It is not difficult to see why Rent to Own is popular with many low income families. Stores like BrightHouse are attractive and they provide customers with many of the essentials of modern living, such as washing machines, sofas and televisions.
These are things that many of us take for granted, but for those on low incomes they can seem frustratingly out of reach most of the time.
But as the All Party Parliamentary Group of Debt and Personal Finance which I Chair found in its inquiry into the Rent to Own Market there are downsides to this, and for the most part it comes down to money.
Rent to Own is an expensive way to buy goods – so expensive that many customers never even get to own the goods they pay for, but see them repossessed for non-payment as their arrears build up.
Not only are the prices of Rent to Own goods inflated, but customers are also often required to pay an additional premium for a bundle of services which they almost certainly don’t want or need, such as extended warranties and insurance. With a high interest rate added to that, customers of Rent to Own can easily find themselves paying three times as much for goods and services than they would from more conventional retail outlets, whether on the High Street or online.
But all too often the customer has no real choice but to take the Rent to Own route, despite the eye watering prices. The APPG has been pressing the regulator, the FCA, to curb the worst excesses of the market, including the compulsory bundling of services, the lack of transparency over prices, and the absence of effective forbearance policies. We are waiting to hear what the new requirements on the sector will be, and we hope they will be stringent. However, whatever happens the customers of Rent to Own will continue to pay inflated prices for the goods they buy and receive poor value for money. That is, until they can find a viable alternative.
Which is why I am so pleased to see this report from the Financial Inclusion Centre. In many ways it picks up from where our inquiry left off, looking at some of the alternatives to Rent to Own provided by social enterprises. Some of these are fledgling enterprises, yet to fully establish themselves in the retail landscape. They are not all the same and there is a real sense that the way they operate – how they raise capital, form partnerships or attract customers – reflects local experiences and needs. But they do have one thing in common, they want to break the stranglehold of these firms, by helping people on low incomes to buy the goods they want and need without paying a poverty premium.
This report is very much a starting point on developing viable alternatives to Rent to Own and I am the first to concede that there is no magic bullet. So we need to work together – MPs, local authorities, social landlords, voluntary organisations, social lenders - to ensure that people have access to essential goods at a price they can truly afford.