Lending money to people on low incomes comes with an obligation to act fairly and carefully.
Today the Financial Conduct Authority (FCA) decided the hire purchase company BrightHouse has not being acting as a “responsible lender” since 2015.
The regulator swiftly ordered the firm to pay compensation to customers worth a whopping £14.8 million.
Brighthouse are one of several growing rent-to-own retailers charging customers a premium for paying for essential items in instalments.
The FCA found thousands of BrightHouse customers had not been properly assessed to work out their ability to repay loans.
Our top priority is to ensure that they are reimbursed as soon as possible
Around 81,000 customers who had to give back products like fridges, cookers or couches after failing to make payments will now receive interest and fees charged, plus compensatory interest of 8%.
Around 181,000 customers who cancelled hire purchase agreements before getting any goods will also get payment back and the compensatory interest.
Hamish Paton, BrightHouse chief executive, said: “We sincerely apologise to those customers who were affected. Our top priority is to ensure that they are reimbursed as soon as possible.”
During the time in question, BrightHouse was not a responsible lender
The company has previously been criticised for the high costs associated with their loans, with some customers eventually paying up three time the original price.
Citizens Advice had also claimed the industry suffered from a lack of good checks on affordability.
The FCA’s Jonathan Davidson said: “During the time in question, BrightHouse was not a responsible lender and failed to meet our expectations of firms in this sector
“Responsible lending and the fair treatment of consumers, especially those in financial difficulties or who are vulnerable, are key priorities for us.”
Big Issue Invest – Big Issue Group’s social investment arm – has supported the growth of ethical alternatives to mainstream credit providers.
Big Issue Invest has helped finance the social enterprises Street UK and Moneyline, organisations aiming to remove barriers to financial inclusion, and serve people finding it hard to access affordable credit.
Read more about that work here.