Rent-to-own store Brighthouse on the brink of collapse due to surge in compensation claims

RENT-TO-OWN store Brighthouse is reportedly on the brink of collapsing due to a surge in compensation claims.

The retailer has put specialists Grant Thornton on standby to handle its possible insolvency, according to Sky News.

If the weekly payment store does go into administration it could put 2,400 employees' jobs at risk.

Sky cited a source close to the Brighthouse shareholders as saying that the potential collapse is not inevitable, but has become more likely in recent weeks.

In 2017, the store was ordered to pay back £14.8million to customers after the Financial Conduct Authority (FCA) found that it had treated customers unfairly

And it seems the retailer is still struggling under the weight of claims for historic mis-selling.

A Brighthouse spokesperson said: "BrightHouse is exploring a range of options to cap its exposure to claims for historic mis-selling.

"To be successful in this, BrightHouse needs the support of its stakeholders and is currently in active discussions with them.

"Naturally, the protection of value in the business and safeguarding of customers’ interests are core to our planning."

Money blogger DebtCamel said: "Brighthouse's recent results say that they are concerned about the number of of complaints about affordability they are getting.

"The regulator's rules say a loan is only affordable if it can be repaid without the borrower getting behind with other bills or having to borrow more. These complaints can go back many years.

"Brighthouse had hoped the Financial Ombudsman would only accept claims about loans in the last six years, but it seems that the Ombudsman has decided it can look look at old loans as well - just as it has done for payday loans.

"This means Brighthouse could be looking at having to pay out a very large amount of money to settle these complaints."

Earlier in February this year, the Brighthouse announced plans to shut 30 stores and axe 350 staff.

It said that it was planning to lose a tenth of its workforce and shops over the next two months.

Top management have been working to restructure the business in recent months following a Financial Conduct Authority crackdown on rent-to-own firms.

The watchdog promised to cap the cost of domestic goods bought through these shops from April, following The Sun's Stop The Credit Rip-Off campaign.

BrightHouse traditionally offered weekly payment plans on household goods to families with poor credit histories who are turned away from traditional lenders.

The firm cashes in on customers who are in financial hardship, charging rip-off rates of up to 99 per cent.

We've heard from hundreds of customers who's debts have spiralled out of control after being allowed to take out more policies than they could afford, while some were hounded by shop staff when they couldn't keep up with repayments.

In early February, Brighthouse announced a shift away from it's rent-to-own model towards high-interest loans, in a bid to shake up the ailing business.

But reports in Sky News suggest that the turnaround plans are not working, and the retailer could end up in administration in a matter of weeks.

Mum-of-two claims she was chased for washing machine repayments by BrightHouse staff ‘while in labour’.

Meanwhile, a mum-of-four had to ration electricity at home to pay back mounting BrightHouse debts.

And Laura Taylor said she was bullied by BrightHouse on her doorstep for almost two decades’.