Buy Now Pay... Earlier

Retailers have always been fond of "buy now pay later" offers, but perceived abuses (or lack of clarity) discovered by the FCA must end by November. 

Typically, a BNPL credit offering involves a 'promotional period' of 3 to 12 months in which no repayments are required and no interest is payable at all if the consumer repays in full during the promotional period. After the end of that period, repayment obligations begin; and interest is charged for the promotional period. Uncertainty arises where the consumer only makes partial repayments during the promotional period. Some creditors ignore partial repayments and still charge interest on the entire amount of credit for the promotional period, at least until the date of the partial repayment(s). This means that consumers who are uncertain whether they'll be able to repay in full during the promotional period also don't know whether to make part repayments. Even only narrowly missing full repayment in the promotional period could mean paying interest on the full amount of credit anyway - or nearly the full amount.

These types of offers could be either on a 'fixed sum' basis for a one-off purchase, or on a running account basis for each product purchased during any given month on a store card, for example, making it tough to understand which partial payments are credited to which purchase.

BNPL offers are not the same as a genuine "payment holiday" features, where interest is still being charged during the 'holiday' period when no repayments are due. Nor are they necessarily the same as a 0%APR offer that you see on cars, for example, where no interest at all is payable for a certain period (so long as there is no discrimination against partial repayments before the interest-free period expires). Credit cards effectively have a much shorter interest-free period of up to two months on each purchase (so you need to clear the whole running balance in that time).

The FCA wants to BNPL consumers to be free to repay as much as possible during the promotional period, so they incur less interest. Changes to the FCA's consumer credit rules (CONC) will require clear information to be given about BNPL credit offers, so consumers know the consequences of not repaying the full balance by the end of the offer period, with a reminder that the offer period is about to end.

The FCA will also prevent creditors claiming more interest on any amounts repaid during the promotional period than would be payable if they repaid the full amount, so consumers get the benefit of making partial repayments even if they don't clear the full amount of credit in that time. 

Creditors must comply with the disclosure rules by 12 September 2019, and must stop claiming interest on partially repaid amounts by 12 November 2019 for purchases after that date.