CONC 5B Cost cap for rent-to-own agreements

This chapter applies:

1. (1)

   to a RTO firm with respect to any RTO agreement that has been entered into on or after one of the following dates:

   1. (a)

      for a RTO agreement that relates to goods that have not been offered or made available to consumers by the RTO firm immediately before 1 April 2019, that date; or

   2. (b)

      for a RTO agreement that relates to any other goods, the earliest of the following dates:

      1. (i)

         any date on or after 1 April 2019 on which the RTO firm has increased the cash price of the goods to which the agreement relates; or

      2. (ii)

         1 July 2019.

2. (2)

   to a RTO firm with respect to an arrangement to vary or supplement an existing RTO agreement so as to supply one or more additional or different goods under that agreement, that has been entered into on or after one of the following dates:

   1. (a)

      for an arrangement that relates to additional or different goods that have not been offered or made available to consumers by the RTO firm immediately before 1 April 2019, that date; or

   2. (b)

      for an arrangement that relates to any other additional or different goods, the earliest of the following dates:

      1. (i)

         any date on or after 1 April 2019 on which the RTO firm has increased the cash price of the additional or different goods; or

      2. (ii)

         1 July 2019.

3. (3)

   Where an RTO firm is a micro-enterprise the references in CONC 5B.1.1R(1)(b)(ii) and CONC 5B.1.1R(2)(b)(ii) to 1 July 2019 are to be read instead as references to 1 October 2019, and all other references to those provisions are to be read accordingly.

A RTO firm must not enter into, vary or supplement a RTO agreement where the cash price of the goods (which are not second-hand goods) supplied under the agreement exceeds the benchmarked price.

Except where CONC 5B.2.4R(1) applies, a RTO firm must establish the benchmarked price by taking the following steps:

1. (1)

   The RTO firm must find three benchmarking cash prices.

2. (2)

   A benchmarking cash price:

   1. (a)

      must be a cash price at which the goods are currently offered or available for sale to consumers in the United Kingdom, but not by another RTO firm or an associate of the RTO firm establishing the benchmarked price;

   2. (b)

      save where paragraph (3) applies, must be for the same goods as the RTO firm intends to supply under the RTO agreement;

   3. (c)

      where paragraph (3) applies, must be for goods comparable, by reference to any features or characteristics of the goods that might reasonably be expected to affect the cash price, to those which the RTO firm intends to supply under the RTO agreement; and

   4. (d)

      may be a cash price charged by a retail revolving credit business provided the other two benchmarking cash prices are not.

3. (3)

   This paragraph applies where, following a reasonable search of the market, the RTO firm has been unable to find three benchmarking cash prices that satisfy the requirements in paragraph (2)(b).

4. (4)

   Where paragraph (2)(d) applies, the median of the three benchmarking cash prices is the benchmarked price.

5. (5)

   Where paragraph (2)(d) does not apply, the highest of the three benchmarking cash prices is the benchmarked price.

6. (6)

   Each item of goods being supplied under one RTO agreement must be benchmarked individually except where the RTO firm is offering a bundle of goods to be supplied for one cash price.

7. (7)

   Except where paragraph (8) applies, where a bundle of goods is being supplied under one RTO agreement for one cash price, the RTO firm must benchmark against other goods supplied as bundles, in the way described in paragraphs (1) and (2) above.

8. (8)

   This paragraph applies where:

   1. (a)

      a RTO firm wishes to supply a bundle of goods under one RTO agreement for one cash price;

   2. (b)

      the RTO firm has been unable to find three benchmarking cash prices based on the same bundle of goods; and

   3. (c)

      any comparable bundle of goods that the RTO firm would need to rely upon to establish a benchmarked price contains one or more goods of significantly different value from those in the bundle that the RTO firm wishes to supply.

9. (9)

   Where paragraph (8) applies the RTO firm must:

   1. (a)

      separately benchmark each item in accordance with paragraphs (1) and (2) above; and

   2. (b)

      set separate cash prices for each of those items.

