Have you ever bought a TV from BrightHouse or a sofa from PerfectHome? Then you might be interested by news that MPs have called for a crackdown on these kinds of stores. This comes after feedback you provided to us last year.
A cross-party group of MPs says the regulator, the Financial Conduct Authority (FCA), needs to take urgent action to stop people from being “ripped off”.
Firms like BrightHouse charge APRs of 94.7% and make customers fork out for expensive cover that can treble the price of household goods.
For example, a washing machine sold for £295 at Co-Op Electricals will cost a whopping £1,092 at BrightHouse once insurance and interest payments are added in.
Recently we told MPs about your experiences of rent-to-own stores after you said it wasn’t fair to be forced to pay for expensive add-ons. While weekly payments are seen as a positive, many of you are worried about not being able to keep up and – as a result – having goods taken away or repossessed.
The cross-party report responded to your concerns and MPs have called on the regulator and the Government to take action.
StepChange Debt Charity has backed calls for reform of the sector. We think MPs are right to be concerned about unfair charges and look forward to seeing the results.
What MPs have said
MPs have criticised stores like BrightHouse for failing to warn customers about the risk of rent-to-own agreements. Some of the key recommendations from MPs are:
- Ban expensive warranties and insurance from being a compulsory part of rent-to-own agreements.
- ‘Health warnings’ about the total costs and risks of repossession.
- Protections for customers against loss of essential items.
- Better price transparency and an investigation into over-charging.
The alternatives to rent-to-own stores
If you’re short of cash to pay upfront, buying from stores like BrightHouse can be tempting. But beware of the dangers! If you can’t keep up with the payments the goods will taken away or repossessed. So unless you know you’ll be able to make payments over the full three-year term, it’s probably wiser to avoid these stores.
However, the good news is there are alternatives if you need to buy something like a washing machine, vacuum or TV.
Credit Unions: Credit unions are known for offering fairly priced loans at affordable rates. But did you know that some also offer great value electrical and household goods through low-cost rent-to-own agreements? Find out if a credit union near you can help.
Buy second hand: Second hand can be a really good option and you can find quality items on established websites like eBay and Gumtree. These sites allow you to set up alerts for specific goods or you can search more broadly for items to suit your needs. Another option is the Freecycle network, which allows members to give – and get – items for free.
Charitable initiatives: Across the UK, furniture re-use charities provide essential furniture, electrical appliances, and smaller household goods. These organisations provide good quality (‘good-as-new’) items that will always be more affordable. Visit the Furniture Re-Use Network and see if they can help.
Local welfare provision: For people in a financial crisis, councils provide access to essential household items like cookers or beds. This is only for people experiencing an emergency so make sure to make your financial situation clear. The Children’s Society has designed a map that contains information about schemes across the UK. So wherever you live, you should be able to find support.