Buy as You View – written evidence (FEX0013)

 

Introduction

 

  1. Buy as You View (BAYV) is delighted the House of Lords Financial Exclusion Committee has been established and is examining the consumer group we term the “forgotten borrower”. This consumer group who are financially excluded have long been overlooked by policymakers and the mainstream credit companies, and there is a lack of understanding of their circumstances. As a company operating in the Rent-to-Own (RTO) sector, providing essential household items to many low income families who are unable to access standard forms of credit, we believe we have a unique insight into how to tackle financial exclusion. We have daily contact serving many of the 1.5 million financially excluded families across the UK, and we would be delighted to provide oral evidence to the committee as the inquiry progresses. This response outlines the challenges the forgotten borrowers face when it comes to accessing credit.

 

Background

 

  1. BAYV is a Home Collected Credit business with over forty years’ experience helping mostly low income households to buy high quality home furniture, consumer electronics and other durable household products through affordable weekly payments.

 

  1. We currently serve 65,000 customers and employ more than 500 full time employees operating in 6 major geographical locations: South Wales, Scotland, the North East, Yorkshire, Midlands and the North West. We do not operate a “bricks and mortar” store operation, and 80% of the 2,000+ applications we receive every week come via our website.

 

  1. BAYV operates one of the nationally lowest APRs in the industry with all charges included upfront and no late fees, guaranteeing that customers will not face any extra charges. We allow customers to return their products at any time without financial penalty, and have a strict affordability checking process that sees less than 30% of all applications approved. Our research has showed that it is often more difficult to be approved a mortgage with a high-street retail bank than be approved a payment plan for a BAYV washing machine, demonstrating our commitment to only taking on customers who are capable of meeting their repayments.

 

  1. We do not charge late fees or default interest. Our customers are clearly shown exactly how much they will pay (per week and in total), for how long, and the cash price of the product. We have spent several years working with organisations such as Thrive, Church Action on Poverty and the Centre for Responsible Credit to develop a customer charter that is clearly displayed on our website.

 

 

The forgotten borrower: exclusion from standard credit

 

  1. The RTO and Hire Purchase sectors serve a customer base of approximately 3 million households across the UK, many of whom are at the lower end of the income scale or recipients of welfare support. The sad but factual truth is that much of this population are excluded from access to other sources of finance and are unlikely to have enough available savings to replace basic essential household products, like beds and washing machines.
  2. Many of the forgotten borrowers rely on short term loans and RTO agreements to meet shortfalls in their income. Recent research published by the Consumer Finance Association (CFA) shows that 54% of customers who access loans and short term credit agreements feel “it makes it easier to pay bills…and without this access to credit, they might be tempted to turn to his local loan shark”.

 

  1. Furthermore, a large proportion of our customers are single working parents on relatively low incomes but with considerable outgoings, and a payment plan with BAYV helps to give clarity and security of the affordable bills that are paid for essential household items on a monthly basis. The CFA also found that customers who set up loans and payment plans online “like borrowing online because it’s a controlled, efficient environment that they understand”.

 

  1. Many of BAYV’s 65,000 customers across the UK are financially excluded from mainstream forms of credit. We believe this consumer group who struggle to afford essential household items and cannot access standard credit are the “forgotten borrowers” of their generation. Among many other associated problems, they are unable to afford to buy or borrow typical household goods many take for granted. It was this unmet demand from which the Rental and Hire Purchase sector was borne out of in the 1950s.

 

  1. At a time when the Government is keen to tackle financial exclusion, there has been little in-depth research to understand this vast consumer base and we urge the committee to examine the type of financial products that can work for low income households, such as the often overlooked RTO market. Given our experience of working with financially excluded families, we are very keen to support the inquiry’s objective to “find a way forward and look at the role banks and others in the financial services industry can play in helping those who are currently excluded…”

 

BAYV supporting financially excluded families

 

  1. BAYV understands that working with low income households requires a responsibility to our customers and we operate a distinctly different model to our competitors which leads the industry in transparency, responsibility and affordability. We are the only company in the RTO sector to have fully adopted the customer charter the industry worked on with consumer groups and charities.

 

  1. We understand that many customers do not have the financial education often needed to navigate the complex rules, regulations and payment plans that are often presented in documents which can be very difficult to understand. Therefore, BAYV is the only RTO business to offer warranty and insurance as optional extras and it is our policy to point out to customers that home insurance may be a cheaper option, including a marker on our website. Our prices are fully transparent within our website listing and catalogue - for every product we show: the cash price; number of weeks; the total cost and the weekly payment.

 

Misconceptions of the RTO sector

 

  1. The public perception of the RTO sector is popularly linked with the largest retailer; BrightHouse, which has regularly come under criticism for its high interest rates, lack of transparency and practice of compulsorily “bundling” warranty and other charges into the total cost of the product.
  2. Due to the bad practises of our competitors in the past, the RTO sector has rightly come under close scrutiny from the FCA and Parliament. There are many who believe that the RTO sector should cease to exist, but we believe this would only lead to more families becoming financially excluded. 

 

  1. There are many not-for-profit companies operating in the RTO sector, such as Fair for You, Own Your Own and a range of community run credit unions. Whilst we welcome more competition in the sector, providing more choice for consumers, it is unrealistic to expect the not-for-profit sector to provide non-standard credit for the millions of consumers who rely on RTO agreements to fund their essential household items. The not-for-profit companies do not have the national scale nor the access to capital that the RTO companies do and would be unable to keep up with consumer demand. It is therefore vital that the RTO sector continues to function with a mix of not-for-profit and for-profit, but all companies act in the best interests of financially excluded consumers.

 

 

12 September 2016