On 5 March 2019, the FCA published Policy Statement 19/6: Rent-to-own price cap – feedback on CP18/35 and final rules (PS19/6). PS19/6 should be read by firms offering household goods on hire purchase and/or conditional sale, consumer groups and debt advice organisations.
In PS19/6 the FCA summarises the feedback it received to Consultation Paper 18/35: Rent-to own and alternatives to high-cost credit (our blog is here). The FCA also confirms that it is going ahead with its proposals to introduce a price cap in the rent-to-own market, with effect from 1 April 2019. The FCA will review the price cap and the effect benchmarking has on product prices a year earlier than planned – beginning in April 2020.
The price cap will:
- set a total credit cap of 100%;
- introduce a requirement that firms must benchmark product base prices (including delivery and installation, but excluding any add-on products like warranties etc) against retail prices; and
- prevent firms increasing their prices for other goods and services sold with an rent-to-own agreement – for example, theft and accidental damage cover, extended warranties, or arrears charges – to recoup lost revenue from the price cap.
The price cap rules come into force on 1 April 2019. They will apply from that date to any new products rent-to-own firms introduce to the market for the first time. For products that rent-to-own firms are already offering, the rules will apply either at the point the rent-to-own firm raises the price or 1 July 2019 (whichever date is sooner). Micro-enterprises will have a further three months for their existing products (until 1 October 2019).
A full summary of the FCA’s feedback to CP18/35 can be found in chapter 2 of PS19/6.