'Rent to Own' Firms to face Parliamentary Scrutiny

photo: Guardian

Business - BrightHouse, the controversial 'rent to own' furniture and electrical goods chain aimed largely at pay-by-the-week low-income households, is to be investigated by an all-party parliamentary group just weeks after it appointed advisers to prepare for a possible stock market float.

The inquiry will examine the 'very high' costs for people on low incomes who use rent to own to obtain sofas and TV sets and whether consumers should be better protected. BrightHouse, with 270 stores across the United Kingdom, is by far the biggest player in a market that has grown rapidly as wages and living standards have been squeezed. It made underlying profits of 52 m pounds on turnover of 333 m pounds last year, and is understood to be planning a possible initial public offering (IPO). It is 87 percent owned by private equity options for an IPO. A listing could value BrightHouse at betwen 500 m pounds and 750 m pounds, although an ongoing inquiry may could the progress of a float.

The all-party parliamentary group on debt and personal finance is chaired by Labor MP, Yvonne Fovargue, and numbers among its members Andrew Tyrie, chairman of the powerful Treasury committee.

"Rent to own outlets have become an increasingly common sight on our high streets in recent years. But despite this, there is little general understanding of how they operate and how they differ from conventional shops. Our inquiry will look in detail at the products and services they offer and will ask whether customers are getting a good deal," said Fovargue.

Although the market is dominated by BrightHouse, the second largest chain, PerfectHome, has 67 stores, and Buy As You View, which operates mostly online, is strong in the north and Wales. All three have recently been engaged in significant expansion plans, with BrighHouse understood to have identified 400 locations for possible new stores.

Debt charities told the Guardian last Octobers they were dismayed by this expansion, pointing to the high cost of BrightHouse's goods, and the 69.9 percent APR on many of its products, which migh make a washing machine that costs 399 pounds from Currys end up costing almost four times that amont from BrightHouse: 1,560 pounds, broken down into 10 pounds weekly instalments. The parliamentary group estimates the combined customers base buying goods through rent to own is arounf 350,000 households.

In its 'call for e vidence" it said: "Consumer groups have pointed out that the overall costs for the customer are very high. This is partly because the price of the products themselves can be high, but also because customers can be obliged to take on a 'bundle' of services at the time of the initiaal credit agreement, including delivery and insurance cover.

"It has been questioned whether this amounts to good value for money for the customer, with some consumer groups arguing that the consumer should be protected from such contracts. The inquiry will look at a number of issues around how the market is working, and will ask whether more needs to be done, from a regulatory point of view, to ensure that customers get a good deal."

BrighHouse, which hasn't confirmed it is intending to float, will be relying on the fact that all-party groups don't have the same power or influence as formally constituted select committees. The group will take written and oral evidence till early November and issue its findings in the middle of December.

A BrightHouse spokesman said: "Our customers choose to shop at BrightHouse because they value our range of top quality products for the home, our affordable weekly payments, and the personal service we offer in nearly 300 communities the United Kingdom."

source: Guardian