The City watchdog announced plans to crackdown on overdrafts, cap rent-to-own agreements and introduce stricter rules for doorstep lenders
HUNDREDS of thousands of people are set to save money from a cap on rip-off rent-to-own fees, thanks to The Sun.
Today, the City watchdog, the Financial Conduct Authority, announced plans to crack down on "exceptionally high" rent-to-own products, as well as a raft of changes to overdrafts and stricter rules for doorstep lenders.
In March, The Sun launched its Stop The Credit Rip-Off campaign to help the millions of families who fall prey to doorstep and legal high street loan sharks.
Today, the FCA said that it was now time to "intervene" and help the 400,000 rent-to-own customers.
Speaking about The Sun's campaign Andrew Bailey, chief executive of the city watchdog, said: It's absolutely right that you highlighted what is - in my view - a major problem.
"It's just not fair in society that people who are less well off and people who are vulnerable are having to pay so much for credit.
GEMMA Oaks, was a customer of a rent-to-own firm for 12 years after turning to them when she was desperate after moving house aged 24.
Gemma, now 36, said: “At the time I didn’t think about the interest rates or how long I would be paying for, I just thought about the weekly price and that it seemed affordable.”
Over the following years, Gemma also bought a TV, stereo, sofa, PlayStation 4, another fridge and two more tumble dryers.
At one point she was paying out £56 a week for her products – it was a major chunk of the weekly budget for the stay-at-home mum-of-four.
It was only last year, when her boyfriend moved in and they decided to clear some of their debt, that Gemma looked at all of her old agreements.
She said: “It was the first time I had actually looked at how much I was paying for each item – it was at least double what they would cost if I’d been able to buy the products outright.”
Gemma has now cleared all of her debt with the firm after her mum secured a loan to help her pay it off.
MPs from all parties have today welcomed the success of The Sun’s ";excellent campaign", and credited this website for the encouraging the FCA to finally take action.
Top Tory MP Robert Halfon said today: "Congratulations to The Sun for yet again standing up for working people who were being exploited by lenders."
Labour's John Mann added: "It’s a brilliant result for the Sun campaign, a boost to all consumers."
Lib Dem boss Vince Cable welcomed the proposed cap on rent-to-own - but warned the FCA has more work to do to protect consumers.
He said: "This has been an excellent campaign. Interest rates have never been lower, yet many borrowers have consistently ended up paying over the odds for their lending.
"There are some promising first steps here, but we must keep up the pressure."
Kelly Greenwood, 28, from Burnley turned to BrightHouse in 2011 after losing her salon business due to ill health.
Her washing machine broke down and she desperately needed a new one. In total she paid £1,286 for the machine. You can buy a similar model on the high street today for £550.
Kelly said: "I've never dealt with anyone so rude in my life. Every single week they would call me at 9am in the morning before I had even had a chance to pay, asking me 'are you paying today?'.
"Sometimes they'd even call me the day before and leave a voicemail.
"They even rang me five or six times when I was going through a really long labour with my eldest son Harry, who is now five."
Kelly ended up borrowing cash from family to pay off her debts.
Charlie Elphicke, a member of the Treasury select committee, has described our campaign as a "huge victory for consumers."
The FCA has seen examples where people have paid more than £1,500 for essentials such as an electric cooker, which could be bought on the high street for less than £300.
It will now consult on plans to introduce a cap on prices with the aim of introducing changes by April 2019.
Citizens Advice claims that a cap - similar to one implemented on payday loans in 2015 - could save consumers up to £62 million a year.
It is also considering banning the sale of extended warranties by rent-to-own firms such as BrightHouse and Perfect Home, which could save consumers up to £7.7million per year.
As part of these new rules, banks could be banned from charging extra for unarranged overdrafts, saving customers up to £140million per year.
Banks will also have to make it clearer to customers when they are in their overdraft.
HAVING large amounts of debt can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis - knowing your spending patterns is the first step to managing your money.
Work out your budget - by writing down your income and taking away your essential bills such as food and transport.
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs.
Pay off more than the minimum - If you’ve got credit card debts, aim to pay off more than the minimum amount each month to bring down your bill quicker.
Pay your most expensive credit card sooner - If you have more than one credit card and can’t pay the balance off in full each month, prioritise the most expensive card (the one with the highest interest rate).
Prioritise your debts - If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them.
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay.
Get free advice - If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further.
Groups such as Citizens Advice and National Debtline offer free advice and can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans.
Doorstep lenders will have a set of new rules to ensure they treat customers "fairly".
These include providing customers with comparative costs of taking out another loan on top of an existing one, so they can see the total cost upfront.
