BrightHouse’s lending practices are to be scrutinised by a Parliamentary inquiry to ensure shoppers are “getting a good deal”.
The inquiry could create problems for the retailer, which is eyeing an IPO at present. Some observers had already expressed concern over BrightHouse’s ability to attract investors due to its controversial model; it offers customers, many of whom are on low incomes, weekly payment plans on household products such as sofas, microwaves and televisions.
But annual interest rates on some products are as high as 69.9%. The retailer has been regulated by the Financial Conduct Authority since April.
The All-Parliamentary Group on Debt and Personal Finance yesterday revealed it will examine the sometimes controversial charges that rent-to-own retailers like Brighthouse impose on their customers. But it is thought that the inquiry could impede the progress of the listing if it concludes the business is behaving in a predatory manner, according to the Independent.
Other players in the rent-to-own market include PerfectHome, which has 67 outlets, and Buy As You View, which operates mainly online.
Chair of the parliamentary group Yvonne Fovargue said: “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.”
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 across the UK.”
BrightHouse, which has 270 stores, generated over £333m last year and delivered underlying profits up 10% to £52m. BrightHouse last month hired Rothschild to explore the retailer’s options, including a possible IPO. If BrightHouse were to float, it is expected to be valued at between £550m and £750m.
The Parliamentary group also noted that customers can be obliged to take on a bundle of services at the time of the initial credit agreement, which includes delivery and insurance cover. Consumer groups have questioned whether this amounts to good value for money and have argued that customers should be protected from such contracts.
It will take evidence in November and announce its findings before Christmas.