BLAENAU Gwent MP Nick Smith has welcomed the Financial Conduct Authority’s new rent-to-own price cap.
Mr Smith has been a long-time campaigner for tougher regulation of the rent-to-own sector.
In December 2016, during Prime Minister’s Questions, Mr Smith called directly on Theresa May to introduce a cap. This call came as a result of Mr Smith seeing data which showed a steep rise in the amount of people struggling to keep up with payments on rent-to-own items in Blaenau Gwent.
Mr Smith has continually pressed for action over this issue, calling for the Government and Financial Conduct Authority to hit rent-to-own firms with the same sort of interest rate cap used to curb payday loan firms.
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On Tuesday, the Financial Conduct Authority (FCA) announced the introduction of a 100 per cent credit cap.
It will be introduced on April 1 and is expected to save consumers in the UK up to £22.7m a year.
Mr Smith said: “This is something I have been calling for for a long time.
“This credit cap is a victory for consumers and a long-overdue measure.
“I have always said, this isn’t about people who are living outside of their means. This is about preventing someone who needs to buy a fridge or a cooker or a cot from spiralling into debt, simply because they need to spread the cost.
“If someone finds themselves in that position it is wrong that they are at the mercy of firms that charge hundreds of pounds more than the item actually costs.”
Speaking after the announcement, Christopher Woolard, executive director of strategy and competition at the FCA said: “The actions we are taking today build on our wider work on high-cost credit and will save some of the most vulnerable consumers in the UK millions of pounds. 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 April 1 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.”
The FCA has also announced that rent-to-own firms will have to benchmark base prices against those charged by three mainstream retailers and will not be able to increase the price of insurance premiums, warranties or arrears charges in order to recoup revenue lost due to the price cap.
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