Major UK high street giant BrightHouse is reportedly on the brink of collapse and has “been forced to put administrators on standby”.
Britain’s biggest rent-to-own retailer is said to be facing potential insolvency in “a matter of weeks” due to a surge in compensation claims.
The collapse of BrightHouse, which has 240 stores across the UK, would plunge 2,400 employees’ jobs at risk.
A source close to BrightHouse shareholders told Sky News that although the potential collapse is not inevitable, it has become more likely in recent weeks.
It comes just months after the retailer announced plans to shut down 30 stores and axe 350 staff, having continued to struggle financially.
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Three years ago, in 2017, the retailer was ordered to pay back a staggering £14.8million to customers after the Financial Conduct Authority (FCA) found it had treated customers unfairly.
Then in 2018 the FCA announced plans to cap the amount of interest that rent-to-own retailers charge customers, which has hit the industry hard.
The cap, which means the maximum interest paid will be no more than the cost of the product itself, started in April 2018.
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Just five months later BrightHouse then reported a £2.2million slump – with a rise in pre-tax loses from £19.9million to £22.1million in the six months to September 29, 2018.
Rent-to-own customers make monthly payments on products at retailers like these until they have paid in full.
But the price can quickly mount up because of interest rates that can reach 99% a year.
The FCA’s rule change now means, for example, if a fridge costs £200, customers will pay no more than £400.
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The change had come after the FCA found 400,000 people were paying an extra £23million a year on goods such as TVs and fridges due to overpricing and excessive interest charges.
A BrightHouse spokesman said: "BrightHouse is exploring a range of options to cap its exposure to claims for historic mis-selling.
"Recent updates, most recently on 28 February, have quantified the provisions raised against the cost of these.
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"To be successful in this, BrightHouse needs the support of its stakeholders and is currently in active discussions with them.
"Naturally, the protection of value in the business and safeguarding of customers' interests are core to our planning."
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