With the FCA clamping down on rent-to-own lenders, credit unions are taking them on with a fair and ethical alternative of their own. Anna Heard 2nd November 2017 Rent-to-own company BrightHouse has built a multi-million-pound business on selling appliances at inflated prices to some of Britain’s poorest households. Since arriving on our high streets in 1994, it has become notorious for TVs and washing machines that end up costing owners thousands of pounds, base prices higher than Harrods, and, for those who fall behind on payments, repossessing goods without so much as a court order. This month, regulators finally caught up with them – and it’s just the start. At the end of October, the Financial Conduct Authority (FCA) blasted BrightHouse as ‘not a responsible lender’, saying it ‘failed to meet our expectations’ of firms in the sector. It found that BrightHouse had made loans without accurately analysing customers’ ability to repay, and required it to pay out more than £14.8m in refunds to 200,000 people affected. But is it enough? The current refunds demanded by the FCA average only about £60 per affected customer. It’s crucial that BrightHouse is also required to compensate customers for hidden extras like the product insurance that is compulsorily charged on many products, and extortionate penalty charges imposed on those who default on payments. When Parliament reviewed the rent-to-own sector in 2015, MPs found that customers faced an average overall bill three times higher than prices on the high street. They reported that the 400,000 UK households who shop at rent-to-own businesses have incurred debts up to £500 million. With an income of £16,100, the average BrightHouse customer earns a third less than the UK average. For the private equity firms that own BrightHouse, though, that’s a business opportunity. We’ve seen this kind of systematic targeting of poor households before, among predatory payday lenders that the co-operative movement has long worked to bring to heel. At the time, the movement argued for credit unions as the ethical and affordable alternative. And now, credit unions are stepping up to take on rent-to-own companies too. Fair for You is a socially responsible, not-for-profit lending company that is challenging the unethical practices of BrightHouse and other predatory firms. On its website, you’ll find sofas, fridges, washing machines and TVs for sale on credit, but at interest rates that are a fraction of the cost of BrightHouse. Fair for You ensures that payments are manageable, setting payments according to each individual customer’s budget. The company’s socially responsible model of lending results in a typical customer paying just £20 to £30 more than they would if buying upfront from a high street shop. In its first year of operation, Fair for You loaned over £1 million to almost 3,000 households. It’s an idea that’s catching on: within 9 months, customers grew by 200%, and it’s currently in the process of securing an extra £5 million in social investment to enable it to expand. Thanks to action by the FCA, firms like BrightHouse are being forced to face up to their responsibilities. But by providing a fair and affordable alternative, it’s the co-operative movement that will put these kinds of predatory lenders out of business for good.