FCA Changes Credit Instalment Definition
The guidelines relate to allowing customers pay for a product or service via instalments. Whether you charge interest or not is largely irrelevant. A customer agreement that allowed payment over instalments was classed as a credit agreement.
The old criteria stated that a credit agreement would be exempt if it met all the following criteria;
- It is repayable by no more than four instalments (e.g. quarterly), within no more than 12 months
- It is a borrower-lender-supplier agreement (i.e. it finances the acquisition of specific goods or services)
- It is for a fixed amount
- It involves no charges or interest (e.g. there can be no admin fee)
The changes with effect from 18th March now state that;
- Exemption is extended to include credit repayable by up to 12 instalments within a year (e.g. monthly), provided the credit agreement meets the other criteria listed above.
A firm offering or broking such agreements does not need to be authorised for consumer credit provided that it is not carrying out any other form of regulated credit activity.
If you are offering this type of facility to your customers then this is good news, remember the changes next time your Consumer Credit Licence comes up for renewal.
The changes should cover most businesses where an annual payment or contract applies.
Full details are available on the FCA website.