PerfectHome, a trading name of Temple Finance Limited, is a rent-to-own firm providing customers with household goods on a hire purchase agreement (69.8% rep APR).

In 2014, regulator, the Financial Conduct Authority (FCA) found that the firm’s affordability assessments didn’t adequately take into account customer circumstances, which meant they lent money they couldn’t afford to pay.

Further, some customers were also charged late fees for arrears on insurance contracts, which was contrary to the firm’s own policy.

As a result, PerfectHome has agreed to pay redress totalling over £2.1m to 37,000 customers, made up of cash payments and balance write-offs.

The redress package will be split in the following way:

• £1.7m relates to 4,000 customers where it was found that affordability assessments weren’t completed satisfactorily
• incorrectly charged late fees
• insurance payments made prior to the delivery of goods
• initial payments made against sales that were subsequently cancelled.

The FCA said PerfectHome has conducted a major programme of improvements to ensure that loans are affordable and customers are being treated fairly throughout the collections process. It will contact all affected customers to explain the refund or balance adjustment they will receive, so customers don’t need to take any action until they are contacted.

Around 2,425 customers whose loans were unaffordable, which led to them defaulting, will have their debts written off by the firm and they will also become the owners of the goods for which they originally received the loan.

Jonathan Davidson, executive director of supervision – retail and authorisations 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.

“PerfectHome have recently been authorised by the FCA following substantial improvements to its business practices.

‘We wish to say sorry to our customers’

Mike Sweetland, chief executive of PerfectHome, said: “We were authorised by the FCA in December last year. As we worked towards this, the FCA advised us that some of our historic practices did not meet the standards it expected as the new regulator of consumer credit firms.

“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.

“We wish to say sorry to our customers and we’re putting that right. Those affected will be receiving letters from me personally with information about their redress payments which will be made by cheque or balance adjustments.

“As part of our authorisation process with the FCA, we worked meticulously through all our policies and practices and made significant improvements such as the centralisation of underwriting to further improve customer credit and affordability checks – which include the assessment of customers’ income and expenditure. After these significant changes, I can say with confidence that the issues of our past could not happen today.”