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LEAH FARRELL

Buy-now-pay-later firms offering 'indirect credit' must now be authorised by the Central Bank

The regulator has also placed an interest rate cap of 23% APR on all consumer credit agreements.

THE CENTRAL BANK of Ireland has widened its consumer protection rules to cover so-called ‘buy-now-pay-later’ (BNPL) firms.

It means companies offering “indirect credit” to customers, allowing them to spread the cost of purchases over instalments while charging them interest, will now need to be authorised by the regulator, the Central Bank said in a statement.

It follows the commencement of the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022, which was signed into law last month by Minister for Finance Paschal Donohoe.

Firms that offer hire purchase agreements such as hire purchase, consumer hire, Personal Contract Plans (PCPs) and BNPL must now register with the Central Bank as either a Retail Credit Firm or a Credit Servicing Firm.

Indirect lenders provide credit to consumers by paying the retailer directly and then charging the consumer interest on future repayments.

Under the regime, the regulator has also capped the interest rates firms can charge customers for credit agreements at 23% APR.

They must also notify the Central Bank if they plan to introduce any new charges or increase their rates.

Firms that have been providing such services up until now can avail of transitional authorisation agreements, the Central Bank said.

In a statement today, Gerry Cross, Director of Financial Regulation, Policy and Risk at the Central Bank, said, “We welcome this legislation as it closes a gap so that providers and servicers of hire purchase, including PCP, consumer hire and indirect credit (e.g. BNPL) will now need to be authorised by the Central Bank.

“Extending our consumer protection framework to these firms will ensure that Irish consumers receive the same protections that we require of other financial service providers. Our aim is to ensure that consumers have the same level of protection no matter where they source their financial services.”

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    Mute Anna Carr
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    May 16th 2022, 3:02 PM

    It’s an evil business designed to prey on vulnerable people, but, on the other hand society screams, I WANT IT NOW. A double edged sword :(

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    Mute Joe_X
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    May 16th 2022, 4:17 PM

    @Anna Carr: Exactly Anna, it seems that people have forgotten how to save up for the things they want, and if they see something they like, they have to have it there and then, instead of saving for it.

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    Mute David CARLIER
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    May 16th 2022, 4:29 PM

    @Anna Carr: sadly it is not so often to buy essential things…

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    Mute Ixtrix Net
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    May 16th 2022, 4:25 PM

    Can someone please delve into other types of financing and banking, that basically should fall under CB oversight, that currently have no oversight or regulation?
    I’m for this change indicated in this story, but if think it’s the only type that has flown under the radar of what the CB *should* be regulating.. then that’s quite a stretch.

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    Mute Eamon Guilfoyle
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    May 17th 2022, 8:50 AM

    Have a look at America to see where this is all going, with a raft of online apps allowing people to stage pay, like affirm or afterpay. All being pushed by influencers.

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