Brighthouse: is it worth it?
THE economy might be recovering, but millions of people still struggle to afford items such as TVs, sofas and computers.
Enter Brighthouse - the UK's largest rent-to-own company - which offers the chance to pay for otherwise unaffordable purchases in small, manageable chunks.
But there are issues to be considered before shopping at one of the company's 286 stores - particularly for those who are on a tight budget.
Customers can end up paying more than double the value of the goods, which are often priced higher than average to begin with. Other problems include being made to take out pricey insurance and unnecessary service warranties on purchases.
In fact, concerns about that bundled insurance and the possible inflation of prices have prompted the FCA to bring forward their review of Brighthouse and other pay-to-own companies to summer 2015.
How it works
Customers first undergo a credit check. They also need to provide proof of income as well as a tenancy agreement or mortgage statement.
Shoppers don't pay for Brighthouse products immediately. Instead they make weekly repayments for a set period of time, as they can with catalogue or other furniture store purchases.
The repayments include interest, which at present is 64.7% representative APR, and mandatory insurance.
By comparison, some of the credit cards on offer for people with poor credit scores have APRs ranging from 30% to 50%.
It doesn't stop there. For goods like computers, tablets and mobile phones, the representative APR is 94.7%.
That means a Samsung 11.6" ATIV Smart PC advertised in Brighthouse for £807.82 "with 5 star service" will cost a total of £1,452.88, over 104 weeks at £13.97 a week.
Five star service
Brighthouse offers what it refers to as "5 star service", which it says means the following:
- Delivery and installation is included in the price.
- Product insurance is included in the price.
- Unlimited repairs are included in the price.
- If products can't be immediately fixed, customers are given a loan product to tide them over.
- Unfixable products are replaced with an item of the same specification.
People looking on the website will be able to find a price breakdown for each product, showing the cost of the item before the "5 star service" is applied.
So , for example, the laptop mentioned above costs £573.56 without the five-star treatment - but as the note next to the breakdown points out, you can't buy it without.
Is it worth it?
Brighthouse are undeniably filling a gap in the market, providing people who struggle to obtain credit elsewhere with a means to buy things for the family home.
There's comfort for people in being able to make weekly payments of a fixed, predictable, amount.
Being able to walk out of a Brighthouse store having ordered a new sofa or computer is undeniably appealing - as is the suggestion of insurance and free repairs, compared to other stores' expensive warranty schemes.
But while these policies seem good on paper, they are generally unnecessary - Which? say modern TVs have only a 5% chance of needing repair within the first five years.
And the mandatory element is one of the factors that prompted the FCA's review of rent-to-own stores, setting off "alarm bells" about possible mis-selling.
A StepChange survey of just under 300 of its clients revealed that 38% were unhappy about being made to buy insurance.
In addition, 72% said they felt the prices they had to pay were too high, with almost four in 10 saying they didn't realise how much they would have to pay in total.
Different products, part one
Brighthouse tell their customers, "if you find an identical product at a cheaper cash price on the high street, we'll match that price."
But identical products are difficult to find and compare for a couple of reasons.
Many of the products on sale are made especially for Brighthouse, or come with features not available from other retailers.
In addition, Brighthouse operate their own product code system, which makes looking for the same item elsewhere on the high street more difficult.
It's only recently that customers shopping online have been able to find the manufacturer codes at the bottom of the product pages, which makes comparison simpler - and the difference in prices more revealing.
A Toshiba 55" Premium Smart 3D LED TV is advertised on the Brighthouse website for £1,381.75, before interest, and a total cost of £2,652 once paid off.
A quick web search shows the same Toshiba 55" Full HD Smart 3D LED TV on sale from around £850, up to about £1,050.
Different products, part two
Online reviews for Brighthouse are mostly good - Feefo gives the company 83% for service and 90% for its products.
But the Consumer Action Group has a special forum for Brighthouse and other hire purchase companies. Among the posts are a couple of common themes - payment issues and customers getting goods other than those they thought they'd bought.
Brighthouse sells refurbished goods as well as brand new items.
As a result of the initial credit check, some customers will receive refurbished versions of the item they wanted, or a similar but lower specification alternative.
A good proportion of complaints are from people who didn't feel it was made clear to them that they would be receiving something different.
Others say they've returned goods to a store to get them repaired as promised, but having been left without a replacement of any sort, they're expected to continue making payments.
Meanwhile late or missing payments incur large fees - and customers report receiving frequent texts and calls until they settle up, with some saying they've been told their goods will be removed.
Brighthouse say people have the option of returning an item to the store - either on a "pick-up and hold basis" until a customer can afford to make payments again, or on a more permanent basis, with nothing further to pay.
Clearly this isn't ideal for bigger items like sofas and washing machines.
They also offer the option of "downgrading" items, as above, where customers replace their item with a cheaper alternative that will cost less per week.
I'm not convinced
Brighthouse chief executive Leo McKee admits that a "substantial proportion" of the company's customers come from lower income households.
He says the company works well for them, with "some 40% of our new customers coming from referrals from existing customers."
Like payday loans, the structured approach to borrowing offered by Brighthouse appeals to many who don't want the temptation offered by a credit card.
That said, almost all credit cards have better interest rates for people who want to spread the cost of borrowing - and holders can request their credit limit be brought down to help them control further spending.
See our guide at the bottom of the page here.
Loans from credit unions are among the cheapest available to people with poor credit history or tight finances, but many require a commitment to save money with them before they can offer a loan.
In the meantime, free and impartial advice - and support for those feeling the strain with repayments - is always available from specialist agencies like Citizen's Advice, StepChange Debt Charity and National Debtline.