BrightHouse in administration: what does it mean for debts and compensation claims?

Rent-to-own retailer BrightHouse has called in administrators following a litany of mis-selling compensation claims.

The rent-to-own retailer has 240 stores and 2,400 employees, who now face the loss of their jobs.

Grant Thornton UK LLP were appointed administrators on 30 March 2020, and includes the part of the business that provides ongoing servicing, warranty and insurance.

BrightHouse offers household essentials and loans on weekly repayments, targeting low-earners who may be turned away by mainstream lenders.

The retailer came under scrutiny in 2017 for introducing high-interest rates, leading to soaring debts for the low-earning households it claims to benefit.

The Financial Conduct Authority ordered it to pay £14.8m in redress to 249,000 customers.

BrightHouse is operating as normal for the time being and there are no changes to customer contracts while the business explores its options - but this could change.

If you're in debt to BrightHouse, or have made a mis-selling claim, here's what you need to know.

What do the administrators say?

• There will be no new rent-to-own or cash loan lending activity
• All outstanding rent-to-own and cash loans remain subject to the terms agreed and customers should continue to make payments in the usual way according to the company's terms and conditions
• Servicing, warranties and insurance claims will continue to be honoured until further notice for essential items and smaller courier deliveries - subject to government coronavirus guidelines.

What will happen to my debt?

Unfortunately, your debt is unlikely to be written off if BrightHouse goes bust.

You'll be expected to keep making the repayments, as agreed in your contract, which an administrator will oversee.

If you stop making your repayments, you could face extra charges and hurt your credit score.

It's also possible that your loan may be sold onto another lender or agency by the administrators.

What does it mean for mis-selling claims?

BrightHouse faces scores of mis-selling claims after the FCA ruled that it had treated customers unfairly in 2017.

It's likely the administrators will oversee these claims if BrightHouse goes bust.

If this were to happen, you might end up receiving less compensation than you would have if BrightHouse was still operating.

It also may take longer for your claim to be processed and paid, as the administrators will be looking to pay back big lenders, like the banks, first.

In 2017 BrightHouse was ordered to pay £14.8m to almost 250,000 customers after an investigation by the regulator found it had failed to be a 'responsible lender'.

It had not properly assessed whether some of its customers could afford to make repayments and charged a large number of customers despite them cancelling during the 14 day cooling-off period.

The majority of affected customers should have been contacted directly by BrightHouse.

If you haven't yet made a claim, and believe you've been mis-sold, it's important to submit your claim as quickly as possible while the company's still operating as normal.

• Read more: Tips on paying off your debts

Will I be able to keep my product?

BrightHouse hasn't been clear on what will happen to products that haven't yet been paid off.

However, as long as you keep to the repayments agreed in your contract, it's likely you'll be able to keep them.

What will happen to my warranty?

You may have paid extra for BrightCare when you bought your item.

BrightCare is an optional service, offering unlimited repairs and replacements if faulty products can't be fixed.

The insurance is provided by a third party - Caversham Insurance Limited - which means if BrightHouse does collapse, you may still be able to make a successful claim for any faulty goods.

You may also have a manufacturer warranty that you can claim on - check your T&Cs to see.

We'll be updating this story as we hear more.