Saturday, June 25, 2022

BrightHouse Administrators are transitioning to eliminating customer refunds

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Grant Thornton believes the cost of dealing with the “significant volume and complexity” of customer affordability claims would exceed the size of the £600,000 reimbursement pot

A report submitted to Companies House by Grant Thornton, who oversees BrightHouse’s administration, said he would seek permission to scrap an original plan to distribute a £600,000 pot to customers who believe that these are mis-sold loans by the specialized lender.

Pressured customers of the collapsed rent-to-own BrightHouse are unlikely to get any money back from the firm overseeing the settlement under a new plan.

In the report, she asserted that “given the likely significant size and complexity of customer affordability claims … the Administrator anticipates that the costs associated with evaluating these claims would far exceed the funds available for distribution.”

This update comes despite the fact that supply chain finance firm Greensill – which itself entered administration last year – received almost £31million as part of the administration process.

Commenting on the update, Luke Harrison, partner at bankruptcy law firm Keidan Harrison, said: “The bankruptcy rules provide for a cascade of payments to be made to various stakeholders of companies that experience bankruptcy.

“The funds available for distribution are limited to the Company’s assets and any recoveries made through claims, which is why you are now seeing claims such as those recently made by insolvency practitioners being made against Carillion’s auditors.”

He added that secured creditors – like Greensill in BrightHouse’s case – are “at the top of the waterfall”, meaning they get paid first, with HMRC now also having a priority right to payment.

“Customers and trade creditors sit further down the waterfall, but usually on the same level,” he said.

“This includes mis-sold claims like in Brighthouse. Investors/shareholders are usually at the bottom of the waterfall unless they have invested through secured loans.”

Prior to its collapse, BrightHouse was lending to customers to purchase household furniture and was also providing cash advances of up to £1,000 for a fixed 18-month term.

Customers were largely from low-income households and so news that customers may not be compensated could come as a double whammy when the cost-of-living crisis hits.

The company had been the subject of controversy before its collapse, with the company paying out £14.8million to nearly 250,000 customers after an investigation by the Financial Conduct Authority (FCA) led to a redress scheme after the regulator found out how the company rates some had customers’ ability to repay and collect payments may have been unfair.

Grant Thornton said he was unable to comment further on his latest update beyond his Companies House report.

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