Nick Smith MP has called for an industry watchdog to cap interest rates in the rent-to-own sector and put £62m back in families’ pockets.
The latest report from the Citizens Advice Bureau reveals that more than half of customers who buy goods from companies such as BrightHouse end up needing to take on more debt to meet the cost of repayments.
CAB have called on the Financial Conduct Authority, who regulate the sector, to copy their successful cap on payday loans alongside minimising late fees to no more than £15.
The Blaenau Gwent MP has taken their findings to the FCA and called on them to defy industry pressure to deliver for consumers.
In a letter to the FCA Mr Smith writes: “Possibly the most heart-breaking finding about the current state of the rent-to-own market is that only half of rent-to-own agreements actually reach completion: the other half involve people paying for goods they never end up owning.
“Citizens Advice estimate that a cap in the rent-to-own sector could save consumers £62 million. That would be £62 million that could go back into the pockets of hardworking families in constituencies such as Blaenau Gwent and across the country.”
Mr Smith has previously campaigned for ethical credit options such as credit unions when he revealed the payday loan company Wonga was lending people in Blaenau Gwent more than £1m a year.
He has been putting pressure on the Government to give the FCA the powers needed to regulate the sector after a BrightHouse shop in Ebbw Vale was found to be charging a total of £780 for a £280 cot.
Citizens Advice helped 5,127 people with rent-to-own debts in 2017, with their evidence suggesting they are often single parents, almost never have a mortgage or own their home, and a large number are out of work due to poor health. Commonly, they hold more than £8,000 of debt.