LONDON (Reuters) - Rent-to-own credit is “very expensive,” and Britain’s markets watchdog is looking at all options including a possible cap on the cost to stop consumers from being ripped off, a senior watchdog official said on Tuesday.
The Financial Conduct Authority (FCA) is due to publish the conclusions of a review into high-cost credit later this month, Christopher Woolard, its executive director of strategy and competition, told parliament’s Treasury Select Committee.
The lawmakers urged him to stop people “paying through the nose” for rent-to-own credit.
This is a form of hire purchase whereby people have use of household goods such as fridges and washing machines while paying for them - plus interest - in regular instalments, followed by an option to purchase outright.
Woolard was pressed several times on whether the watchdog would impose caps on rent-to-own credit, given signs that a cap introduced on payday loan interest rates in January 2015 has not created huge problems.
He indicated that action of some sort is likely.
“All the tools are on the table as far as we are concerned,” Woolard said.
The cost of using rent-to-own to buy goods was “very expensive indeed”, even compared with other forms of high cost credit, he said.
There was no appreciable evidence that a cap on payday loan interest charges, which has shrunk the sector, has sent consumers into the arms of illegal loan sharks.
But at the same time, more people appear not to be paying utility bills and local government taxes, Woolard said.
“We are seeing people change their habits,” he added.
John Glen, a junior finance minister, said he was sympathetic to further, well-evidenced intervention in respect of credit that is exploitative of individuals.
“I want to make absolutely sure that whatever we do doesn’t have an adverse consequence,” Glen said.
Last October, the FCA forced Britain’s biggest rent-to-own company BrightHouse to pay 14.8 million pounds to nearly a quarter of a million customers it failed to treat properly.
Citizens Advice, which advises people about dealing with debt, said only half of all rent-to-own agreements are completed, leaving customers paying large sums for goods that they often do not get to keep.
Reporting by Huw Jones; Editing by Mark Potter