The rent-to-own company BrightHouse has been ordered to pay back £14.8 million to almost a quarter of a million customers by the financial watchdog.
The Financial Conduct Authority (FCA) found the firm "was not a responsible lender" in many cases from April 2010, and the FCA has been "working with" BrightHouse since 2014 to address the issues.
BrightHouse provides household goods on hire-purchase agreements, and the watchdog found the credit checks and collections processes were not up to its expectations.
The compensation is linked to 384,000 lending agreements which "may not have been affordable" and payment "which should have been refunded", the FCA said.
The firm proposed compensation for customers in two sets of circumstances.
- Customers whose circumstances were not assessed properly at the outset of the loan to determine whether they could afford it and may have had difficulty making payments. Customers who handed back the goods will be paid back the interest and fees charged under the agreement, plus compensatory interest of 8%. Customers who retained the goods will have their balances written off. This redress totals around £10.1 million for 114,000 agreements entered into between 1 April 2014 and 30 September 2016, covering 81,000 customers.
- Customers who made the first payment due under an agreement with the firm which was cancelled prior to the delivery of the goods. This first payment was not returned to all customers. BrightHouse will refund this first payment plus pay compensatory interest of 8%. This redress totals around £4.7 million for 270,000 agreements entered into after 1 April 2010 covering 181,000 customers.
The FCA said BrightHouse will write to all affected customers, some of whom are affected by both sets of circumstances, to explain the refund or balance adjustment that they will receive. Customers do not need to take any action until they are contacted by BrightHouse.
BrightHouse said on its website: "We are sorry this has happened. We will contact all customers included in the programme by personal letter before the end of the year."
Customers can find more information on the firm's website.
Which customers will be receiving repayments?
- The company says customers who took out an agreement with BrightHouse between April 2010 and April 2017 and then either cancelled it within 14 days or did not take delivery of the goods and did not receive a refund of any payments made, will be refunded.
- Customers who took out an agreement between April 2014 and September 2016 and where BrightHouse have identified that its checks may not have effectively ensured that consumers could afford the repayments. Where customers returned the product to BrightHouse, the company says it will refund the interest and any fees paid under the agreement.