The Financial Conduct Authority (FCA) has once again taken action against a rent-to-own firm that was judged to have failed to treat its customers fairly.
In the latest instance, a firm which provides household goods to customers on hire purchase agreements will pay refunds totalling £2.1 million to some 37,000 customers. The redress will be paid as a mixture of cash payments and balance refunds.
The FCA’s investigations identified that the firm was failing to carry out sufficiently rigorous affordability assessments before allowing customers to purchase goods on credit and was therefore providing some of its customers with loans that they could not afford to repay. This applies to some 4,000 customers, who will collectively receive £1.7 million in compensation.
2,425 customers will have their loans written off and will become the owners of the goods they purchased via the firm. These 2,425 customers are those that defaulted on their loans as a result of being granted credit they could not afford to repay.
The regulator has also identified a number of other ways in which the firm was failing its customers, including:
- Some customers were charged late fees for arrears on their insurance contracts, even though this was contrary to the firm’s own policy
- Some customers were required to pay for insurance before receiving any goods
- Other customers did not receive a refund of their first payment where their agreement with the firm was cancelled before the goods were delivered
The approximately 31,000 customers affected by these issues will collectively receive £400,000 in compensation.
The FCA says it recognises that the firm “has conducted a major programme of improvements to ensure that loans are affordable and customers are treated fairly throughout the collections process.”
Jonathan Davidson, Executive Director of Supervision – Retail and Authorisations at the FCA said:
“Our key priority is to ensure all financial firms lend responsibly and treat consumers fairly; especially those in financial difficulties or who are vulnerable.
“Unaffordable lending is not acceptable in any circumstances. I am pleased that the firm has taken steps to address this and provide redress to those customers affected.
“[Name of firm] have recently been authorised by the FCA following substantial improvements to its business practices.
“This package of redress continues the FCA’s work with the rent-to-own sector to resolve the concerns we have previously identified.”
The firm’s chief executive said of the FCA’s findings:
“We were authorised by the FCA in December last year. As we worked towards this, the FCA advised us that some of our historic practices did not meet the standards it expected as the new regulator of consumer credit firms. As part of our authorisation process with the FCA, we worked meticulously through all our policies and practices and made significant improvements such as the centralisation of underwriting to further improve customer credit and affordability checks — which include the assessment of customers’ income and expenditure. After these significant changes, I can say with confidence that the issues of our past could not happen today.”
Similar redress orders have been imposed on two other rent-to-own firms in recent months. The FCA has said on a number of occasions that it sees supervising this sector as a priority.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.