Rent-to-own shops attract negative publicity

16th February 2015

Stores such as Brighthouse and PerfectHome allow customers to purchase household goods via the payment of weekly instalments. Like hire purchase, the ownership of the goods does not transfer to the customer until the payments have been completed.

This business model appears to be popular, Brighthouse operates 291 stores around the UK and PerfectHome a further 67. Online competitors such as Buy as you View also exist.

Last week a group of MPs concluded that rent-to-own shops are ripping off their customers. Among many criticisms, 94% interest rates, compulsory additional warranties and possibly mis-sold insurance policies were highlighted.

The sector took a further blow from news in Hull where PerfectHome was found guilty in court of aggressive and misleading trading practices. Trading Standards found fifty sets of house keys in the store that had been collected from customers to facilitate the repossession of goods if regular payments weren’t made.

PerfectHome was fined £6,000, but intends to appeal against the verdict. They state that the retention of house keys is not company policy and was the action of a rogue store manager.

How expensive can rent-to-buy become? The following examples show the extraordinary additional costs that can be involved:

  • The BBC found a Hotpoint tumble dryer on sale in Curry’s for £229 which would (including compulsory extras) cost £780 via Brighthouse.

  • The BBC also found a Samsung freezer on sale for £644 in John Lewis which would cost a total of £1,716 via a five year deal with Brighthouse.

  • The Independent highlights a 42-inch TV available for £249 via Argos while a similar model could cost £1.482 via a rent-to-buy shop.

If something goes wrong with an important household item while you’re in a Scottish trust deed is replacing it via rent-to-own an option? We’d strongly advise against it. Apart from being a rip-off in terms of total cost, your household budget may be placed under great strain while you keep up other with other bills and your trust deed payment. Repair of the broken item, buying second-hand or securing help from family could all have significant advantages over rent-to-own.

If an essential household item breaks, we suggest that you speak to your trustee before heading off to Brighthouse or PerfectHome. It’s perfectly likely that your trust deed provider will allow you a temporary payment break to help you to replace a washing machine, fridge, or a freezer for example.

Can you include debts owed to rent-to-own firms if you’re starting a trust deed? There is a significant risk that the goods will be repossessed if you do not make the payments. Therefore, if the goods are essential, you may need to request that an expenditure allowance be made that enables you to keep up the payments until the goods are finally yours.

Because rent-to-own shops are dealing with financially vulnerable customers, and because they’re currently mired in controversy, the Financial Conduct Authority is bringing forward an investigation into the sector. As with the payday loan sector, it’s quite possible that major changes will be forced upon these shops to make sure that customers get a fair deal in the future.

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Wylie & Bisset Grant Thornton

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