Dark days ahead as BrightHouse folds
BrightHouse – the biggest rent-to-own operator in the UK – has collapsed, with administrators now attempting to salvage parts of the business. Customers should continue to make the monthly payments required to keep their household goods, with administrators now acting as the collecting agent.
The company had been struggling after an influx of compensation claims for selling to people who could not repay. Its shops were then shut owing to coronavirus restrictions on retailers. Julie Palmer, from corporate recovery business Begbies Traynor, said: “Coronavirus was the final nail in the coffin for BrightHouse.”
BrightHouse, the trading name of Caversham Finance Limited, has 240 shops and 2,400 employees, whose jobs are now at serious risk.
The firm’s collapse came minutes before Italian restaurant chain Carluccio’s also fell into administration. Collectively, the two firms employ 4,500 people.
BrightHouse’s 200,000 rent-to-own customers make monthly payments for household appliances, in effect renting goods (and paying interest) until they have paid in full.
Many are on low incomes and find it difficult to access credit from mainstream lenders to pay for fridges, TVs, washing machines and other electrical items. Only about a third are in work.
Customers should continue to make payments in the usual way, the administrators confirmed, although for some the closure of shops and no doorstep collection owing to coronavirus means that should be done in a different way.
Failing to make repayments, even now the company is in administration, could lead to extra charges and harm a credit score. However, those unable to pay for practical reasons owing to coronavirus will not be charged extra or have their credit score affected.
All new rent-to-own agreements and cash loans, which the company also provided, will now be stopped.
Servicing, warranties, and insurance claims will continue at present, as will delivery of essential items already ordered, but in line with coronavirus restrictions. These services operated alongside the rent-to-own service.
The collapse, which was trailed on Friday, means that the administrators – Grant Thornton – will now try to find buyers for all, or some, of the business.
The company’s website was still operating on Monday morning.
Alongside many other lenders of high-cost credit, the company was being challenged by people who said they were given credit when they should not have been.
In October 2017, the company was fined nearly £15m by the City regulator, the Financial Conduct Authority (FCA), for not acting as a “responsible lender”.
Some of those customers were given rental agreements, despite being unable to realistically afford to make the repayments.
In January, the business said it was under pressure from dealing with additional mis-selling claims
Debt adviser Sara Williams, who writes the Debt Camel blog, said: “Customers need to think if they can manage to make the repayments.
“If their income has fallen because of coronavirus, they should ask for a payment break. And if the item is just too expensive, they should ask for a lower payment arrangement. They may be able to make an affordability complaint and get a refund of the interest they have paid on previous items.”
However, anyone eligible for compensation may now find they have to wait longer, and receive a fraction of what they might have expected.
Rules, introduced last year, restricted the cost of rent-to-own, following claims of spiralling debts. The FCA ruled that interest charged would be capped to as much as the cost of the product.
Prices were also controlled, with shops only able to charge no more than the median – the middle price – of three mainstream retailers, including delivery and installation charges.
Shops were also prevented from increasing their prices for insurance premiums, extended warranties, or arrears charges, to recoup lost revenue from the price cap.
Before the rules were brought in, spiralling interest charges meant some rent-to-own consumers had ended up paying more than four times the retail price they would have paid in normal shops.
Among those who were unhappy with how the business operated was Terri Carter, a paralegal from Great Yarmouth.
She had ordered a TV through BrightHouse after running out of money when furnishing her new home. She went into the store to explain that she needed to miss a repayment, only later to find a woman in a suit, accompanied by two “big blokes”, banging on her door.
At home with her son, they threatened to take away her TV, and she felt forced to agree to making extra payments.
“I work in law so I knew my rights, but what if that happens to someone older, or someone who has just had a baby?” she said.
Angela Clements, founder or not-for-profit buy-now-pay-later operator Fair for You, said: “While my heart goes out to BrightHouse’s staff who will lose their jobs, I hope that its collapse will make other lenders think twice before trying to make easy money out of hard-working families in this way.
“There is a clear need to support and rapidly scale the affordable lending sector so that other high cost credit doesn’t keep mutating in that gap.”