A price cap on the cost of buying household goods through rent-to-own deals will be introduced next month, the City watchdog has confirmed.
The Financial Conduct Authority (FCA), which announced a crackdown on the sector in November last year, has set a price cap of 100 per cent on the interest customers can be charged in a move than could save customers hundreds of pounds.
Some rent-to-own consumers were found to have paid more than four times the retail amount for items such as televisions and white goods.
Rent-to-own firms will also have to meet benchmark base prices set by three mainstream retailers, and will be banned from increasing insurance premium prices to recoup lost revenue from the price cap.
FCA executive director of strategy and competition Christopher Woolard said: “The actions we are taking today build on our wider work on high-cost credit and will save some of the most vulnerable consumers in the UK millions of pounds.
“This price cap has been designed to target some of the most excessive prices in the rent-to-own market."
The measures will be introduced from 1 April and the FCA will review the impact of the new rules next year.
Citizens Advice chief executive Gillian Guy said: "This cap will stop people from paying over the odds compared to similar products on the high street and falling into further debt when costs spiral out of control. Our evidence has repeatedly shown well-designed caps can reduce the harm high-cost credit can cause."