BrightHouse will reimburse customers to the tune of £14.8m after agreeing a compensation package with the Financial Conduct Authority (FCA).
The struggling rent-to-own retailer, which came under attack by the FCA in 2015, has agreed to the redress scheme following a two-year investigation into its legacy processes.
It said, having worked closely with the FCA, it has identified issues with some of its past business practices.
Two types of customer were affected: those who, between April 2010 and April 2017, might not have received a refund when an agreement was cancelled within 14 days; and those who, between April 2014 and September 2016, were not given a rigorous enough affordability assessment.
The first group of customers will receive an average payment of £27, and the latter around £147. The retailer will contact 213,000 past and current customers to explain what they are owed.
BrightHouse chief executive Hamish Paton has apologised to affected customers and said the firm’s “top priority” is to ensure they are reimbursed “as soon as possible”.
“We’re absolutely determined that this doesn’t happen again and have made significant improvements over the last 18 months,” Paton said.
“The FCA recognised this when they confirmed in April that they are minded to authorise our business, subject to specific conditions.”
It is understood that BrightHouse is racing to refinance £220m of bonds that are due next year.
Owner Vision Capital is expected to kick-start a formal sale process this month after retaining adviser Rothschild but, according to reports, a consortium of bondholders is preparing to table a debt-for-equity swap deal.
The move could squeeze out Vision Capital, which acquired the business 10 years ago.
BrightHouse, which operates through 280 stores, rents out household items such as washing machines, fridges and furniture. In June, it posted a 79.1% slump in profits to £11.7m for the year to March.