The Financial Conduct Authority has proposed a cap on costs of rent-to-own goods, (previously known as hire-purchase), to prevent extortionate charges from being made to purchasers.
Rent-to-own retailers charge monthly payments to customers until they have covered the full charge of the item they are purchasing, often white goods or furniture. The customers are often less well off, and unable to afford £250 for a new cooker (for example) but may end up paying £600, with the interest rates that are charged.
The proposals are firstly, to cap the interest rates, so that the purchaser would pay no more in additional charges and interest than the cost of the product itself. Eg. for a £300 cooker, the purchaser would pay no more than £600. This does not include warranties and insurance, however, which could take the price up further than the cap.
The second part of the proposal is to limit the cost of the goods themselves. The retailer would be limited to the median cost of the item if purchased elsewhere, ie. the middle price.
Charities in the sector have broadly welcomed the news, but there is still a feeling that 100% markup is rather high.
For more, see the BBC website.