The UK’s 400,000 rent-to-own prospects want defending from excessive rates of interest and late cost charges, in keeping with a number one charity.
Residents Recommendation has referred to as on the Monetary Conduct Authority (FCA) to introduce a cap, much like that on payday loans, which may save customers paying as much as £62m in repayments on rent-to-own merchandise.
Lease-to-own corporations promote customers home goods – similar to home equipment, furnishings and electronics – by rent buy agreements.
About 400,000 folks have rent-to-own debt within the UK.
Loans can have an annual proportion price (APR) as excessive as 99.9% over the course of three years, in addition to punitive late cost charges that add to the unique value, Residents Recommendation mentioned.
Final week, the FCA advised Excellent Dwelling, one the nation’s largest rent-to-own retailers, to pay again £2.1m to 37,000 prospects, by money funds and writing off money owed.
One other retailer BrightHouse, which has additionally confronted a giant payout to mistreated prospects, advised the Treasury Committee’s family finance inquiry that about half of its rent-to-buy agreements don’t outcome within the buyer proudly owning the product they’re paying for.
Gillian Man, chief govt of Residents Recommendation, mentioned the Metropolis watchdog’s interventions present there are “vital” issues within the sector.
“The FCA must put in place measures to guard folks from costly borrowing and spiralling money owed. What can look like a lifeline should not grow to be a tripwire.
“The proof is obvious – the cap on the payday lending market secured a a lot better deal for customers.”
The charity says additionally it is involved that affordability checks will not be selecting up on customers’ means to maintain up with repayments.
“One individual we helped was referred to Residents Recommendation as she owed greater than £9,000 to a rent-to-own supplier by 12 rent buy agreements,” the charity mentioned.
“She was unable to work attributable to her long-term well being circumstances and was struggling to fulfill different payments similar to hire, council tax and meals.”
Residents Recommendation is asking the FCA to offer guidelines for lenders, together with checking proof of revenue.
Whereas many rent-to-own retailers do undertake affordability checks, there aren’t any guidelines on what these ought to embody.