IanSmithCSE
Guru
- Location
- Worcester, Worcestershire
Good evening,
You are asking a quite tricky question and it is worth doing an internet search on regulated and unregulated consumer credit.
As a one line summary, offering interest free credit for 12 months or less is usually unregulated and an unregulated credit product imposes pretty much no obligations on the lender to ensure that the customer can afford what he bought.
Obviously with a tyre this doesn't matter, but £600 on a sale bike at Evans, £3k on a watch, £400 on a pair of shoes etc can pretty quickly add up to too much credit being offered.
It may be this lack of obligation along with the customer getting the goods for a lower upfront cost that is the reason for the growth of such 3/6 month deals.
Why this obligation is important is that some retailers are getting nervous about offering finance as courts are sometimes making surprising decisions.
A recent one is : Johnson v FirstRand Bank Limited (London Branch) T/A Motonovo Finance and a few other car finance providers. The issue isn’t what the customer paid, they were told what the cost would be and this is what they paid, the argument is that the commission paid to the car dealer wasn’t specified and the dealer could set it at whatever rate they wanted.
Although you may think that they deserved it, it might also be informative to lookup James Banamor and Amigo loans. Financial obligations freely entered into by Amigo’s customers were overturned by the courts.
Saying much more that this would move us into NACA territory as Amigo were making loans of 10s of thousands of pounds at 49% and when repayments were missed Amigo went after the people who acted as guarantor for the loans, may of whom said we don’t want to pay, it’s unfair, we didn't expect to have to actually do what we said we would.
Depending upon where the funding comes from, inside or outside of the retail group, it may also remove credit card commissions and charge backs.
It may also be worth noting that the details of these credit deals may not be passed onto the credit reference agencies, unless you default. You may not care, but if you buy a £2k bike on credit, how you repay could very well make a difference to your credit score. On a credit card the credit reference agencies will see a larger purchase and associated repayments, if this £2k is a big purchase it could replace 3-6months of smaller recorded purchases, appearing as if you bought nothing on credit during this time.
To my mind it is not a con but a fightback by retailers against credit regulators and the power of credit card companies and the unreasonable customer.
Bye
Ian
You are asking a quite tricky question and it is worth doing an internet search on regulated and unregulated consumer credit.
As a one line summary, offering interest free credit for 12 months or less is usually unregulated and an unregulated credit product imposes pretty much no obligations on the lender to ensure that the customer can afford what he bought.
Obviously with a tyre this doesn't matter, but £600 on a sale bike at Evans, £3k on a watch, £400 on a pair of shoes etc can pretty quickly add up to too much credit being offered.
It may be this lack of obligation along with the customer getting the goods for a lower upfront cost that is the reason for the growth of such 3/6 month deals.
Why this obligation is important is that some retailers are getting nervous about offering finance as courts are sometimes making surprising decisions.
A recent one is : Johnson v FirstRand Bank Limited (London Branch) T/A Motonovo Finance and a few other car finance providers. The issue isn’t what the customer paid, they were told what the cost would be and this is what they paid, the argument is that the commission paid to the car dealer wasn’t specified and the dealer could set it at whatever rate they wanted.
Although you may think that they deserved it, it might also be informative to lookup James Banamor and Amigo loans. Financial obligations freely entered into by Amigo’s customers were overturned by the courts.
Saying much more that this would move us into NACA territory as Amigo were making loans of 10s of thousands of pounds at 49% and when repayments were missed Amigo went after the people who acted as guarantor for the loans, may of whom said we don’t want to pay, it’s unfair, we didn't expect to have to actually do what we said we would.
Depending upon where the funding comes from, inside or outside of the retail group, it may also remove credit card commissions and charge backs.
It may also be worth noting that the details of these credit deals may not be passed onto the credit reference agencies, unless you default. You may not care, but if you buy a £2k bike on credit, how you repay could very well make a difference to your credit score. On a credit card the credit reference agencies will see a larger purchase and associated repayments, if this £2k is a big purchase it could replace 3-6months of smaller recorded purchases, appearing as if you bought nothing on credit during this time.
To my mind it is not a con but a fightback by retailers against credit regulators and the power of credit card companies and the unreasonable customer.
Bye
Ian
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