Tens of thousands of customers of rent-to-own firm PerfectHome will share a £2.1 million compensation pot for unfair treatment.
Under a deal agreed with the Financial Conduct Authority watchdog, the firm will refund customers in the form of cash payments and balance write-offs.
The FCA ruled that at least 2,000 customers were given loans they could not afford.
In total, about 37,000 people will benefit from some level of financial redress, the FCA said.
PerfectHome provides household goods to customers on hire purchase agreements – everything from TVs to washing machines, sofas to fridge freezers.
The FCA said the scheme proposes redress for customers in four sets of circumstances:
- £1.7 million relates to 4,000 customers where it was found that affordability assessments were not completed satisfactorily. This meant, in some cases, customer circumstances were not sufficiently considered and loans were issued that may not have been affordable for customers.
- incorrectly charged late fees;
- insurance payments made prior to the delivery of goods; and
- initial payments made against sales that were subsequently cancelled
Jonathan Davidson, executive director of supervision at the FCA, said: “Our key priority is to ensure all financial firms lend responsibly and treat consumers fairly; especially those in financial difficulties or who are vulnerable.
“Unaffordable lending is not acceptable in any circumstances. I am pleased that the firm has taken steps to address this and provide redress to those customers affected.”
He added that PerfectHome had recently been authorised by the FCA following substantial improvements to its business practices.
Around 2,425 customers will have their debts written off by the firm, and they will become owners of the goods they purchased in the process.
Mike Sweetland, chief executive of PerfectHome, apologised to those customers that had been affected.
He added: “Our processes around theft and accidental damage insurance, cancelled sales and a smaller number of affordability checks did fail some of our customers and have all been stopped.”
Last month, the FCA fined doorstep lender Provident Financial £2m and ordered it to pay more than £170m in compensation after another mis-selling breach.
Thousands of customers were sold an add-on product on its Vanquis credit card which actually put people further into debt rather than help them manage their repayments better.