Britain goes for broke at 'rent to buy' chain
Shop specialising in 'buy now, pay later' deals to have 288 branches by end of year in recession boom
A chain of shops offering its customers rent-to-own goods on weekly payment plans that can add up to more than twice the items' face value is expanding across the country, following on the heels of high-street pawnshops and payday loan companies.
The little-known retailer BrightHouse announced yesterday that it will add a further 35 stores this year to the 253 it has already opened, responding to demand from recession-hit consumers for the latest domestic goods on credit.
The chain sells goods such as televisions, washing machines, cookers, mobile phones and computers to shoppers attracted by being able to spread the cost of brand new gadgets, despite paying more in the long-term.
The retailer's business model has come in for criticism for the prices it charges some of the most financially struggling members of society.
An article on national money education charity Credit Action's website says that "saving up to buy an item outright rather than using credit is often the wisest option".
To illustrate the point, it compares a Playstation 3 Bundle bought with optional cover from BrightHouse at £691.08 (£13.29 per week) with the best High Street or online price of £289.99, which is £401.06 cheaper.
But the chain's chief executive, Leo McKee, dismissed the disapproving comments and said: "The criticism is disappointing. My team and I have made a huge effort to be transparent."
He added the retailer had "enjoyed another year of exceptional growth".
BrightHouse's plans to open 35 stores this financial year represent a 40 per cent rise on the 25 it introduced in 2011-12. The chain, which employs more than 3,000 people, posted a 4 per cent rise in operating profits to £34.8m over the year to March 31 and revenues up 17.1 per cent to £266.5m, while its underlying sales at stores open at least a year rocketed by 7.3 per cent.
McKee added: "We are confident that both existing and new stores can continue to deliver solid growth and generate quality cash flow."
The retailer said it had been further boosted by a "surge" in TV sales in the first half of this year, driven by the recent European Football Championship and build up to this month's London Olympics. Debt campaigners warned consumers to be aware that hire-purchase shops like BrightHouse were offering a form of credit – just like the payday loan companies which have faced criticism for taking advantage of people in financial hardship.
Linda Isted, communications manager for national charity Debt Advice Foundation, said: "Before anyone takes on any kind of credit, it's critically important that people look at their own financial position. They need to work out their total household income, and the bills they have to pay every month – rent or mortgage, council tax and insurance, travel to work, food, overdrafts and secured loans, and a cushion for unexpected costs. Most of us only have a rough idea of our monthly budget, and we often forget some outgoings."
She added: "Borrowers must be sure they understand the agreement they are entering into, however attractive the prospect is of the new purchase."
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