A Blackpool MP is leading a campaign to curb the so-called rent-to-own furniture and white goods sector.
Paul Maynard said many customers do not realise the huge amount of cash they will end up paying to high street shops which offer household items at low weekly rates.
I believe the level of care taking about the affordability of my mortgage should apply to the affordability of short- to medium-term credit.MP Paul Maynard
The Blackpool North and Cleveleys MP spoke out in Parliament and asked Treasury Minister Damian Hinds to host a summit on the sector along with debt and consumer charities, the Financial Conduct Authority.
Mr Maynard said: “I have many people come in to my surgeries telling me of how, due maybe to family break-up or escaping a violent partner, they have had recourse only to these rent-to-own companies to furnish a new home.
“They are told how the plans are affordable as it’s only ‘so much a week’, but when they sign on the dotted line, pay the delivery fee and start paying back they suddenly realise what a large percentage of their often-limited disposable income it actually is.
“I mentioned in the debate when I re-mortgaged last year it took weeks and at least two hours being questioned in the bank.
“I believe you can walk in to a rent-to-own shop and walk out 20 minutes later with several contracts for goods, warranties and insurances that you may not be able to afford.
“I believe the level of care taking about the affordability of my mortgage should apply to the affordability of short- to medium-term credit.
“I am hopeful, that like with pay-day loans, we can get better, fairer and more transparent regulations of this market and hopefully the whole industry can show that it wants to change and leave behind the reputation of being no better than legal loan sharks.”
Mike Barry from Blackpool Credit Union said they saw many people who had fallen foul of the schemes.
He said vulnerable people who could not get credit any other way were often tempted to buy items for their homes via rent-to-own.
He said: “We have a lot of people coming to us who have debts from these shops.
“The interest rates are fairly high, not as high as pay day loans, but the price in these shops is much higher than ordinary shops.
“Add to that the fact that if they have not got home insurance they will be forced to take out insurance and warranties and a washing machine that could cost £300 at a shop could cost £2,000 under one of these schemes.”
He said people needing such goods could come to the Credit Union, join and then take out a loan at a reasonable interest rate instead.