ABCUL responds to FCA announcements on Rent to Own and affordable credit
23 Nov 18
This week saw the Financial Conduct Authority (FCA) announce a package of measures to address consumer detriment in the Rent-to-Own (RTO) market. The primary measure was an overall price cap. The package also notes measures to promote alternatives, such as credit unions.
The RTO market serves some of the poorest and most financially-vulnerable consumers enabling them to buy white goods and home furnishings on an affordable pay-weekly basis. However, through a combination of inflated prices, interest and additional insurance covers, borrowers can end up paying 4 or 5 times the cost of the same goods elsewhere on the highstreet.
Commenting on the package, ABCUL Head of Policy and Communications, Matt Bland, said: “Our members have long been incensed by the activities of Rent-to-Own retailers and the exorbitant costs they charge to some of the poorest members of society. While they offer affordable repayment schedules of a few pounds a week, the long-term cost of goods compared to what those with cash up front pay is eye-watering.
“So ABCUL and our members applaud this week’s announcement from the Financial Conduct Authority which will see the levels of unsustainable debt and the rip off practices of Rent-to-Own curtailed in some of the UK’s poorest communities. The similar measures taken in the payday lending market have been a huge success and it’s great to see this extended into the Rent-to-Own market.
“Many credit unions offer affordable alternative schemes for the purchase of white goods and home furnishings providing a cheaper, more ethical way for people to access the things they need to make their house a home. Be that simply by offering small sum cash loans for borrowers to spend in the mainstream stores or, in an increasing number of cases, through formal partnerships with furniture and white goods retailers.
“With that in mind, it was also great to see the FCA set out a range of areas in which it is taking steps to support credit unions and other affordable alternatives to expand and play an every greater role in disrupting high-cost credit. We look forward to exploring these with the FCA. We also believe that there is more that the FCA could do to support credit unions to expand in areas not covered in the consultation and we will be setting these out in our engagement with the FCA proposals.”