MPs demand end to ‘rip-off’ tactics of rent-to-own shopsComments Off on MPs demand end to ‘rip-off’ tactics of rent-to-own shops
Stores such as BrightHouse, PerfectHome and Buy as you View have been accused by the All Party Parliamentary Group on Debt and Personal Finance of forcing people to take out expensive warranties and insurance when buying fridges or sofas through high street stores.
MPs have also accused the stores of possibly misselling insurance and services people don’t need.
They are demanding the introduction of ‘health warnings’ to ensure customers are aware of the total cost of agreements and the risks of repossession.
Vulnerable customers should also be protected against losing essential items that they have mostly paid for, the MPs said.
Their research uncovered the shocking fact that more than a fifth of customers in arrears have goods taken back by the firms.
Yvonne Fovargue Chair of the APPG said: “Rent to Own Stores charge inflated prices to some of the poorest people in the country.
“Customers are often obliged to take out additional warranties and insurance, as a result paying several times the true value of the goods. Many customers simply can’t keep up and the goods are taken back to be sold again.”
Rent to Own firms specialise in supplying furniture, TVs and basic household goods such as washing machines to low-income households.
The three main firms have and estimated combined customer base of more than 350,000 households.
The high street firms offers customers – many of whom cannot get normal loans – weekly payment plans on household products such as microwaves and televisions.
The MPs investigation revealed APRs as high as 94.7% as well as charges for bolt-on cover that double the cost of essential household goods.
“Rent-to-own firms have been cashing in on people’s financial struggles for more than a decade,” Ms Fovargue said. “The FCA needs to act now to stop RTO customers from being ripped off.”
The Committee has also demanded that expensive warranties be banned from rent-to-own agreements.
It wants the Financial Conduct Authority to investigate the possible insurance mis-selling and whether people who use rent-to-own have been sold services they didn’t need.
The FCA took over regulation of the consumer credit sector in April 2014. RTO firms have “interim permissions” but will have to assure the regulator that their business models are not harmful to consumers in order to continue to trade.
The FCA announced at an evidence session of the APPG in December that concerns about the sector meant it would bring forward this assessment of firms from spring 2016 to summer 2015.
“The APPG is writing to the chief executive of the FCA, Martin Wheatley, to ask him to adopt our blueprint for reform,” said Ms Fovargue. “The regulator should act urgently to protect customers.”