Fashion chain probed over rip-off policies
by Rachel Millard ONLINE retailer N Brown will hand out £40m compensation after selling customers poorvalue insurance on its clothes and homeware.
The plus-sized clothing specialist, whose brands include Simply Be, Jacamo and JD Williams, will contact around 150,000 customers following concerns raised by the watchdog, the Financial Conduct Authority (FCA).
The latest worries come after a Mail investigation revealed the firm was charging interest rates of almost 60pc. Shoppers paid premiums of an average £100 for insurance provided by a third party underwriter on N Brown products but rarely made a claim.
N Brown declined to disclose how much it made from the deals.
It is the latest blow to the firm over its financial products after it set aside around £22.9m to compensate customers mis-sold payment protection insurance.
Yesterday, analysts said the FCA could scrutinise the firm’s financial services arm more closely.
Advertised by TV star Lorraine Kelly, model Lisa Snowdon and former cricketer Freddie Flintoff, N Brown made around one-third of its £901m annual income from interest and fees charged on credit deals used to pay for clothes – rather than the clothing itself.
In May, the Mail revealed it charges APR as high as 58.7pc, with fees of £12 for late payments. A quarter of 4.3m customers buy on credit.
UBS analysts said yesterday: ‘There is a risk the FCA could look at the profitability of the credit book and whether the interesti rate charged by N Brown offers value for money. This, we believe, is a key concern for the N Brown group given its materiality to group profit before tax.’
However, N Brown believes thatt is unlikely, as the FCA gave ‘full and unconditional’ authorisation to its financial services business in Septemberb last year.
The insurance at the heart of itsi latest problems was sold to customers between 2006 and 2014, mostly before 2011.
At the time, N Brown was more of a catalogue business selling a higher proportion of homeware products such as electrical goods. But insurance was also sold on cutprice clothes. It is believed that the insurance provider contacted customers after the sale to offer insurance, meaning they had to expressly choose it rather than opt out.
It reviewed the policies after the FCA asked the industry to make sure insurance products were fair value and found a low level of claims, suggesting the policies were bad value.
The £35m-£40m cost will not affect underlying operations, N Brown said, and trading is still strong. Shares yesterday fell around 6pc to 284.8p. The FCA declined to comment.
Fashion chain makes £265m on store credit by charging rates of 60pc Daily Mail, May 30