Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.

CONC 5B.1 Application and guidance

Application

CONC 5B.1.1 R

1This 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.

CONC 5B.1.2 G
  1. (1)

    1This chapter applies to RTO firms when they are entering into new RTO agreements, and when they are varying or supplementing an existing RTO agreements so as to supply additional or different goods under the agreement. This chapter does not therefore apply where the variation or supplementation of an existing RTO agreement does not involve the supply of additional or different goods.

  2. (2)

    Where CONC 5B.1.1R(2) applies, this chapter does not apply in relation to goods that had been supplied under an existing RTO agreement prior to the relevant date as provided in CONC 5B.1.1R(2)(a) and (b).

CONC 5B.1.3 G

1 RTO firms are reminded that, as set out in GEN 2.2.1R, the provisions of this chapter have to be interpreted in light of their purpose.

Guidance on application and interpretation

CONC 5B.1.4 G

1In this chapter, a word or term in bold (other than in headings and titles) has the meaning given in CONC 5B.7.

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.2.1 R

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.2.2 R

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 UKconsumer 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 UKconsumer 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.2.3 G
  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.2.4 R
  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.2.5 R

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.2.6 G

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.2.7 R

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.2.8 R
  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.2.9 G

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.2.10 G
  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.2.11 R
  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.2.12 G

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.

CONC 5B.3 Anti-avoidance

CONC 5B.3.1 R

1 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.

CONC 5B.3.2 G
  1. (1)

    1For example, RTO firms should not seek to increase the price of theft or accidental damage insurance, or extended warranties in order to recover revenue lost due to the cost cap rules.

  2. (2)

    RTO firms are also reminded of the rule in CONC 7.7.5R which states that firms must not impose charges on customers in default or arrears difficulties unless the charges are no higher than necessary to cover the reasonable costs to the firm.

CONC 5B.4 Policies and procedures for establishing benchmarked prices

CONC 5B.4.1 R

1A 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.

Obligations in competition law

CONC 5B.4.2 G

1 RTO firms are reminded of their obligations to ensure compliance with competition law (including the prohibitions against anti-competitive agreements and abuse of a dominant position in Chapters 1 and 2 of the Competition Act 1998 and the criminal cartel offence in Section 188 of the Enterprise Act 2002 as amended by the Enterprise and Regulatory Reform Act 2013). Those obligations include:

  1. (1)

    not entering into any agreements with other firms where the agreement has as its object or effect an appreciable prevention, restriction or distortion of competition – for example to agree sale prices or to allocate customers. For example, if a RTO firm director called another RTO firm or a non-RTO firm and agreed to sell their products at a certain price, this would be restrictive of competition and illegal. The individuals involved could also be prosecuted for the criminal cartel offence; and

  2. (2)

    not disclosing to, or accepting from, competitors any commercially sensitive information such as pricing or price planning, customer or market information or company strategy. For example, if a RTO firm’s employee met or called another RTO firm’s employee to find out any current or future pricing information whatsoever, that was not otherwise publicly available, whether for the purpose of attempting to fulfil any obligation under these rules or not, that could be illegal anti-competitive activity, even if the recipient of the information stayed silent.

CONC 5B.4.3 G

1 RTO firms should also note the following points.

  1. (1)

    The disclosure or receipt of commercially sensitive information may amount to a breach of competition law and could lead to infringement findings and fines not only in relation to the firm disclosing the information but also in relation to other firms receiving the information.

  2. (2)

    A person commits the criminal cartel offence if they agree with one or more others to make or implement (or cause to be made or implemented) certain prohibited cartel arrangements relating to two or more businesses, namely price fixing, market sharing, bid-rigging, and limiting output. The maximum penalty on conviction for the criminal cartel offence is five years imprisonment and/or an unlimited fine.

  3. (3)

    It is the responsibility of each firm to assess its own position under competition law (for example by taking its own legal advice) and to ensure all its staff are compliant with competition law and in particular that they know what is, and is not, lawful practice.

  4. (4)

    Relevant guidance on competition law has been published by the Competition and Markets Authority.

    [Note: for example, see:

    Competition Law Risk a Short Guide at:

    https://www.gov.uk/government/publications/competition-law-risk-a-short-guide

    Limiting risk in relation to competitors’ information at:

    https://www.gov.uk/government/publications/limiting-risk-in-relation-to-competitors-information

    Quick Guide to Complying with Competition Law at: https://www.gov.uk/government/publications/how-small-businesses-can-comply-with-competition-law.]

CONC 5B.5 Record keeping

CONC 5B.5.1 G

1 RTO firms are reminded of their obligations in SYSC 9.1.1R to keep orderly records, which must be sufficient to enable the FCA to monitor the firm’s compliance with the requirements of the regulatory system. Records which the FCA would consider to be sufficient to show compliance with the benchmarking requirements in CONC 5B include:

  1. (1)

    point-in-time evidence of other benchmarking cash prices such as screengrabs or outputs of third party benchmarking data, together with evidence establishing the point in time to which it relates;

  2. (2)

    evidence to show how the RTO firm took reasonable steps to ascertain whether the same item of goods or bundle of goods was available for sale by other retailers; and

  3. (3)

    evidence to show how the RTO firm established that goods benchmarked against were comparable to those supplied by the RTO firm.

CONC 5B.6 Consequences of contravention of the total cost of credit cap

CONC 5B.6.1 R

1Where 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.

CONC 5B.6.2 G

1Taking the example in CONC 5B.2.12G, if the agreement provided that the total amount of charges that may be payable by the borrower were £600 (so exceeding the sum of the cash prices which was £500), the obligation to pay the £600 charges would be unenforceable, and where a customer had paid part or all of the £600, they would be entitled to have the amount of charges they had paid refunded by the RTO firm.

CONC 5B.7 Interpretation

CONC 5B.7.1 R

1In 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.