There are also plans to help customers of catalogue credit and store cards who are in persistent debt.
Complaints about high-cost credit, including rent-to-own firms and doorstep lenders, have soared to their highest-ever level this year - an increase of 40 per cent, according to new figures from the Financial Ombudsman Service.
High-cost credit is used by three million people in the UK.
Single-parents age 18 to 34 are three times more likely to have a high-cost loan such as a doorstep loan than the national average.
A cap on payday loans, which was introduced in 2015, has seen the amount of people with unmanageable debts more than halve, according to Citizens Advice.
It has not pushed more customers into financial difficulty.
Grandmother, Tracey Jeans, 50, who lives in Edinburgh, has been a customer of doorstep loan firm Provident for 32 years.
She currently has four loans totalling to £2,600 and she claims this leaves her with just £40 a week to pay bills as well as live on.
She said: “I come from a working-class family and they make it so easy to get into trouble.
“They didn’t ask about other loans. They didn’t ask if I had extra income. I think it's irresponsible of them.
“It’s so horrible. Sometimes I just don’t want to be here.”
A spokesperson from Provident said: "We lend responsibly, our customers know what they need to pay back as the amount they repay is fixed at the outset, and we work with them should their circumstances change and they find themselves in financial difficulties.
"We’re committed to doing the right thing by our customers."
It has not led to more people going to loan sharks.
Citizens Advice, which is also calling for a cap, claims it regularly see cases of customers who are struggling to keep up with doorstep loan payments.
Half of people with doorstep debt feel trapped.
Meanwhile, rent-to-own customers often continue to make payments, even if they can't afford them, because they are concerned about sending the items back.
The Sun wants the Financial Conduct Authority to put a cap on repayable costs for both rent-to-own and doorstep loans so customers never have to pay back more than double the amount they borrow.
We've featured customers such as the mum who spent six years paying back a £1,000 loan to "keep a roof over her family's head" when she split from her partner in 2012.
And the mum-of-two who was chased by BrightHouse for a washing machine repayment "while in labour".
Our calls for an end to the high-cost credit rip-off was also backed by Fabulous columnist Stacey Solomon, who revealed once felt "robbed" and "taken advantage of" after unknowingly signing up for a store card in a high street shop.
We revealed how rent-to-own firms charge up to FIVE times more for insurance than taking out a specialist gadget policy and filmed a doorstep lender offering a dad a loan that would have left him with £1 a week to live on.
We provided advice on the alternatives to high cost credit, explained the steps you can take to get out of debt and revealed how you might be able to get a refund on a doorstep loan or high cost credit agreement.
Mum-of-two Charlene Telford from Tamworth, Staffordshire, is now unable to get a mortgage due to her damaged credit history.
The now 32-year-old first took out a doorstep loan in 2011 to help tide her over the expensive Christmas period.
Over five years she ended up taking out more loans - in total she borrowed £1,600 but this added up to £2,583 once all the interest and charged were added on.
She said: "I regret it so much. I didn’t realise until The Sun’s campaign that the interest rates were so high and what that really meant.”
Lucie Russell, co-founder of The Big Issue and director of the Fair By Design anti-poverty campaign, credited The Sun's campaign for the FCA's actions.
She said: "The Sun's really powerful stories of individuals and families locked into debt through high-cost credit and buying products from rent to own stores like Brighthouse at far more than they would cost if they had the money to buy them outright has really brought alive the debt trap that so many people on low incomes fall into."
But some of the measures announced today do not go far enough.
MoneySavingExpert.com founder Martin Lewis called for a cap to be extended to all forms of short-term high-cost loans.
He said: "Regardless of what type it is, a simple rule like ‘no one should pay more interest than the amount they borrowed’ for lending less than a year should be looked at."
Gillian Guy, chief executive from Citizens Advice, said: “The FCA’s willingness to cap rent-to-own credit is good news for the thousands of people who rely on it to cover essential items.
“It shows they’re prepared to be decisive, but that makes it even more disappointing that they haven’t extended these measures to the doorstep lending market, which 1.6 million people use to help make ends meet.
HERE'S a summary of everything that will now be consulted on and could come into effect as soon as April 2019:
Rent-to-own
Doorstep loans
Overdrafts
Catalogue credit and store cards
“The FCA should reconsider their decision not to consult on a cap in this market. If they fail to act to protect these consumers, the ball will be firmly in the government’s court.
"It must show it is genuine in its commitment to making markets work for everyone, and put pressure on the regulator or legislate to give people the protection they need.”
Mike Sweetland, boss rent-to-own company Perfect Home, said it would "assist the FCA during its consultation on the possibility of a cap on rent to own prices".
He added that the firm is "committed to serving customers".
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