From Telegraph.co.uk
Credit crisis brightens sub-prime lenders
By Richard Fletcher and Philip Aldrick
Hard pressed UK consumers are turning to sub-prime lenders as traditional providers of credit tighten their lending criteria.
New Year may see collapse of high street chains
BrightHouse, the controversial retailer that sells on weekly credit, reported an 11.5pc increase in like-for-like sales in 2007 in sharp contrast to high street rivals.
Customers can "rent-to-buy" from private equity owned BrightHouse without undergoing any credit checks - but typically end up paying more than double the usual high street price for household products such as TVs, sofas and washing machines.
The sales growth at BrightHouse comes amid increasing evidence that the credit crunch is spilling directly on to Britain's high street as providers of traditional consumer finance rein in the amount of "buy now, pay later" loans made available to shoppers.
Consumer finance is vital to big-ticket retailers of furniture, household appliances and large electricals. Many claim to have experienced a recent drop-off in the levels of acceptances, while figures from market research group Datamonitor show there was a large reduction in the volume of finance provided in three months to September.
Consumer finance groups, such as GE Money, HSBC's HFC and BNP Paribas' LaSer, have been tightening up their lending criteria for much of the past year and are said to have stepped up their efforts in the last few months as wholesale funding costs have soared due to the liquidity crisis.
According to Datamonitor, the value of loans made through point-of-sale retail finance in the last quarter fell by £400m to £1.8bn. The quarterly fall was the steepest in more than half a decade and overall levels are now at their lowest since records began in 1994. The figures incorporate store cards, instalment credit and mail order.
One retailer of big-ticket items, who declined to be named, said: "The lending criteria have not changed but we have noticed a drop-off in the level of acceptances. They have fallen from 75pc to 68pc with the biggest fall in November."
Accounts filed by BrightHouse at Companies House earlier this month appear to confirm that the tightening has forced consumers to turn elsewhere for credit.
In the 12 months to the end of March 2007, pre-tax profit soared to £12.5m, up from £7m the year before. Sales rose to £129m, up from £116m the prior year.
BrightHouse, which is owned by Vision Capital, has been targeted by consumer debt campaigners who have accused the retailer of being uncompetitive and misleading customers.
Although its advertised APR rate is around 29pc, the cost increases dramatically if customers take out service cover, which allows them to return hired goods at any time. BrightHouse's accounts said "the majority of customers" take out service cover.
Including service cover a Nintendo Wii would cost a Brighthouse customer £519 - or £9.99 a week for 52 weeks. Argos is selling the same games console for £294. A Whirlpool fridge - widely available elsewhere on the high street for £175 - will cost a BrightHouse customer £376.55, including service cover.
Retailers have already warned that tightening credit conditions have hit trading.
This month ScS Upholstery blamed the challenging trading conditions of the past year in part on "consumer credit providers [seeking] to minimise their risk through tougher lending criteria, [which] has led to lower customer loan acceptance rates".
Credit card providers have also tightened lending criteria. According to MoneyExpert.com, there was a sharp rise to 3.27m in applicants rejected over the past six months. Providers are believed to be rejecting 40pc-50pc of applications compared with 33pc last year.
A GE Money spokesman said: "GE Money regularly reviews its lending and risk policies as part of its standard operating procedure." HFC declined to comment.
Link here:
Credit crisis brightens sub-prime lenders - Telegraph 
Brighthouse enjoying the credit crunch! (Don't say I didn't tell ya!) 
