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Status: You are viewing the version of the handbook as on 2019-09-14.

CONC 5B.2 Prohibition on RTO firms from entering into RTO agreements

Entering into, varying or supplementing agreements: requirements as to the cash price of new goods

CONC 5B.2.1R

1A 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.

CONC 5B.2.2R

1Except 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.

CONC 5B.2.3G
  1. (1)

    1New goods are goods which are not second-hand goods and include, for example, ex-display goods.

  2. (2)

    The range of features which RTO firms might consider under CONC 5B.2.2R(2)(c) when identifying comparable goods includes brand, quality, functionality, performance, size and colour, but only where these features could reasonably be expected to affect the cash price.

  3. (3)

    In relation to CONC 5B.2.2R(10), examples of cases where the FCA would expect a RTO firm to exclude a cash price include, but are not limited to:

    1. (a)

      cash prices that have been set primarily for a non-UK market; and

    2. (b)

      cash prices that have clearly been set in error.

Establishing a benchmarked price for goods that will be new to the UK market

CONC 5B.2.4R
  1. (1)

    1This 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.

Timing

CONC 5B.2.5R

1A 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.

CONC 5B.2.6G

1The fact that a benchmarked price for goods has been established before the coming into force of CONC 5B does not prevent it satisfying the requirements of CONC 5B.2.5R(1). Subsequent benchmarking then has to be carried out in accordance with 5B.2.5R(2), (3) or (4) in the normal way.

Entering into, varying or supplementing agreements: requirements as to the cash price of delivery and installation of goods

CONC 5B.2.7R

1A 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.

CONC 5B.2.8R
  1. (1)

    1A 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.

CONC 5B.2.9G

1The fact that a benchmarked price for delivery and/or installation has been established before the coming into force of CONC 5B does not prevent it satisfying the requirements of CONC 5B.2.8R(2)(a).

CONC 5B.2.10G
  1. (1)

    1The FCA does not expect RTO firms to identify the cash prices for delivery and/or installation of identical goods. It will be sufficient for RTO firms to select cash prices for the delivery and/or installation of the category of goods. For example, RTO firms would need to find cash prices for the delivery and/or installation of washing machines but not for a particular model of washing machine.

  2. (2)

    When selecting benchmarking cash prices for delivery, RTO firms should select prices which apply in comparable circumstances to those that apply to the RTO firm, for example in terms of distance or timing.

Entering into, varying or supplementing agreements: total cost of credit cap

CONC 5B.2.11R
  1. (1)

    1A 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.

CONC 5B.2.12G

1Where more than one item of goods and/or services is supplied under one RTO agreement, the total amount of the charges that may be payable by the borrower under that agreement should be calculated with reference to the sum of the cash price of each of the goods and, where relevant, services. For example, where a RTO agreement covers the supply of a washing machine and dryer, and delivery and installation of both:

Washing machine:

cash price

=

£200

Dryer:

cash price

=

£250

Delivery:

cash price total

=

£30

Installation:

cash price total

=

£20

The sum of the cash prices

=

£500

The total amount of charges that may, in addition, be payable by the borrower must not exceed £500.