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New Rules

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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