdown Cap On Rip-Off Rent-To-Own Firms Will Save Customers £22.7million A Year, In A Victory For The Sun thesun.co.uk

In March, The Sun launched its Stop the Credit Rip-Off campaign to help millions of families who rely on high cost credit like rent-to-own and doorstep loans.

We called for firms to stop charging customers more than double what they'd borrowed.

Now, the city watchdog, The Financial Conduct Authority, has said it will force firms to limit the cost of the product and total amount they can charge in credit – and it will help save consumers £22.7million a year.

Firms will not be allowed to charge more in interest than the cost of the product.
They will also have to benchmark the price of the item – before adding interest – against three other retailers.

This means that is an item costs £100 they will not be able to charge more than a maximum of £200 in total.

The cap, which must now go through a consultation period, should be in place from April 1 next year.

The FCA is also introducing a 2-day cooling off period for the sale of extended warranties from February 22 2019, which means that firms will no longer be able to sell them alongside products.

Weekly payment stores charge customers small amounts each week – starting from just £3.50 – but customers often end up paying back up to four times the high street price.
Yesterday, The Sun revealed how hard-up households pay up to three times the price for items In Black Friday sales by BrightHouse and PerfectHome.

In July, we also warned that rent-to-own customers spend hundreds of pounds extra on expensive warranties.

A similar cap was introduced for payday loans in 2015 and since then the number of people with unmanageable debts to those lenders has more than halved.

Andrew Bailey, chief executive of the Financial Conduct Authority said: "A cap will prevent firms charging over the odds for essential everyday items like cookers or washing machines.

"We believe a cap is the only intervention that will effectively tackle the highest prices."

Gillian Guy, chief executive of Citizens Advice, said: “This cap is a victory for people who struggle with the runaway costs of rent-to-own agreements.

“These products are aimed at people who have little choice but to resort to this type of credit, yet they come with crippling interest rates on prices that are far higher than anywhere else on the high street.

“A cap gets to the heart of the problem by stopping costs from spiralling out of control and pushing people into further debt."

Martin Lewis, founder of MoneySavingExpert.com said: "The fact that the most vulnerable with the least pay four times as much for their electrical and white goods as everyone else is simply unjust and it’s rightfully about time that the FCA cracked down on it."

Sara Williams, who writes about debt on the Debt Camel blog, said: "Pay weekly customers often focus just on the weekly charge.

"The new price and interest cap controls to start in April will help stop them being ripped off by massively inflated prices.

"Well done The Sun for joining debt advisers in campaigning about this important issue and well done the FCA for taking action!"