The CfRC has today submitted its response to the FCA concerning its proposals to introduce price controls in the Rent to Own market. The full response can be downloaded here.
We very much welcome the FCA’s announcement to introduce price controls in view of the considerable harm being caused in this sector, and the very low incomes that customers have. However, whilst welcoming the overall intention, we have serious concerns that the proposals for price control will not deliver any significant improvement for many Rent to Own customers. We go into considerable detail regarding this in the submission.
To address the problem we have made five headline recommendations concerning possible FCA rules:
- That base price benchmarking be introduced from April this year, but that the number of retail comparators be increased to 5, and that no catalogue retailers be included in this. This should be an interim measure. In addition to this that the FCA needs to conduct a more thorough investigation of alternative approaches to base price control over the course of the next 12 months, with much greater consumer agency involvement in this study. It should then review its approach alongside the impact of the retail benchmarking of that year;
- That default charges be included in the credit cap of 100% of base price;
- That much more rigorous rules will be required to ensure the impacts of the cap are not avoided in respect of theft and accidental insurance. We also recommend that measures be taken to address the poor value of these products;
- That more detailed work is required to address the problem of ‘comparable prices’ and consumer agencies should be engaged in this; and
- That the FCA proposals for supervision of price controls in this market are not fit for purpose. Again, we believe that the FCA should engage with consumer groups concerning this issue.
We have also highlighted ways in which the FCA could help develop more affordable alternatives to Rent to Own, and other high cost lenders, and have called on it to work with Government to fund a ‘Project Innovate Challenge’, with the active engagement of the public, voluntary, and FinTech sectors – as well as existing affordable credit providers – for this purpose. Concept development, co-design with target users, and product and service testing should be funded and the FCA should provide access to its Regulatory Sandbox for trials of the most promising proposals to take place.
Commenting on the submission, CfRC Director, Damon Gibbons, said:
“The FCA needs to ‘up its game’ considerably if it is to deliver a fair deal for low income customers using Rent to Own. Its current proposals risk legitimising the rip-off prices that firms are currently charging, and there does not appear to have been a serious consideration of alternative approaches. We hope that the FCA will respond positively to our submission and look forward to discussing our alternative proposals with them.”