BrightHouse has announced a customer redress scheme after a review by the Financial Conduct Authority (FCA) identified some of its legacy processes.
The news comes after the FCA confirmed in April that it was minded to authorise the rent-to-own electricals and furniture retailer, subject to specific conditions.
These conditions included restructuring its debt, carrying out more detailed assessments of customers’ incomes before allowing them to make a purchase, and sticking to the new business plan that was submitted to the FCA in March.
BrightHouse – owned by private equity firm Vision Capital – was targeted by the FCA over its controversial hire-purchase practises, such as alleged overcharging and hard-sell tactics targeting vulnerable consumers.
For example, last year it was revealed that its weekly installments system meant customers paid £1056 for a washing machine which retailed for £350.
Two groups of customers are included in the redress scheme which was developed following engagement with the FCA and independently reviewed.
The first group is those who, between April 2010 and April 2017, may not have received a refund of their initial payments when an agreement was cancelled within the first 14 days. These customers will receive an average payment of £27.
The second group consists of those who signed an agreement between April 2014 and September 2016 and where BrightHouse’s affordability assessments might not have been effective enough. These customers will receive an average payment of £147.
Alternatively, if the customer retained the product, then the ownership will be transferred to them.
The total value of the scheme to customers is £14.8 million.
This includes not only the cash repayments of £6.5 million but also the value of interest and fees on balances which have already been written-off in the normal course of business.
BrightHouse chief executive Hamish Paton issued an apology to those affected on behalf of the retailer.
“Our top priority is to ensure that they are reimbursed as soon as possible,” he said.
“We’re absolutely determined that this doesn’t happen again and have made significant improvements over the last 18 months.”
Customers affected do not need to contact BrightHouse.
By the end of the year personal letters will be sent to 213,000 past and current customers, explaining what they are due.
The retailer has also been under financial strain, battling to refinance £220 million of bonds that are due next year.
It recently enlisted Rothschild as an adviser and Vision Capital is expected to commence a formal sale process this month.
BrightHouse operates through 280 stores and rents out household items such as washing machines, fridges and furniture.