A LONG-time campaigner for tougher regulation of rent-to-own shops, Blaenau Gwent MP Nick Smith has welcomed plans to cap the rate of interest these businesses can charge.
Rent-to-own items are paid for in weekly or monthly instalments, with customers ultimately paying far in excess of the actual value of the goods. A rent-to-own customer could pay £800 over three years for a fridge that would cost £260 on the high street.
Yesterday the Financial Conduct Authority announced plans to place a 100 per cent credit cap on rent-to-own firms, meaning that, as of next April, customers will not pay more than twice the base price of a product, including delivery and installation.
In December 2016 Mr Smith spearheaded calls to protect families who rely on rent-to-own firms to furnish their homes, raising the issue during Prime Minister’s Questions.
Mr Smith called on Theresa May to introduce a cap on interest rates. This question came off the back of data showing that there had been a steep rise in the amount of people struggling to keep up payments in Blaenau Gwent.
Since then Mr Smith has continually pressed for action over this issue, calling for the Government and Financial Conduct Authority to hit rent-to-own firms with the same sort of interest rate cap used to curb payday loan firms.
Mr Smith said: “I have been pressing for action over this issue for a long time and I welcome this announcement.
“These measures are long-overdue. A credit cap will prevent vulnerable families from falling victim to spiraling costs and escalating debt.
“This has never been about people living beyond their means or spending frivolously, it is about people who need to buy a cooker or a fridge or a cot for their baby.
“If someone has no option other than going down the rent-to-own route it is unacceptable that they can end up paying hundreds of pounds more than the item actually costs.”