Cap on rent-to-own products could save consumers £276, says Citizens Advice

A total cost cap on rent-to-own items like washing machines, fridge freezers and televisions could save consumers £276 (28%) per product, new analysis from Citizens Advice has found.

The national charity has modelled the impact its proposed total cost cap in the rent-to-own sector would have. The FCA has indicated it will implement a cap by April 2019 and is currently looking at what form this will take.

Citizens Advice found its suggested cap on the cost of a typical washing machine, purchased from a rent-to-own retailer, could save people £174 (30%). Consumers are typically tied in to such deals for 3 years.

The new analysis also compared the cost of 9 other household products available from the major rent-to-own providers, with the same items purchased upfront from a typical high street retailer.

Last year Citizens Advice helped more than 5,000 people with rent-to-own debts. Their average overall debt was £8,193.(For further detail, see ‘Notes to Editors’).

It says a cap on interest and charges associated with rent-to-own products could save consumers up to £62 million on 245,000 goods.

Citizens Advice is calling for the FCA to commit to its April 2019 deadline and implement its proposed 100% cost cap in the rent-to-own sector that:

• Makes rent-to-own products more affordable. By limiting the upfront cost of the item, plus installation/delivery fees and interest, the outstanding levels of debt held by rent-to-own clients would be reduced.
• Limits late payment charges at £15 per agreement per year. Nearly 60% of rent-to-own clients are charged late payment fees. These charges commonly amount to £72 over the course of a loan.

The charity says a cap will give people a clear idea of the total amount they are expected to repay, helping families to manage their money. It found 25% of people who had purchased a product didn't know the total amount they would have to repay.

Gillian Guy, Chief Executive of Citizens Advice, said:

"By 1 April 2019, it will have been 853 days since the FCA launched its high-cost credit review. Until a cap is introduced, consumers will continue to pay over the odds for these high-interest products.

"Caps can work, we've seen this with payday loans where thousands of consumers have been protected by the FCA and are now better off as a result.

"The FCA has recognised the massive harm caused by the high interest rates on tempting rent-to-own deals. It should now stick to its own deadline to implement a cap. No one should have to pay more than double what they borrow."

Citizens Advice will respond to the FCA's further consultation proposals - including on extended warranties, doorstep loans and overdrafts - ahead of the 31 August deadline.

Notes to editors

1. These prices are based on averages between two major rent to own providers.
2. This price is modelled on the structure of a cap that we have proposed in response to question 2 of the FCA’s call for evidence.
3. This is based on the price of a similar product from Argos sold in June 2018.
4. This is the standard cost of delivery and installation found at comparable home appliance stores.
5. Figures in the charity's March 2018 'Rent to Return?' report show, if existing rent-to-own loans were priced down through a similar cap to that on payday loans, consumers could be protected from paying up to £62 million in repayments on 245,000 rent-to-own products.
6. About 400,000 people have rent-to-own debt in the UK. In 2017, Citizens Advice helped more than 5,000 people with problems relating to these loans. Of these, the average amount of rent-to-own debt was £972, the average overall debt was significantly higher at £8,193, 63% had dependent children and, our clients were three times more likely to be female than male.
7. Citizens Advice is made up of a network of local Citizens Advice in England and Wales, all of which are independent charities, the Citizens Advice consumer service and the national charity Citizens Advice.
8. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers.
9. Citizens Advice is the statutory consumer advocate for energy and postal markets. We provide supplier performance information to consumers and policy analysis to decision makers.
10. The Citizens Advice Witness Service provides free and independent support for both prosecution and defence witnesses in every criminal court in England and Wales.
11. Citizens Advice also offers Pension Wise appointments at 500 locations across England and Wales.
12. The advice provided by the Citizens Advice service is free, independent, confidential and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
13. To get advice online or find your local Citizens Advice in England and Wales, visit citizensadvice.org.uk
14. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers.
15. Last year we helped over 2.7 million people face to face, by phone, email or web chat. For full service statistics see our monthly publication Advice trends.
16. Citizens Advice service staff are supported by more than 23,000 trained volunteers, working at over 2,500 service outlets across England and Wales.