A PLAN to introduce a cap on interest rates rent-to-own firms can charge has been welcomed by Blaenau Gwent MP Nick Smith.

The Labour MP has long campaigned for action to be taken on the rates the companies, which allow customers to pay for products in instalments, are allowed to charge, saying many were left paying far more than the product was ultimately worth.

And now the Financial Conduct Authority (FCA) has announced it is planning on introducing a cap on rates, to come into force next April, as part of a range of new measures.

Welcoming the news, Mr Smith said: “This is a big step forward after a long wait for action and a lot of campaigning from myself and others to almost drag the FCA kicking and screaming to this conclusion.

“We’ve seen debt slashed from payday loans after a cap was introduced and the FCA must now be diligent and produce a solution that’s fit for purpose.

“I don’t want people in Blaenau Gwent caught in a debt trap because they can only afford small weekly payments. There’s room in society for a service that helps people without punishing them with ridiculous mark ups.

“For many, next April is a long time away. Families up and down the country who have to wait nearly a year longer, accumulating more debt every day, deserve a solution that is comprehensive and loophole-free.”

Other measures being considered by the FCA include a reform to overdraft charges and store cards, including mobile alerts warning of potential overdraft charges and stopping the inclusion of overdrafts in the term "available funds".

Chief executive Andrew Bailey said: "High-cost credit is used by over three million consumers in the UK, some of who are the most vulnerable in society.

"Today we have proposed a significant package of reforms to ensure they are better protected including the possibility of a cap on rent-to-own lending.

"The proposals will benefit overdraft and high-cost credit users, rebalancing in the favour of the customer.

"Our immediate proposed changes will make overdraft costs more transparent and prevent people unintentionally dipping in to an overdraft in the first place. However, we believe more fundamental change is needed in the way banks charge customers for overdrafts."