The Financial Conduct Authority (FCA) will introduce a price cap intended to protect vulnerable customers in the UK in the rent-to-own (RTO) sector.

The price cap comes from FCA concerns over the excessive pricing of rent-to-own products, potentially exploited against people who may not fully understand the payment structure. The cap will be introduced from 1 April 2019 and is estimated to save consumers in the UK up to £22.7m a year.

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In the policy statement, the FCA confirmed details such as setting a total credit cap of 100%, introducing a requirement on firms to benchmark base prices against the prices charged by three mainstream retailers, and preventing firms increasing their prices for insurance premiums to recoup lost revenue from the price cap​​​​​.

A 100% price cap would mean that consumers do not pay credit costs (total interest payable) that are higher than the price of the product, including delivery and installation.

Christopher Woolard, executive director of strategy and competition at the FCA, said: ”The actions we are taking today build on our wider work on high-cost credit and will save some of the most vulnerable consumers in the UK millions of pounds.

“This price cap has been designed to target some of the most excessive prices in the rent-to-own market. The measures come into force from 1 April and we will be keeping a close watch on firms’ compliance. We will review the impact of the price cap in 2020 and if further work is needed to protect these customers we are prepared to intervene again.”

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The FCA found that RTO consumers are paying in total more than four times the retail price of some goods. The FCA has committed to carry out a further review to assess the impact of the price cap, taking place in April 2020.

This month the FCA has confirmed that the Financial Ombudsman Service (FOS) will soon require financial services firms to pay significantly more compensation to consumers and businesses.

As of 1 April, the current limit of £150,000 will increase to £350,000 for complaints by firms on or after that date. Complaints made to the FOS concerning actions before 1 April will increase to £160,000.