On 20 March 2020, BrightHouse went into administration.
BrightHouse sold electrical appliances, furniture, computers and mobiles on hire purchase. Its customers made weekly payments, sometimes described as “rent-to-own”.
Coronavirus has meant that its 240 shops have had to shut and many customers are likely to be asking for payment holidays as their income has fallen and they can’t manage the normal weekly payments.
But BrightHouse’s finances were already precarious before Coronavirus. In February, it was reported that BrightHouse was “close to collapse” and it was said to be applying to the FCA for a Scheme of Arrangement that would let it limit what it had to pay in refunds to customers who had been sold goods on unaffordable credit.
With the new coronavirus problems this month, it is not surprising that BrightHouse has given up and gone into administration.
Some 172,000 people were buying an item from BrightHouse at the end of December.
This article looks at what going into administration will mean for BrightHouse customers.
Background – BrightHouse’s high prices
The FCA found that high product prices plus high interest and the cost of insurance and warranties meant a customer could pay £800 over three years for a fridge that would cost £260 on the high street.
This cost is very high for many BrightHouse customers – only one third are in work and a half have children.
BrightHouse hasn’t been checking properly that the credit it is giving is affordable. The FCA says a loan is unaffordable if paying it leaves a customer so short of money they get behind with essential bills or have to borrow more.
So customers have been making increasing numbers of affordability complaints. Brighthouse has said:
the level of redress claims from customers is putting increasing pressure on the available liquidity in the group.
Are you currently paying Brighthouse for an item?
When a lender goes into administration, the debt you owe to them still legally exists.
But you need to ask yourself now if you can afford to keep up the repayments, especially if your income has reduced because of coronavirus? And whether you should make an affordability complaint?
If you are currently buying an item from BrightHouse and you can afford to keep up the payments, that is usually the best thing. BUT read the next bit about whether you can make an affordability complaint.
Has Coronavirus made your money situation worse?
The BrightHouse website has a page about Coronavirus. It says:
We appreciate the current situation will be very difficult for some of our customers. If you find yourself unable to pay please contact us by visiting http://www.brighthouse.co.uk/contact-us and completing the online form, or call us on 0800 526 069 and press option 2.
In the meantime you will not be charged any late fees, interest on late payments or lose the use of your product during this difficult time.
So you should definitely do this – complete that online form saying why your income has fallen and ask for a payment break until you are being paid again. This will not harm your credit record – see Good news about protecting your credit score.
The FCA who regulates BrightHouse has said that this still applies now that BrightHouse has gone bust:
Due to the coronavirus (Covid-19) pandemic, the FCA expects lenders to provide appropriate forbearance to consumers who are experiencing, or expect to experience, difficulty in keeping up with repayments. The FCA’s rules on forbearance state that firms should allow the customer reasonable time and opportunity to repay. This is applicable even when a firm is in administration.
If you are paying through BrightHouse taking the money from your bank, you should cancel the Direct Debit or Continuous Payment Authority with your bank so your money is safe.
AND also read the bit below about whether you should make an affordability complaint.
Are the repayments just too high for you to afford?
You may be struggling to pay the amounts even if you haven’t been affected by Coronavirus. If this is happening to you, contact BrightHouse using the form here http://www.brighthouse.co.uk/contact-us and ask for the payments to be reduced. Just say what you can now afford to pay.
You may be worried that the goods may be repossessed. This is VERY unlikely to happen.
Repossessing goods at the height of social distancing is going to be very hard. And I expect the administrators would much prefer to get reduced payments from you than have a lot of second-hand items to have to try to sell!
AND also read the bit below about whether you should make an affordability complaint.
Should you make an affordability complaint?
If you win an affordability complaint, interest is removed from any current loan so you only repay the cost of the item (plus insurances and warranties).
If you have finished paying for the goods, you can still complain they were “unaffordable.” Just because you managed to pay doesn’t mean the credit was “affordable” – it may have caused you problems including:
- having to borrow more money every month eg from loans, catalogues or help from relatives; or
- getting behind with essential bills such as rent, council tax, utilities; or
- missing payments to other debts.
When you win an affordability complaint about a loan that has finished, the interest you paid is refunded to you.
How to make an affordability complaint
To make a complaint, send an email to: firstname.lastname@example.org with AFFORDABILITY COMPLAINT as the subject and saying:
“I want to ask for a refund of the interest that I paid on the items I bought from the BrightHouse shop in [Leicester]. I am asking for a refund because I could not afford the repayments and have enough money left over for my other essential spending and existing debts.”
Give your full name, address and telephone number. ou don’t need to list what you have bought and when – Brighthouse has all the records.
You can win an affordability complaint if you only bought one item. But as a general rule, your complaint is stronger:
- the more items you have bought, especially if there were several at a time, meaning that your weekly repayments were higher;
- the larger the repayments are compared to your income. For someone with a reasonable income, the weekly repayment on an item may be affordable, but if your income was low you may struggle to afford what sounds like a low amount every week for two or three years;
- if you ever had repayment problems, then BrightHouse should have looked very carefully before selling you another item.
Now BrightHouse is in administration you will probably not get your full refund back if you do win your affordability complaint. But it’s easy to send a complaint in so why not do this if you know the BrightHouse loans caused you difficulty?
If you still owe BrightHouse some money, your refund for unaffordable lending should be used to repay that balance. This is known legally as “the right of set-off”.
This article Wonga refunds if you still have a loan – the “right of set-off” looked at this situation for Wonga customers and the same now applies to BrightHouse. You are likely to be much better off if you stop paying BrightHouse now, than if you carry on paying for a year and then only get a small percentage of your refund back in the end.
So if you still owe BrightHouse some money AND you think you have a good affordability complaint you should consider stopping paying BrightHouse anything at all.
StepChange agree with this advice. Here is what they say:
If you have both an outstanding debt and a complaint with Brighthouse, you should stop paying the debt until the complaint is resolved. This is so that any redress they get can be offset against your outstanding debt. This should not put any goods at risk, because repossession action should not be taken where a complaint is under investigation.
Have you already complained?
Having seen several payday lenders go into administration, I expect the BrightHouse administration to follow the same path:
- if you have a complaint with BrightHouse, they will stop work on your complaint. You won’t receive a decision within the 8-week time limit that previously applied and you will not be able to send your case to the Financial Ombudsman when you don’t receive a response.
- if you have a complaint with the Financial Ombudsman, this will be returned to the administrators to settle.
The administrators will announce how this will work in a few weeks. But for now, expect your complaints to effectively be on hold for many months.
There will be more information next week and over the coming months. I will be keeping this page updated.
You can ask questions in the comments below.