Rent-to-own firms charge customers HUNDREDS of pounds for ‘useless’ warranties
The Sun analysed a number of products from both Perfect Home and BrightHouse to demonstrate how much extra customers are paying on 'useless' warranties
RENT-TO-OWN customers are shelling out hundreds of pounds for “useless” and “questionable” warranties that promise protection they don’t need.
Firms such a BrightHouse and PerfectHome target those on low incomes with poor credit scores and customers can end up paying back more than double for an item once delivery, installation and charges are factored in.
Alongside the products, they offer warranties that they promise will protect the item if it needs fixing.
But experts point out these packages, which can add hundreds of pounds on to the total cost of products, may be entirely worthless because shoppers are already protected in a number of ways by law.
The Sun analysed a number of products from both PerfectHome and BrightHouse to demonstrate how much extra customers could be paying.
Customers are protected in three ways:
- Under the Consumer Rights Act 2015, it specifies that products should be of satisfactory quality, fit to do the job intended and last a reasonable length of time. That means if shoppers buy a new tablet computer or dishwasher and it breaks down within a few months they can take it back to the shop. It’s up to the manufacturer to prove the appliance wasn’t faulty when it was bought and they must resolve the issue for you.
- Items often come with a 12-month guarantee from the manufacturer
- Items may be covered by home insurance
- Shoppers are also protected if they paid by credit card for their goods but they are faulty or not as described, as long as they paid between £100 and £30,000 under Section 75 of the Consumer Credit Act.
The Financial Conduct Authority (FCA) is considering whether to ban rent-to-own firms from selling extended warranties, which would save shoppers £7.7million per year.
It is looking at the products as part of its high-cost credit review after complaints that extended warranties were "useless" and made understanding the costs of buying a rent-to-own product difficult.
It follows calls from The Sun to crackdown on high-cost credit firms, as part of our Stop the Credit Rip-Off campaign.
For example, a Hotpoint 8KG washing machine costs £495 upfront from PerfectHome but it adds up to £804.96 after 104 weekly payments of £7.74.
PerfectCare adds another £1.32 a week, or £137.28, bringing the total cost to £942.24.
A Hoover 8kg Washing Machine costs £298.25 upfront from BrightHouse but £702 after 156 weekly payments of £4.50.
The BrightCare package adds £1.25 a week or £195 over the period. It brings the total price to £897 – almost three times the initial cost of the machine.
Andrew Hagger, personal finance expert at MoneyComms.co.uk, says: “Sales staff often have targets to sell extended warranties, hence the sometimes pushy approach, but don’t be rushed into signing on the dotted line. In most cases these warranties are over-priced.”
Citizens Advice estimates that extended warranties can add another 20 per cent to the cost of already “high-priced rent-to-own goods”.
Gillian Guy, chief executive at Citizens Advice, says: “People can get a bad deal when they buy an extended warranty with a rent-to-own agreement as they are already well protected by the law.
They are often bought by people unable to afford the upfront cost, who worry they need extra protection.”
Peter Tutton, head of policy at debt charity StepChange, says: “It’s not just the interest rates and price of the goods themselves that can make rent-to-own an expensive type of credit. Add-ons like insurance or warranties sold alongside the products increase the cost.
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“The FCA’s proposal to separate the sale of warranties from selling rent-to-own agreements is a step in the right direction that should help consumers already forced to resort to high-cost credit.”
Boss of Perfect Home Mike Sweetland said: “Our customers are free to choose the add-ons that are right for them. We have transparent pricing, we are clear about the service levels our packages offer and we signpost customers to alternatives, so they can make informed choices.
“As part of our agreement process, we ask if a customer has existing household insurance and advise them to check whether their item would be covered. We also actively advise customers that it may be more cost effective to take out a home contents policy.
“We want our customers to be able to make informed decisions about the products and service packages that are right for them.”
A spokesperson from BrightHouse said: "Our customers typically don’t have the savings to cover costly repair bills, so they choose to take out our optional BrightCare warranty.
"It gives them piece of mind that their product will be fixed, even outside of manufacturer’s warranty and repair exclusions."
Warranties: your rights
IF you are unsure whether you need a warranty, don’t be pressured into signing up for it when you buy your items.
Ask for a copy of the warranty document, take it home and check the small print.
Many items will come with a 12-month guarantee from the manufacturer or will be covered by your home insurance.
In some cases – if you are buying a lower-value items such as a kettle or iron – the warranty may cost more than it would to just buy a new product.
If you do take out a warranty you are entitled to change your mind within 45 days according to 5
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