This Evaluation Paper summarises our evaluation of our 2019 price cap intervention in the rent-to-own market (RTO). Evaluation is part of our Mission’s decision-making framework. Testing the effectiveness of our remedies helps us make better decisions.
Read Evaluation Paper 20/1 (PDF)[1]
We committed to evaluating the impact of our price cap rules to protect vulnerable consumers when we announced our RTO intervention[2] in March 2019.
We wanted our price cap to bring down prices of RTO agreements where the costs to consumers were very high compared with other retailers’ prices. Work at the time of our intervention showed that RTO consumers were particularly vulnerable.
Following our commitment at the time of intervention[3], restated on our website[4] earlier this year, we have evaluated 2 key aspects of the RTO price cap:
- The effect of the price cap’s benchmarking requirements on product prices. We expected the benchmarking requirement to reduce the gap between RTO base prices and those of products sold by other retailers.
- The effectiveness of our rules preventing revenue recovery through insurance, arrears and other charges.
To evaluate the effect of product benchmarking we:
- undertook a price comparison between RTO and high street retailers before and after the intervention
- used statistical techniques to account for the fact that other factors may have affected prices over the period
- reviewed qualitative evidence to investigate the effectiveness of the price cap’s anti-avoidance measures
Our evaluation’s results estimate that the price cap’s benchmarking requirements have brought RTO prices much closer to the high-street average. We have seen no evidence to suggest that RTO firms raised the prices of add-ons and connected goods or services to recoup revenue lost because of the price cap.
Read more about the effect of our intervention in our Evaluation Paper 20/1 (PDF)[1].
Who this applies to
- Rent-to-own firms
- Consumer groups and advocates
Next steps
We welcome views on this Evaluation Paper.
You can send them to us by email at: [email protected] or in writing to: Economic and Financial Analysis Department, Strategy & Competition Division, Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.