Cap on rip-off rent-to-own firms will save customers £22.7million a year, in a victory for The Sun
Almost half a million people use rent-to-own firms like BrightHouse and Perfect Home, which charge up to four times the high street price for household furniture and electrical items
INTEREST rates and fees charged by rip-off weekly payment stores are to be capped to help stop thousands of cash-strapped Brits falling deeper into debt, in a victory for The Sun.
Almost half a million people use rent-to-own firms like BrightHouse and Perfect Home, which charge up to four times the high street price for household furniture and electrical items.
In March, The Sun launched its Stop the Credit Rip-Off campaign to help millions of families who rely on high cost credit like rent-to-own and doorstep loans.
We called for firms to stop charging customers more than double what they'd borrowed.
Now, the city watchdog, The Financial Conduct Authority, has said it will force firms to limit the cost of the product and total amount they can charge in credit - and it will help save consumers £22.7million a year.
Firms will not be allowed to charge more in interest than the cost of the product.
They will also have to benchmark the price of the item - before adding interest - against three other retailers.
This means that is an item costs £100 they will not be able to charge more than a maximum of £200 in total.
The cap, which must now go through a consultation period, should be in place from April 1 next year.
The FCA is also introducing a 2-day cooling off period for the sale of extended warranties from February 22 2019, which means that firms will no longer be able to sell them alongside products.
Weekly payment stores charge customers small amounts each week - starting from just £3.50 - but customers often end up paying back up to four times the high street price.
Yesterday, The Sun revealed how hard-up households pay up to three times the price for items In Black Friday sales by BrightHouse and PerfectHome.
In July, we also warned that rent-to-own customers spend hundreds of pounds extra on expensive warranties.
A similar cap was introduced for payday loans in 2015 and since then the number of people with unmanageable debts to those lenders has more than halved.
Andrew Bailey, chief executive of the Financial Conduct Authority said: "A cap will prevent firms charging over the odds for essential everyday items like cookers or washing machines.
"We believe a cap is the only intervention that will effectively tackle the highest prices."
Gillian Guy, chief executive of Citizens Advice, said: “This cap is a victory for people who struggle with the runaway costs of rent-to-own agreements.
“These products are aimed at people who have little choice but to resort to this type of credit, yet they come with crippling interest rates on prices that are far higher than anywhere else on the high street.
“A cap gets to the heart of the problem by stopping costs from spiralling out of control and pushing people into further debt."
Martin Lewis, founder of MoneySavingExpert.com said: "The fact that the most vulnerable with the least pay four times as much for their electrical and white goods as everyone else is simply unjust and it’s rightfully about time that the FCA cracked down on it."
Sara Williams, who writes about debt on the Debt Camel blog, said: "Pay weekly customers often focus just on the weekly charge.
"The new price and interest cap controls to start in April will help stop them being ripped off by massively inflated prices.
"Well done The Sun for joining debt advisers in campaigning about this important issue and well done the FCA for taking action!"
I had to choose between heating my home and paying BrightHouse bills
SINGLE-MUM of eight Georgina Hamm was forced to choose between heating her home and paying rent-to-own firm BrightHouse due to “extortionate” late fees and mounting debts.
The 49-year-old from Leyton, North London, took out more than 10 agreements for items including TVs, games consoles and mobile phones for her children.
She claims to have paid back £20,000 but owed thousands more to the firm.
At the worst point Georgina was paying BrightHouse £85 a week which left her £45 a week to feed her children, now aged between 11 and 33.
She told The Sun: “I’d stopped paying council tax, rent and other bills but I was too scared to miss a BrightHouse payment.
“We couldn’t afford to put the gas central heating on.
“They make it sound so easy, that you can buy these things for just a few pounds a week, but it’s actually very expensive.”
Georgina, who is a full-time carer for three of her children, claims she was charged £5 a day per item if her payment was late.
As she didn’t have a debit card, every Saturday she would make the 50-minute bus journey to the store in Wembley to pay in cash, sometimes bringing her younger children with her.
One Saturday she didn’t have the cash to make the payment and went in on the Monday.
She said: “They told me I owed £120 in late payment fees on top of what I needed to pay.
“I didn’t have that kind of money so I had to borrow it from a friend.
Two years ago, Georgina took out a debt repayment plan known as an Individual Voluntary Agreement (IVA) to help her pay off everything that she owed, including her debts to BrightHouse.
A spokesperson from BrightHouse said: ";BrightHouse provides a unique way for those on low incomes, who are often excluded from mainstream credit, to get the everyday things many of us take for granted.
“We take our customers’ circumstances very seriously and we have extremely robust policies in place to ensure that the agreement is affordable and to identify customers who might be in a vulnerable position.
"Every BrightHouse agreement is uniquely flexible and we have a range of ways to help customers if they tell us that their circumstances have changed.
"These include rewriting the agreement, payment holidays, a payment plan, or an alternative product.
"Ultimately, we’re happy to accept the return of the product at any time and in any condition, leaving the customer with no debt and avoiding a default on their credit file."
In May, the city watchdog, the FCA, announced plans to crackdown on "exceptionally high" rent-to-own products, as well as a raft of changes to overdrafts and stricter rules for doorstep lenders.
We've previously revealed how firms charge up to five times more for insurancecompared to specialist providers.
MPs from all parties welcomed the success of The Sun’s "excellent campaign";, and credited this website for encouraging the FCA to finally take action.
As part of these new rules, banks could be banned from charging extra for unarranged overdrafts, saving customers up to £140million a year.
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BrightHouse was ordered to pay £14.8million in compensation in October last year, after the FCA ruled that it had treated customers unfairly.
While PerfectHome was ordered to pay back £2.1million to thousands of customers in March this year.
In November last year, The Sun revealed how BrightHouse staff claimed they had twisted affordability checks and been set bonus-related targets.
A spokesperson for PerfectHome said: “As an FCA-authorised lender, PerfectHome is committed to responsible lending.
"We recognise that consumers need to be protected by fair and appropriate regulation.
"The FCA’s new rent-to-own proposals are outlined in a 135-page consultation document today.
"We will consider them carefully and will work closely with the FCA throughout the consultation process.”
A spokesperson from BrightHouse said: “BrightHouse has been working closely and constructively with the FCA over a number of years.
"This comprehensive process has led to many changes in the way we operate as a business and serve our customers.
“We’re going to carefully consider today’s announcement, while continuing to offer those excluded from mainstream credit ways to get the household goods they need.”
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