People in debt work together with lenders for Fair Prices

A new report highlights how grassroots campaigners form our Thrive project have succeeded in improving credit lending practices for an estimated 325,000 people on low incomes.

The report ‘Improving Practice in the Rent to Own Industry, published on 5 October 2012, sets out the progress made by the Thrive project in Stockton-on-Tees. You can read or download the report here.

Set up by Church Action on Poverty, Thrive successfully engaged local residents around their concerns, and identified high use of rent-to-own companies in the area. With assistance from the Centre for Responsible Credit, and funding from Friends Provident Foundation, the group made a set of ‘asks’ to the main three rent-to-own firms (Brighthouse, PerfectHome and Buy As You View).

Those firms have now responded with seven key commitments, incorporated in their customer charters:

  • To ensure that goods are competitively priced;
  • To use mystery shopping exercises to evaluate how prices are explained to their customers;
  • To provide customers with a range of payment options;
  • To limit default charges to no more than the actual cost incurred to the company;
  • To put in place policies and procedures to help people in financial difficulty and to refer customers in arrears to free, independent, debt advice agencies;
  • To develop clear policies for future complaints handling; and
  • To provide clear annual statements of account.

They will also work with us to explore sharing customer data through credit reference agencies, whcih could allow low-income customers to improve their credit scores and benefit from lower prices.

The report also points to some areas where further work is required. Firms and campaigners will need to work with relevant trade associations to ensure these commitments are taken up by the whole sector, and are properly monitored and enforced.

Niall Cooper, National Coordinator of Church Action on Poverty, said:

We are delighted with the commitments that have been made so far by companies in this sector. They go beyond those contained in the codes of practice of their trade associations and are a real step forwards. We look forward to working with the firms on an ongoing basis in respect of other issues, including by exploring the benefits of data sharing for low-income consumers. We are also now looking to Government and the consumer credit trade associations to ensure these commitments are taken up by the entire sector.

David Harwood, Company Secretary at BrightHouse, said:

Thrive has done a marvellous job instigating industry talks in the tent-to-own sector. We’re looking forward to continuing working with both the Centre for Responsible Credit and Church Action on Poverty, and sharing best practice going forward.

Talking about her involvement in the project, Stockton-on-Tees resident Maureen Hagan said:

In 2008 I left my partner and moved into unfurnished private accommodation. As a full-time guardian for two teenage granddaughters I had no savings and was reliant on benefits. Although I was able to find some second-hand furniture, I had to turn to PerfectHome and Buy as You View to purchase a new sofa, bed, washer and cooker.
In the beginning I joined Thrive just to get me out of the house…but people have listened to me…a normal everyday person. Not somebody with airs and graces. It was electrifying to know that I was actually helping, not just me, but other people in the same situation I'm in.

Click here to read or download the full report.

Some notes

  1. The rent-to-own sector of the UK consumer credit market comprises firms providing household goods such as furniture, white goods, and electrical items on rental agreements to lower income households with an option for the consumer to purchase these at the end of the rental period. The households using firms in this sector, which are also sometimes referred to as ‘weekly payment stores’, would otherwise have difficulty paying the cash price for these types of goods, and are also limited in their ability to obtain what would be a large amount of credit relative to their income to fund these purchases from other sources.
  2. However, prices are high and the OFT’s High Cost Credit Review in 2010 noted that there was both a lack of transparency in the pricing of RTO agreements and a high degree of dependency on this source of credit amongst RTO customers. Research conducted as part of the review found that 17 per cent of RTO customers hold a number of agreements concurrently and 10 per cent of customers use these forms of agreement continuously, i.e. with no gap between agreements. When asked directly, some 36% of RTO customers identified themselves as being either fairly or very dependent on RTO as a form of credit.
  3. The Office of Fair Trading (‘OFT’) estimated that the RTO sector made advances of between £250 million and £300 million in 2008. However, both the market leader, Brighthouse, and PerfectHome have recently expanded their operations in recent years in the wake of the economic downturn.
  4. Thrive engaged a group of residents in 2010 as part of wider work on financial exclusion issues in Stockton-on-Tees. This group discussed their use of RTO firms, and particularly Buy as You View, which has a strong presence in the region. They set up a project, with funding from Friends Provident Foundation, to engage BAYV, Brighthouse and PerfectHome on the issues of concern in 2011.

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