10th February 2015
Many thousands of customers who have bought household goods via rent-to-own schemes are being “ripped off”, a group of MPs have found.
An investigation by The All Party Parliamentary Group on Debt and Personal Finance has discovered that some of the poorest people in the UK are being charged interest rates of up to 94.7% a year to buy TVs, washing machines or furniture.
The MPs have called on the regulator to take action to protect consumers.
Rent-to-own agreements allow customers to pay for expensive items like white goods in weekly instalments, but the report found that they are usually required to take out compulsory insurance and warranties, which can double the eventual cost.
The three main rent-to-own firms are BrightHouse, PerfectHome and Buy as you View. The MPs estimate the three firms have combined customer base of more than 350,000 households. BrightHouse, the largest player this sector, said it was disappointed by the report.
The MPs concluded said this cover may have been mis-sold, particularly as many customers already had household insurance.
The report found one in five BrightHouse customers is falling more than a month behind with payments. It also revealed that 22% of rent-to-own customers in arrears have goods taken back or repossessed – equivalent to one in ten of all agreements. Half of customers are wholly or partly reliant on benefit income.
The report said the contracts are “risky and expensive” and the total cost of such deals with interest is usually two or three times the retail price.
In one example, Samsung freezer cost £644 from John Lewis – but, under a five year plan from BrightHouse, the same freezer cost £1,716.
Yvonne Fovargue, Labour MP for Makerfield and chair of the all-party group, said: “Rent to Own Stores like BrightHouse charge inflated prices to some of the poorest people in the country. Customers are often obliged to take out additional warranties and insurance, as a result paying several times the true value of the goods.
“Many customers simply can’t keep up and the goods are taken back to be sold again.”
She added: “Rent-to-own firms have been cashing in on people’s financial struggles for more than a decade. The Financial Conduct Authority (FCA) needs to act now to stop rent-to-own customers from being ripped off.
“The APPG is writing to the chief executive of the FCA, Martin Wheatley, to ask him to adopt our blueprint for reform. The regulator should act urgently to protect customers.”