Mum-of-four rationed electricity at home to pay back mounting BrightHouse debts
The rent-to-own firm continued to lend to Sarah Harrison, 34, from Leeds even though she was struggling to keep up with her existing repayments
A MUM-of-four felt forced to choose between paying her electricity bills or paying back her debts to BrightHouse.
Sarah Harrison, 34, from Leeds is one of the company's many hard-up customers with poor-credit ratings and she says the rent-to-own firm continued to lend to her, charging sky-high interest rates, despite the fact she was struggling to pay back existing debts.
An estimated 1.4million low-income families rely on high-cost credit such as rent-to-own agreements, payday and doorstep loans to get by each year - and the impact on their finances is severe.
Rent-to-own firms such as BrightHouse exist because they lend to people who would struggle to get financial help from anywhere else, thanks to poor credit history.
But they charge a premium to their customers for being poor in the form of extortionate interest rates - meaning that the hardest-hit families are sometimes paying back more than DOUBLE the cost of the product.
And what’s worse, some customers have told The Sun about how they have been able to take out multiple agreements with the firm, even though they couldn’t afford their existing weekly repayments.
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.
Last month, we launched our Stop-the-Credit Rip Off campaign to help those struggling to repay high-cost debt by calling on the financial regulator to extend a cap on the total cost of credit that already applies to payday loans.
Ex-BrightHouse employees have previously revealed the nasty tactics used by the company to reel in vulnerable customers, including twisting affordability checks to hit bonus-related targets and chasing customers for payments.
Many home credit customers take on multiple loans, with 34 per cent of them holding outstanding debt on two or more of their agreements, according to Citizen's Advice.
And now some customers have told the Sun Online how they were allowed to take out more loans, even though they already owed the company thousands of pounds.
Over the next couple of years, Sarah also signed up for a washing machine and tumble dryer, as well as a sofa from BrightHouse.
At the worst point, they were paying back £50 a week, leaving them with £30 spare to cover any unexpected bills or outgoings.
She said: “Sometimes we didn’t have enough to top up the electricity meter so we’d have to ration the heating.
"At the lowest points, the BrightHouse repayments were having to come out of the child benefit and that's not what that money is supposed to be for.
"It was overwhelming having so many different things to pay off.”
“It’s a catch 22 because you are paying out so much that you can never afford to save for your own stuff, so you end up trapped.”
Eventually, Sarah handed all of the items back when she was in a position to buy her own furniture outright elsewhere.
"It was frustrating that I'd paid all that money and I wasn't even going to get to keep the goods," said Sarah, "but I wanted nothing to do with them anymore, so as soon as we could afford our own, we handed the items back."
In total, the couple paid back an estimated £3,000 including insurance costs.
A BrightHouse spokesperson said: ";The BrightHouse agreement is uniquely flexible and we have a range of ways to help customers if they tell us that their circumstances have changed.
"These include rewriting the agreement, payment holidays, a payment plan, or an alternative product.
"Ultimately we’re happy to accept the return of the product at any time and in any condition, leaving the customer with no debt and avoiding a default on their credit file."
BrightHouse was ordered to repay 249,000 customers £14.8MILLION at the end of last year after the financial watchdog found that it treated customers unfairly.
Some customers had loans written off, while others were handed back cash due to the investigation.
Five cheaper alternatives to high-cost credit
IF you're sure you can afford a loan, then the interest rates you’ll see below are even lower than the cap we're calling for of double the original item price or loan amount.
Remember, before applying for a loan, borrowing money and failing to keep up with repayments can have a big and long-lasting effect on your finances.
- Fair For You - A not-for-profit a ‘community interest company’ that's owned by a charity. The representative APR is 42.6%. So for a loan of £500 over a year, with weekly payments of £11.48, the total interest is £96.82. This is actually only 36 per cent of the original amount borrowed.
- Fair Finance - This firm offers personal loans of up to £1,000 repayable over six to 18 months. Borrow £500 over 12 months and you’d pay £13.88 a week, a 5 per cent admin fee of £25 and the total cost of the loan is £247. That’s 49.4 per cent of the amount borrowed - although the APR is 135.8 per cent, which may make it sound more expensive.
- Scotcash - This firm offers personal loans of between £50 and £1,000 repayable over up to a year. The representative APR is 121.5 per cent, with a 6 per cent admin fee that is payable when your loan is approved. On a £500 loan repaid over 12 months you would pay an admin fee of £30, make weekly repayments of £12.99 and pay £175.28 in interest. So the total cost of borrowing is £205.28.
- Five Lamps - If you borrowed £500 over a year you would pay £13.11 a week and a 5 per cent admin fee of £25 (deducted from the loan amount). In total you’d pay £206.72 in interest on your loan. This is 41 per cent of the original sum borrowed.
- Moneyline - On a 12-month loan of £500, you’d make 52 payments of £14.79, as well as pay a fee of £25. In total, you’d repay £794.08, so the cost to borrow £500 is £269.08. Although the representative APR is 180.62 per cent, the actual cost is just under 54 per of the amount borrowed.
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