The FCA, who regulates amongst other things consumer credit in the UK, announced today that it may impose a price cap on high street rent-to-own companies, such as BrightHouse and Perfect Home. We’ve already blogged about the high costs of buying typical household appliances from this type of company:
- Do rent to buy retailers make financial sense?
- Is high street rent to own a sensible financial choice?
The FCA stated that this review is part of a wider review of high cost consumer credit that also encompasses unauthorised overdrafts. It’s initial analysis of the UK high cost short term credit market led to a price cap being applied to payday loans at the start of 2015. In the 18 months since that cap was put in place the number of payday loans issued has reduced by 800,000 with far fewer people falling into arrears and defaulting on their loan.
The Review of Rent-to-Own is very Welcome
The UK rent-to-own sector has grown considerably in recent years. There are now hundreds of stores spread across UK high streets and it is estimated that 400,000 people use this type of firm. BrightHouse, the largest company in this market, says it services over 270,000 itself.
Our analysis suggests that a product bought in this manner could cost up to 3 times what it would cost if you pay cash. This is because of the high interest rates applied and also charges for additional warranties and insurance.
Amigo Store Joins Solution Loans
Amigo Loans, who have worked with Solution Loans for many years, launched their Amigo Store earlier in 2016. Amigo Store aims to undermine the typical rent-to-own company by offering an online alternative based upon guarantor loan credit. Their arrival into the market is welcome as it should help to shake up the industry by providing a strong degree of competition.
Find out more about Amigo Store and how to benefit from it.