Responsibility for regulating the rent-to-own (RTO) sector transferred from the Office of Fair Trading (OFT) to the Financial Conduct Authority in April 2014.
Firms, previously regulated by the OFT, may continue to operate if they have interim permission. We are currently determining applications for full authorisation from RTO firms, including the three largest – Bright House, Perfect Home and Buy as You View, which between them have a majority share of the market.
We will authorise firms only if they demonstrate they meet, and will continue to meet, our threshold conditions. Applications from firms in the RTO sector are subject to robust scrutiny as their business model poses a higher risk because it serves customers who are likely to be financially vulnerable. We look at a range of matters, including whether the firms lend affordably and how they treat customers who get into financial difficulty and struggle to repay their loans. To date, we have received applications from 20 firms that engage in RTO as part of their business models; we have authorised seven and continue to assess applications from the remaining 13.
In addition to assessing authorisations, the FCA has also been working closely with the three largest firms to address a number of immediate and pressing concerns. We identified a number of concerns at the three firms in relation to:
- affordability assessments
- arrears handling and forbearance
- price transparency
All three firms have co-operated with us fully and, following our interventions, the firms have improved the clarity of pricing and are committed to substantial improvements to their policies and processes to ensure that loans are affordable and customers are treated fairly if they encounter difficulty in making repayments.
We have also required each of the firms to appoint an independent Skilled Person to assess whether the changes undertaken by the firms have been effectively implemented and suitably address our concerns. The Skilled Persons reports are expected to be completed in early 2017 and will be carefully considered by the FCA.
In addition, each firm has committed to assess whether action should be taken to address any previous consumer detriment. If any remedial action is necessary, the Skilled Persons will oversee this activity.
We have already announced one redress scheme in March 2016 where Buy as You View[1] agreed to paying £939,000 to 59,000 customers in respect of fees charged to customers in arrears. The FCA will not hesitate to take action where we find evidence of consumer detriment, and we were pleased that Buy as You View worked with us closely to ensure its customers were compensated for these historic issues.