Caversham Finance Limited, which trades as BrightHouse, will be required to pay more than £14.8 million in compensation to some 249,000 customers.
BrightHouse is a rent-to-own firm that offers hire purchase agreements to customers purchasing various household goods. Typically, the firm requires weekly repayments to be made on these agreements.
An investigation by the Financial Conduct Authority (FCA) found issues with both the firm’s affordability assessments, and with its collections processes.
BrightHouse customers affected by the issues identified by the regulator will now receive cash refunds and/or balance write-offs as follows:
The first category is customers whose circumstances were not fully assessed, for the purposes of an affordability assessment, and who may subsequently have had difficulty making payments. Any such customers who handed back the goods purchased under their agreement will receive a cash refund of the total interest and fees charged under the agreement, plus interest of 8%. Any customers in this category who retained the goods will have their balances written off. In this category, some £10.1 million will be paid in compensation on 114,000 agreements taken out between April 1 2014 and September 30 2016, covering some 81,000 customers.
The second category of affected customers are those who made the first payment due under an agreement with the firm, which was then cancelled prior to the delivery of the goods. This first payment was not returned to all customers, as it should have been. BrightHouse will refund this first payment plus interest of 8%. In this category, approximately £4.7 million in compensation will be paid on 270,000 agreements entered into after April 1 2010, covering 181,000 customers. Some of the 249,000 customers fall into both categories.
BrightHouse will write to all affected customers advising them how the redress programme will work.
The regulator acknowledges that BrightHouse has now taken steps to improve its lending application assessments, ensuring that loan repayments are affordable; and has also made changes designed to ensure customers are treated fairly throughout the collections process, for example changes have been made to its late payment fee structure.
The FCA has previously indicated on a number of occasions that it is concerned about the business practices of firms in the rent-to-own sector.
A BBC investigation identified BrightHouse customers who were required to pay over £1,000 for a £358 washing machine.
Jonathan Davidson, Executive Director of Supervision – Retail and Authorisations at the FCA said:
“During the time in question, BrightHouse was not a responsible lender and failed to meet our expectations of firms in this sector. I am pleased that it has agreed to provide redress to those customers affected by these historic practices.
“This scheme continues our work with the rent-to-own sector to resolve the concerns we have previously identified.
“Responsible lending and the fair treatment of consumers, especially those in financial difficulties or who are vulnerable, are key priorities for us.”
BrightHouse chief executive Hamish Paton said:
“We sincerely apologise to those customers who were affected. Our top priority is to ensure that they are reimbursed as soon as possible. We’re absolutely determined that this doesn’t happen again and have made significant improvements over the last 18 months. The FCA recognised this when they confirmed in April that they are minded to authorise our business, subject to specific conditions.”
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.