PerfectHome ordered to pay £2.1million compensation to 37,000 customers for forcing loans they could not afford
The news comes as The Sun launched its Stop The Credit Rip Off campaign aimed at exposing the true cost of borrowing from these firms
RENT-TO-OWN firm PerfectHome has been ordered to pay back £2.1million to thousands of customers, in a victory for the Sun.
Some customers will have the loans written off, while others will be handed back cash due to the investigation by the financial watchdog.
In total, the rent-to-own firm, which takes weekly payments from customers for household goods, must pay back 37,000 customers.
The news comes as the Sun launched its Stop The Credit Rip Off campaign aimed at exposing the true cost of borrowing from these firms.
On Monday, we called for more stricter affordability checks on rent-to-own firms but this still doesn't go far enough.
An investigation by the Financial Conduct Authority found that the hire purchase firm did not carry out sufficient enough affordability checks which led to customers taking out loans they couldn't afford to pay back.
Why we want to Stop The Credit Rip-Off
WE never want you to pay more than double the amount you've borrowed - whether it's for a new sofa or a loan to help pay your bills.
That's why The Sun has launched a campaign calling for a cap on the total cost of rent-to-own loans and doorstep lending at double the original price or loan amount.
A similar cap was introduced for payday loans in 2015 and since then the number of people struggling with unmanageable debts to those lenders has more than halved, according to Citizens Advice.
People on the lowest incomes, living in the poorest places, are paying a poverty premium - up to 7 million people have resorted to high-cost credit, according to the Department for Work and Pensions.
People whose wages or benefits don't stretch far enough need to borrow from rent-to-own or doorstep lenders to help pay for things such as an unexpected bill or to furnish their homes.
These come with exorbitant rates of interest - more than 1,500 per cent in some cases of doorstep lending.
It is scandalous that one mum who borrowed cash to help keep a roof over her family's head and ended up paying back over THREE times the original amount.
It's time to stop the credit rip-off.
Here's what we demand:
Rent-to-own
- Cap on all repayable costs at double the item list prices (including fees, add-ons and interest)
- Ban on incentives for all sales staff
- Ban on discounts for existing customers to tempt them into more credit
- Companies to publish example interest rates and costs on all payment options
Doorstep lending
- Cap at double the original amount borrowed
- Stricter affordability checks
- Ban on discounts for existing customers to tempt them into more credit
It's time to Stop the Credit Rip-off.
The watchdog also found that some customers were charged late fees or arrears on their insurance contracts, even though it was against PerfectHome's company policy.
Some customers were charged for insurance before they received the goods, while others weren't always given a refund when they cancelled their agreement before the goods were delivered.
The FCA has ordered the firm to pay £1.7million back to 4,000 customers who were allowed to take out unaffordable policies.
LATEST ON STOP THE CREDIT RIP_OFF CAMPAIGN
The remaining £400,000 will go to customers who were incorrectly charged late fees, made to pay insurance before their goods arrived, and payments made before a policy was cancelled before they received the goods.
Jonathan Davidson, from the FCA said: "Unaffordable lending is not acceptable in any circumstances. I am pleased that the firm has taken steps to address this and provide redress to those customers affected."
Customers won't need to take any action as PerfectHome will notify you if you are owed a refund.
Mike Sweetland, Chief Executive of PerfectHome, said: "We wish to say sorry to our customers and we’re putting that right. Those affected will be receiving letters from me personally with information about their redress payments which will be made by cheque or balance adjustments."
ARE YOU DUE COMPENSATION FROM PERFECTHOME?
A TOTAL of 37,000 customers are due compensation or some form of redress from the rent-to-own firm.
These include:
- Customers who were allowed to take out policies, even though they couldn't afford them.
- Customers who were charged late fees even though it is company policy that they don't charge for late payments.
- Customers who have been charged insurance payments before the goods have arrived.
- Customers who have made their first payment but then cancelled the agreement before the goods were delivered.
PerfectHome will contact all of the customers affected and customers do not need to take any action until they ar contacted.
Some customers will be given cash payments, whilst other will have their balance written off.
Around 2,425 customers whose loans were unaffordable which caused them to default will have their debts written off.
They will also be able to keep the goods.
Gillian Guy from Citizens Advice said: “While today’s announcement is good news for the 37,000 people affected, we need to recognise that there are still fundamental problems in the rent-to-own sector.
“This is the third time that the FCA has had to intervene in this market. The regulator must now put in place measures to protect people from expensive borrowing and spiralling debts.
“The FCA should use its upcoming high-cost credit review to build on the success of the payday loan cap and extend the same protections to rent-to-own customers”.
Rent-to-own firms and doorstep lenders will hand out credit to struggling families where they would normally be refused to borrow from a bank.
But it means that millions of struggling families are left stuck paying sky-high interest rates of up to 1,557 per cent a year.
It's time to Stop the Credit Rip-off.
BrightHouse, to repay 249,000 customers £14.8million
The Sun is calling for calling for a cap on the total cost of rent-to-own loans and doorstep lending at double the original price or loan amount.
Politicians across the spectrum have thrown their weight behind The Sun's campaign, and demanded that ministers act now to cap rip-off credit fees and stop hardworking Brits being fleeced by legal high street loan sharks.
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