10. (10)

    Where a RTO firm reasonably considers that a particular cash price is so far outside the range of cash prices it has found that no reasonably-informed UK consumer is likely to pay that cash price, the RTO firm must not use that cash price as a benchmarking price.

11. (11)

    In assessing whether a particular cash price is so far outside the range of cash prices it has found that no reasonably-informed UK consumer is likely to pay that cash price a RTO firm must, in particular, consider:

    1. (a)

       the difference between that cash price and the other two benchmarking cash prices the RTO firm has found;

    2. (b)

       evidence suggesting that the cash price is out of date, for example where the item is no longer in stock; and

    3. (c)

       any other factors suggesting that the seller does not expect to sell the goods at that cash price.

1. (1)

   This paragraph applies to goods:

   1. (a)

      that will not be sold exclusively by a RTO firm;

   2. (b)

      that are not currently offered for sale on the UK market; and

   3. (c)

      that have features so technologically different from those of goods currently for sale on the UK market that it is not possible to identify goods that are genuinely comparable.

2. (2)

   Where paragraph (1) applies, a RTO firm must establish a benchmarked price for the goods that is reasonable, having regard in particular to:

   1. (a)

      any price at which the goods have been advertised in the United Kingdom prior to launch;

   2. (b)

      any recommended retail price for the goods;

   3. (c)

      any other recommended price for the goods that has been provided by a supplier;

   4. (d)

      where the goods replace an existing model:

      1. (i)

         the cash price at which the existing model was first offered for sale in the United Kingdom; and

      2. (ii)

         where the existing model replaced a previous model, the difference between the cash price of the previous model and the cash price of the existing model at the time the existing model was first offered for sale.

A RTO firm must establish the benchmarked price for goods:

1. (1)

   by the time it offers to supply the goods under a RTO agreement for the first time;

2. (2)

   by the time it increases the cash price at which it offers to supply the goods under a RTO agreement;

3. (3)

   where a benchmarked price has been established under CONC 5B.2.4R(2), by the end of the period of 3 months that begins on the day on which the goods were first offered for sale on the UK market; and

4. (4)

   no later than 12 months after the last time it established a benchmarked price in accordance with any provision of this rule.

A RTO firm must not enter into:

1. (1)

   a RTO agreement;

2. (2)

   an arrangement to vary or supplement an existing RTO agreement by the supply of additional or different goods under that agreement; or

3. (3)

   a connected agreement,

where the cash price for delivery and/or the cash price for installation exceeds the relevant benchmarked price.

1. (1)

   A RTO firm must establish the benchmarked price for delivery or installation of goods supplied under a RTO agreement by selecting the cash prices charged for, as relevant, delivery or installation of the same category of goods by three retailers (who must not include a RTO firm or an associate of the RTO firm establishing the benchmarked price) and taking the median of those prices.

2. (2)

   A RTO firm must establish the benchmarked price for delivery and/or installation:

   1. (a)

      by the time it offers to supply the relevant goods under a RTO agreement for the first time;

   2. (b)

      by the time it increases the cash price at which it offers to provide delivery or installation in relation to goods supplied under a RTO agreement; and

   3. (c)

      no later than 12 months after the last time it established a benchmarked price in accordance with any provision of this rule.

1. (1)

   A RTO firm must not enter into a RTO agreement for goods that provides for the payment by the borrower of one or more charges that, alone or in combination with any other charge under the RTO agreement or a connected agreement, exceed or are capable of exceeding the cash price of the goods plus, where relevant:

   1. (a)

      the cash price for delivery;

   2. (b)

      the cash price for installation; and

   3. (c)

      the cash price of goods or services supplied under a connected agreement.

