The following article has been reproduced from the BBC Web site (www.bbc.co.uk/watchdog)

BBC WATCHDOG REPORT

 28^th JANUARY 2003

BRIGHTHOUSE - HIRE PURCHASE

But BrightHouse will — provided you're happy to enter into a long-term relationship of paying over-the-odds for their goods on hire purchase.

The Scamp family from Liverpool, has run up devastating debts with BrightHouse that they'll be paying for three years.  The Scamps are not able to get credit elsewhere. Consequently, they have had to furnish their house almost entirely with goods from BrightHouse.   The Scamps got a BrightHouse brochure through the door offering 'affordable shopping, for a brighter home'.   The Scamps took up the BrightHouse offer to 'come in for a chat and cup of coffee with our trained and friendly staff'.

Tony Scamp said:  "We did need a washing machine, a very essential item with a family."  The cash price for this second-hand washing machine was £421.54 initially costing Tony £6.59 a week over three years. That's £1,028.04.  Watchdog worked out that Tony is paying on the washing machine an APR of 29.9%, plus service and insurance cover — costing as much as the machine itself.   Tony bought other items from BrightHouse taking his instalments to nearly £30 a week. His total debt was nearly £4,500 — almost twice as much than if he had paid cash.

Tony told Watchdog BrightHouse realised he was in difficulty and re-wrote the contract giving his family free service cover and allowed him to stop paying his insurance — effectively saving Tony what BrightHouse says, amounts to £1,500.  But Tony was clearly at his limit.   However BrightHouse continued to offer Tony more goods on HP.

Tony said:   "They offered me a second hand three piece suite, a three seater, two seater sofa at £400 in the store.   When the Scamps were deeper in debt, representatives from BrightHouse credit outlet wanted back their goods.

John Battle, MP for Leeds-west told Watchdog there's a BrightHouse store in the heart of his constituency. He says it's there to deliberately target those who are less well off. John Battle is calling for changes in the law to govern lenders such as BrightHouse.

John Battle MP said: "Companies like BrightHouse may seem to be offering good cheap deals. In fact because they charge such exorbitant amounts of interest are locking the poor into debt.  "In effect I would argue that they are really leeching off the life blood of the poor, forcing them into deep debt for the rest of their lives.

"It's unsustainable debt and I think what's more, because they are part of the larger banking system and often reputable companies and what they're doing is not illegal. In effect our credit cards are at the expense of the poorest because they are being subsidised by those who are paying the highest rates."

Getting into debt with a company like BrightHouse can be a worrying experience. But one customer found it terrifying. She fell behind on repayments for a bed and stereo, when one of the BrightHouse boys came to her house.    The BrightHouse customer who doesn't want her identity to be revealed told Watchdog she was shocked by the actions of a BrightHouse employee outside her home.

She said:   "My child's in that house. And this person was out there threatening to kick the door in. I said: 'You're not coming in my home'. Then he was getting really angry as he was talking and he was raising his voice. He smacked his hand against his van.    "So I came back inside and at that point I was really panicking. At first I was like, 'I can't move' and by that time the police had pulled up outside."   The police arrived to give advice to the debt collector outside the home of the BrightHouse customer.

This happened on the same day BrightHouse was looking to recruit other arrears control staff. The credit outlet company advertised for an 'intelligent, customer focused individual'.   Another BrightHouse worker was so disturbed by what he was being asked to do he resigned and spoke to Watchdog.   He said:   "It was almost bullying. That's how I felt...just badger them until they paid up. It was literally how we worked in many cases."

Bullying customers was hinted at when Watchdog made an undercover visit to BrightHouse to enquire about a stereo.

Secret Filming of BrightHouse:  BrightHouse: "What you need to do is make sure you can make these payments before you sign them up. Because the gentleman in the office there will batter you with phone calls if you go late at all. So they do ring you up, yes, and we letter you and we do, y'know so..."

Secret Filming of BrightHouse Employee:  "The biggest killer is the late fees. Once you're in that spiral of dropping late, coming in on the Monday and trying to find the late fees, it's a vicious circle."

