November 23, 2018
White goods sold on buy-now-pay-later deals are under the spotlight following revelations that cash-strapped rent-to-own (RTO) customers are paying in some cases three times the average retail price for their fridge or cooker.
The financial regulator, the Financial Conduct Authority (FCA), said this week that while RTO customers are the most financially under-pressure, with just a third in work, they are being ripped off by high product prices, high interest rate charges and add-ons, like extended warranties from hire purchase retailers.
The FCA said RTO customer may pay £800 over three years for a fridge that would cost £260 on the High Street. In some cases, prices are four or even five times the median retail price.
As a result, the FCA is proposing to introduce a price cap from April 2019 that will dramatically limit the amount of interest the buy-to-rent retail sector can charge their customers and bring down RTO prices to a maximum of 10% above mainstream prices.
The FCA used a series of examples demonstrating potential savings for RTO customers under its proposed price cap.
The regulator said someone who buys a Hotpoint 60cm gas cooker on a rent-to-own basis could save £606 over a three-year period, or £3.88 a week.
Meanwhile, an RTO purchaser of a 60cm Indesit fridge-freezer could save £360 over three years, or £2.31 a week.
Overall, the FCA said it estimated that consumers who continue to use RTO could save almost £18 million a year as a result of the proposed price cap.
Brighthouse is one of the most well-known appliance retailers in the rent-to-own sector.
In a statement, the firm said: “BrightHouse has been working closely and constructively with the FCA over a number of years. This comprehensive process has led to many changes in the way we operate as a business and serve our customers.
“We’re going to carefully consider today’s announcement, while continuing to offer those excluded from mainstream credit ways to get the household goods they need.”
Hotpoint and Indesit declined to comment, while Beko and Samsung, which both have a number of appliances listed on the Brighthouse website, was unavailable for comment.
Have something to say? Email the editor