2. (2)

   A RTO firm must not enter into an arrangement to vary or supplement a RTO agreement by the supply of additional or different goods, where the arrangement provides for the payment by the borrower, in relation to the additional or different goods, of one or more charges that, alone or in combination with any other charge under the RTO agreement or a connected agreement, exceed or are capable of exceeding the cash price of the additional or different goods supplied, plus, where relevant:

   1. (a)

      the cash price for delivery;

   2. (b)

      the cash price for installation; and

   3. (c)

      the cash price of goods or services supplied by a connected agreement.

RTO firms must not attempt to recover revenue that may be lost due to compliance with the total cost of credit cap rules through the price for other goods or services provided by the RTO firm in connection with a RTO agreement.

A RTO firm must:

1. (1)

   establish, implement and maintain clear and effective policies and procedures to enable it to establish benchmarked prices under CONC 5B.2.2R, CONC 5B.2.4R and CONC 5B.2.8R;

2. (2)

   set out the policies and procedures in (1) in writing, and have them approved by its governing body or senior personnel;

3. (3)

   assess and periodically review:

   1. (a)

      the effectiveness of the policies and procedures in (1); and

   2. (b)

      the RTO firm’s compliance with those policies and procedures and with its obligations under CONC 5B; and

4. (4)

   in the light of (3), take appropriate measures to address any deficiencies in the policies and procedures or in the RTO firm’s compliance with its obligations.

Where a RTO firm enters into a RTO agreement in contravention of a rule in CONC 5B.2.11R:

1. (1)

   an obligation in or under a RTO agreement that requires the borrower to pay charges which in total would exceed the total cost of credit cap, is unenforceable in its entirety; and

2. (2)

   the borrower is entitled to recover any amount paid in charges. If that is the case, at the written or oral request of the borrower, the RTO firm must, as soon as reasonably practicable following the request and in any case within 7 days of the request, repay to the borrower any charges paid by the borrower under or in connection with the RTO agreement.

In this chapter, words or terms used in CONC 5B which appear in bold (other than headings and titles) have the following meanings:

1. (1)

   “associate” means any person whose business or domestic relationship with a RTO firm, whether directly or indirectly, might reasonably be expected to give rise to a community of interest between them which may involve a conflict of interest in dealings with consumers;

2. (2)

   “benchmarked price” means a price calculated in accordance with CONC 5B.2.2R, CONC 5B.2.4R or CONC 5B.2.8R;

3. (3)

   “charge” is a charge payable, by way of interest or otherwise, in connection with the provision of credit under a RTO agreement, whether or not the agreement itself makes provision for this, and whether or not the person to whom it is payable is a party to the RTO agreement or an authorised person, and which would form part of the total charge for credit;

4. (4)

   “connected agreement” is an agreement:

   1. (a)

      for delivery and/or installation of goods supplied under a RTO agreement; and/or

   2. (b)

      which provides for a payment in connection with a RTO agreement where that payment would form part of the total charge for credit;

5. (5)

   “household goods” means goods which are normally found in a residential home and includes but is not limited to furniture, kitchen appliances (such as cookers, washing machines and dryers, microwaves, refrigerators and freezers), electronic and technological goods (such as vacuum cleaners, televisions and accessories, music systems and accessories, games consoles and accessories, computers, tablets and accessories, and mobile phones);

6. (6)

   “retail revolving credit business” means a person:

   1. (a)

      whose business comprises or includes the sale of goods financed by a form of retail revolving credit; and

   2. (b)

      whose business does not comprise or include the sale of such goods from one or more physical stores.

7. (7)

   “RTO agreement” means a regulated credit agreement which is a hire-purchase or conditional sale agreement that supplies one or more items of household goods, but excluding those in relation to goods acquired principally for business purposes; and

8. (8)

   “RTO firm” means a firm whose business comprises or includes the regulated activity of entering into a regulated credit agreement as lender and/or exercising or having the right to exercise the lender’s rights and duties under a regulated credit agreement, in relation to one or more RTO agreements, as defined in CONC 5B.7.1R(7) and in relation to more than one category of household goods.