The ex-BrightHouse employee who had resigned told Watchdog about customers in debt.  He said:  "I came across one case where one person, every single week she was paying a small amount, I think it was about £3 a week, but every week because she was late she'd pay a £2 late fee every single week. She was paying £5 a week on a £3 a week payment.  "Quite a substantial amount of income in one branch I came across was actually late fees."

John Battle MP told Watchdog people become trapped in debt.  He said:  "Most people think there's an attractive offer but they don't realise what they're getting into for the long term. Once they've made the commitment they're then hounded, sometimes for years, to pay back absolutely exorbitant rates of interest."

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BrightHouse Statement to Watchdog

"BrightHouse believes that everyone, regardless of their background, should have the opportunity to own the nice things in life. We therefore offer customers the opportunity to pay on credit in small weekly amounts.

"95% of our customers pay on time and 87% of those who reach the end of their contracts take out another one. This level of loyalty is a reflection of the integrity and transparency with which we operate and the care and attention given to our customers by our staff. All of our shops are located on UK High Streets and are therefore open to scrutiny.

"It is neither possible nor in our interest to do anything other than operate strictly according to the law and we would not exist as a business unless there was a market need.

"We strongly refute the suggestion that any customer would be charged a level of interest above that advertised (29.9% APR). Our computer systems make this impossible and the example you quote in respect of a 'father of a family from Liverpool' is grossly inaccurate in almost every way. In fact, our local store has bent over backwards to assist that particular family through their difficulties, writing off amounts of monies owed on two separate occasions as well as reducing the ongoing payments.

"Over the life of the contract, the family will pay significantly less than their original agreements required. In addition, both the amount of interest and the effective rate of interest have been reduced.

"It is our policy to work with our customers to help them through any financial difficulties they may have. We do not believe many other companies would have been so understanding and accommodating towards the family in Liverpool as BrightHouse has been — certainly not the high street banks.

"In view of the fact that the information provided by Watchdog only enabled the company to identify one of the three customers referred to, we are clearly unable to comment specifically about any allegations made by the other two customers.

"The late payment fee referred to as a 'vicious circle' is a £2.50 fee which is levied only once in each period of time when customers fall behind with their payments. It does not rack up in subsequent weeks. A further £2.50 fee is only levied when another period of late or missed payment occurs — this hardly constitutes a 'vicious circle'. At £2.50, this charge is by far the lowest we are aware of in the credit industry and falls far short of the actual cost of administering an account that falls into arrears.

"In fact, no one should ever get into debt with BrightHouse because, uniquely, our customers can take out an option which allows them to simply return the products and walk away, with nothing more to pay. When this happens the products are always returned by agreement with the customer. We do not forcibly repossess products and on each occasion goods are returned, our staff are not allowed to accept them unless the customer has signed a consent form confirming that they are returning the goods of their own free will.

"When a product is returned, we issue the customer with a voucher to the value of all the money they have previously paid. This whole arrangement enables customers who fall on hard times to stop paying for up to a year and then return to exactly where they left off when they regain their income. Although it is not possible for returning customers to have back the actual product they were previously purchasing, a suitable alternative product of the same type and age is provided. This is always done by agreement with the returning customer who invariably has a choice of alternative products.

"We reject the notion that such products are of poor quality. In fact, the reverse is true. It is our policy to ensure that returning customers receive products that are at least as good, and preferably better than the ones they were originally purchasing. By definition, these goods are always second hand (because the customer is continuing from where they previously left off) but are refurbished to a high standard by our 300 refurbishment and service personnel and are fully guaranteed.

"It is true to say that some of our electrical products are more expensive than in the major electrical retailers such as Dixons and Comet. This is mainly a function of scale - these companies have much greater buying power than BrightHouse. We tend to be more price competitive on furniture because the market for furniture is more fragmented and we are one of a number of medium sized purchasers.

"You have cited an ex-employee who says the company has used 'bully boy tactics to get people to pay'. We utterly reject this accusation. All staff who deal with debt are highly trained, tightly controlled and regularly audited. All our procedures, processes and paperwork have, over the years, been thoroughly discussed with the regulators and are fully written up in training and operational manuals. As you would expect, we operate strictly in accordance with the law. A disgruntled ex-employee who has left under a cloud and has an axe to grind, such as the individual you have been in contact with, is not a sound source of information."