Rent-to-own firm BrightHouse has agreed to pay back £14.8 million to 249,000 customers who were found to have been treated unfairly.
Some customers will have loans written off while others will get large amounts of money refunded following an investigation and ruling by the Financial Conduct Authority watchdog.
The inquiry dates back to 2014 and concluded that thousands of customers were tied into loan agreements they simply could not afford.
BrightHouse describes itself online as “leading by lending responsibly”, and provides household goods such as TVs and furniture to customers on hire purchase agreements.
But the FCA found that 384,000 customer lending agreements “may not have been affordable” and also that payments “should have been refunded” between 2010 and 2016.
The firm has proposed redress for customers in two sets of circumstances:
1: Customers whose circumstances were not assessed properly at the outset of the loan to determine whether they could afford it
These customers who handed back the goods will be paid back the interest and fees charged under the agreement, plus compensatory interest of 8%.
Customers who retained the goods will have their balances written off. This redress totals around £10.1 million for 114,000 agreements entered into between 1 April 2014 and 30 September 2016, covering 81,000 customers.
2: Customers who made the first payment due under an agreement with the firm which was cancelled prior to delivery
This first payment was not returned to all customers. BrightHouse will refund this first payment plus pay compensatory interest of 8%.
This redress totals around £4.7 million for 270,000 agreements entered into after 1 April 2010 covering 181,000 customers.
Jonathan Davidson, executive director of supervision at the FCA, said: “During the time in question, BrightHouse was not a responsible lender and failed to meet our expectations of firms in this sector.
“Responsible lending and the fair treatment of consumers, especially those in financial difficulties or who are vulnerable, are key priorities for us.”
BrightHouse chief executive Hamish Paton said he “sincerely apologised” to those customers caught up in the situation.
He pledged to ensure they would be reimbursed as soon as possible.