BrightHouse customers unlikely to receive refunds

BrightHouse specialised in loans for items such as fridges and sofas, and collapsed in 2020, after suffering a £43.5m pre-tax loss for 2019-2020.

It had faced an influx of historic complaints over mis-selling, and failed in its strategic shift towards focusing on cash loan products.

Grant Thornton is managing the administration, and its latest report showed a plan to budget £600,000 to reimburse customer who might have been mis-sold expensive loans by BrightHouse has been discontinued.

The £600,000 had originally been set aside to cover over 11,000 affordability claims from customers. However Grant Thornton’s latest report, released in April 2022, highlights that administrators aim to procure court permission to curtail the compensation scheme, because the cost would be too high.

“Given the likely significant volume and complexity of customers’ affordability claims […] it is the administrators’ expectation that the cost associated with assessing these claims would far exceed the funds available for distribution,” the report said.

“As a result of the above, the administrators are seeking to make an application to the court in the coming period to seek to disapply the prescribed part”.

The news comes as a number of creditors have received substantial sums. Chain finance firm Greensill (or its creditors because it is itself in administration) received nearly £31m.

Lender Greensill was defined as a secured creditor, meaning it was at the front of the repayment queue when its customer (BrightHouse) collapsed. Grant Thornton’s report noted that Greensill received a total of £30.86m in 2020 – a year before it collapsed into administration.

Sara Williams, debt adviser and author of the Debt Camel blog, said: “The hundreds of thousands of customers who should have had a refund for unaffordable lending will receive nothing. The money that customers have been pushed into paying during the administration is all going to the secured creditors.”

She added: “The government and the Insolvency Service need to change this. The customers are the innocent victims here and they should be given priority. Administrators should not seek to collect debts without considering first if the loan was mis-sold.”

Credit Strategy has contacted Grant Thornton for comment.