Rent to own specialist, PerfectHome has agreed with the Financial Conduct Authority (FCA) a package of redress totalling over £2.1 million. This will be made up of cash payments and balance write-offs for 37,000 customers.
PerfectHome (a trading name of Temple Finance Limited) is a rent-to-own firm which provides household goods to customers on hire purchase agreements. Responsibility for regulating the rent-to-own sector transferred from the Office of Fair Trading to the FCA in April 2014. Following this, the FCA identified that the firm’s affordability assessments did not adequately take into account customer circumstances which led to customers being issued with loans they could not afford.
In addition collections processes did not always deliver good outcomes for customers with some customers being charged late fees for arrears on their insurance contracts, contrary to the firm’s own policy, customers paying for insurance before receiving goods and customers not always receiving a refund of their first payment where the agreement was cancelled before goods were delivered.
In response to these concerns, PerfectHome has conducted a major programme of improvements to ensure that loans are affordable and customers are treated fairly throughout the collections process. PerfectHome has identified customers that may have been treated unfairly in the past and has committed to pay redress to these customers.
The scheme proposes redress for customers in four sets of circumstances:
- £1.7 million relates to 4,000 customers where it was found that affordability assessments were not completed satisfactorily. This meant, in some cases, customer circumstances were not sufficiently considered and loans were issued that may not have been affordable for customers.
The remaining redress relates to:
- incorrectly charged late fees;
- insurance payments made prior to the delivery of goods; and
- initial payments made against sales that were subsequently cancelled.
Jonathan Davidson, Executive Director of Supervision – Retail and Authorisations at the FCA said “Our key priority is to ensure all financial firms lend responsibly and treat consumers fairly; especially those in financial difficulties or who are vulnerable. 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.”
“PerfectHome have recently been authorised by the FCA following substantial improvements to its business practices. This package of redress continues the FCA’s work with the rent-to-own sector to resolve the concerns we have previously identified.”
PerfectHome will contact all affected customers to explain the refund or balance adjustment they will receive. Customers do not need to take any action until they are contacted. Around 2,425 customers whose loans were unaffordable, which led to them defaulting, will have their debts written off by the firm. They will also become the owners of the goods they originally got the loan for.
Gillian Guy, Chief Executive of 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.”