PS19/6: Rent-to-own price cap – feedback on CP18/35 and final rules

Read PS19/6[1]

In November 2018, we consulted on introducing a price cap in the rent-to-own (RTO) market[2] to address harm from high prices paid by vulnerable consumers.

Today, we confirm that we are going ahead with our proposals to introduce a price cap in the RTO market. We believe that this will be effective in reducing harm from high RTO prices.

We want to bring down prices on RTO agreements where the overall costs to consumers are high compared to other retailers’ prices. Our price cap is designed to do this by:

• setting a total credit cap of 100%
• introducing 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
• preventing firms increasing their prices for other goods and services sold with an RTO agreement – for example, theft and accidental damage cover, extended warranties, or arrears charges – to recoup lost revenue from the price cap

In light of feedback received during the consultation process, we will review the price cap and the effect benchmarking has on product prices a year earlier than planned – beginning in April 2020. This review will also look at the effectiveness of our rules on other charges – insurance, extended warranties and arrears.

Who this applies to

This document should be read by firms offering household goods on hire purchase and/or conditional sale, consumer groups and debt advice organisations.

It will affect consumers considering purchasing household goods using RTO from 1 April 2019.

What you need to do

The price cap rules come into force on 1 April 2019. They will apply from that date to any new products RTO firms introduce to the market for the first time.

For products that RTO firms are already offering, the rules will apply either at the point the RTO firm raises the price or 1 July 2019 (whichever date is sooner). Micro-enterprises will have until 1 October 2019 to do this.

RTO firms should take steps now to ensure that they comply by these dates.