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FCA Review of High Cost Credit & Rent to Own Sector

The FCA have just published an update on progress in their review of high-cost credit, indicating the further work they are doing and the timelines for this, as well as a separate update on their work on the rent-to-own sector.

Angela Clements, CEO of Fair for You, says in response:

“We welcome this report and the growing understanding that the FCA is developing in the damage done to lower income family households and communities by high cost credit. Our customers tell us that the health and well being of their whole family is improved when able to escape high cost credit and use affordable credit that is better designed for their needs, when the washing machine or fridge freezer breaks.”

Customers like Danielle, Community Support Worker & Carer for her eldest son, who says that with her 3 children under 7 she never sees the end of her washing, so when her washing machine broke she didn’t have the time or resources to get another.

“There’s no way I could lug my three children to a laundrette to do all this washing and sit there – it just would not be physically feasible to do that.”

She had tried buying second hand in the past but found that in the long run she was spending more, “you tend to find that the appliances don’t last as long as they would if they were new…you have a lot going wrong with them in a short space of time.”

But when she tried to pay in instalments from rent to own stores and using her auntie’s catalogue, her experience was ‘pretty shocking’:

“I did use Brighthouse for my old tumble dryer and I found that the repayment rate was very high, customer service pretty much nil, and if it broke you have to wait 3-4 weeks before they would sort anything out. In the end they then wanted money off me even though it was unusable, even though I was paying for the insurance and everything. I was paying for something that couldn’t be used and had people ringing up threatening that they were going to come round to my house and remove goods.”

It’s like legal loan sharks – the interest they charge is so extortionate. For my tumble dryer, if I wanted to buy it outright, it was £400 quid. Through Brighthouse it was £1200 with the insurance. It’s an extortionate rate and the thing is they will forever get away with it because people will use it.”

Danielle is on facebook groups that help deal with people’s debts and rent to own companies like Brighthouse and Buy as you View. She says that other member who have been in similar situations know that they are getting a bad deal, but that there was no alternative for them.

Since being with Fair for You, Danielle has bought a washing machine, tumble dryer, fridge freezer and, once she was a member of the Good Payers Club, a laptop. Fair for You has helped her family, and she says it’s had a positive impact on her children’s well-being because she has everything they need, “they don’t have to worry about it”.

When her washing machine broke down she was able to get another one within 3 days of submitting her application online.

“I find that for one, the Fair for You interest rates are lower. It’s easier to afford – you’re not asking for high sums of money per week. When I took out my loan I was offered several ways to repay the loan each week. That was good because I could set a budget that I could actually keep to. Having a new alternative puts you more at ease, knowing you don’t have to go to these high street stores paying a stupid amount of money.”

Neil Marshall, Senior Manager of the High-cost Credit Review Team at Financial Conduct Authority has said the following:

“We remain of the view that fundamental reform of this market may be necessary to protect consumers.

We continue to develop our understanding of the causes of harm to consumers in the markets for rent-to-own, home-collected credit and catalogue credit products. Today’s update sets out some specific issues of concern in these markets that we are focusing on. We recognise not only that some of this credit can have social utility, but also that there are limits to what can be achieved through traditional regulatory interventions alone.

We, therefore, set out a number of initiatives that we are taking forward to increase the awareness and availability of alternatives to high-cost credit, including where we are working with government and other bodies.”

You can find more information in their press release.

The update on high-cost credit is here and the update on rent-to-own work is here.


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