FCA hint at capping Charges from rent to buy companies
The FCA have hinted that it's considering a range of options whilst it investigates Rent to Own companies. Rent to Own companies often help people with Poor Credit or Low incomes with items they need such as White Goods (Washing Machines, Cookers) and/or furniture.
However some of these companies have gotten a bad press due to the costs involved.
It's worth remembering this business concept has been around for years. When I was growing up my parents rented a Television set and a Video recorder from a company called Radio Rentals.
Back in the 80s people struggled to make ends meet and hiring products like Television sets was pretty popular.
Television sets in this example are now a lot more affordable, but for people on low incomes they are still out of affordable reach.
The option of spending a couple of pound a week to hire a television set still has massive appeal. Especially for families when children want to play game consoles on a Television set.
Companies like Dial A TV and Brighthouse do offer benefits. This includes the option to Rent or Rent to Buy. Brighthouse even allow you to return the goods and not owe any further payments.
High interest products are not linked exclusive to Rent to Buy companies. Some Catalogues and even credit cards appear to have APR rates of over 59%.
A few years back an investigation into Pay Day loan companies saw a massive cull of products available. Although some Pay Day Loan companies tactics were often bordering illegal, some felt the market place has shrunk so much that those who really need a loan may be frozen out.
Rental companies offer a service when other companies may not always help. Customers with low incomes or bad credit are often frozen out of main stream finance.
The FCA have started to look and investigate Rental and Rent to buy companies. Some of their concerns raised by Citizen Advice surround Affordability Checks. When customers are on such a low income or are already in severe debt, they are more likely to struggle.
The FCA have stated that a Cap on the costs Rental and Rent to Buy companies can charge is possible it did stress this would be a last resort.
Pay Day loan lenders are now capped at charging no more than 0.8% per day for the amount a customer borrows. Rent and Rent to buy companies can charge as much £1170 for a product costing £416.99.
However, things to bear in mind with Rental and Rent to buy companies include the fact that their price includes Insurance, Delivery and Installation. Most offer Breakdown Cover and will repair or replace an item which stops working. Plus, for some customers, the option of paying weekly makes budgeting more affordable.
The fear of Capping the charges too much include the possibility that Rent and Rent to Buy companies starting to reject more customers. This could mean customers who need a new Cooker or Washing Machine having to turn to Loan sharks.
People with Bad Credit often have had circumstances go against them in the first place, when things start to improve it's not always a case of being able to get the products they need on credit. So although we agree that better Affordability checks could help the industry, customers are always made aware up front on the costs involved.
Customers who need Furniture or White Goods who cannot afford to rent or rent to buy should consider looking around for local charities or even websites like Gumtree where White Goods and even Furniture can often be found available free of charge.