The UK’s largest rent-to-own lender BrightHouse has appointed administrators from Grant Thornton, placing 2,400 jobs at risk.
Grant Thornton insolvency practitioners Chris Laverty, Andrew Charters and Sarah O’Toole have been appointed as joint administrators of Caversham Trading, which trades as BrightHouse.
As a result, there will be no new rent-to-own or cash lending activity at BrightHouse and all outstanding rent-to-own or loans remain subject to their agreed terms, the administrators said.
Servicing, warranties and insurance claims will continue to be provided, they added.
Like many lenders which have collapsed during 2019 and 2020, BrightHouse faced an influx of historic complaints over mis-selling.
Earlier this month, it emerged that BrightHouse had suffered a £43.5m pre-tax loss. In a statement at the time, the firm told Credit Strategy it “exploring a range of options to cap its exposure to claims for historic mis-selling”.
This included a move away from rent-to-own and a shift towards cash loans, a report issued to investors showed. BrightHouse trialled cash loan products in 2018.
It also revealed that it had increased its complaints provisions by £4.9m to £17.5m, reflecting “a higher volume of claims being received than previously forecast”. Complaints are costing the company around £1m per month, the report showed, although BrightHouse believes that the eventual bill could be much higher, should its disputed cases with the Financial Ombudsman Service (FOS) be upheld.
The company has undertaken significant structural changes in recent years in order to improve its resilience, its offering to customers and comply with regulations after a clampdown by the Financial Conduct Authority (FCA).
The business is on its third chief executive in little over a year. Hamish Paton left to join Amigo Loans in 2019, with his replacement Anth Mooney appointed in July. However, after six months, it was announced he would join Vida Homeloans owner Belmont Green as chief executive, leading BrightHouse to appointment of Alan Gullan as interim chief executive.
Away from complaints, the entire rent-to-own sector has been adjusting to a cap imposed by the Financial Conduct Authority (FCA). Under the cap, which came into force in April 2019, credit charges cannot be more than the cost of the product. In addition, rent-to-own firms would need to benchmark the cost of products against the prices charged by three other retailers.
The rules would also prevent firms increasing their prices for insurance premiums (for example, theft and accidental damage cover), extended warranties or arrears charges in order to recoup lost revenue from the price cap.