Hire purchase and buy now, pay later deals fall under Central Bank remit

The Central Bank confirmed on Monday that providers of hire purchase deals, personal contract plans (PCP) for car purchases and "buy now, pay later" (BNPL) finance have come under its regulatory purview on foot of new laws.

The recently-enacted Consumer Protection (Regulation of Retail Credit and Servicing Firms) Act 2022 allows the Central Bank to close a consumer protection gap so that consumers who enter into hire purchase deals, including PCP, consumer hire and indirect credit arrangements such as BNPL agreements are protected by the regulator’s consumer protection code.

Firms providing such services will be required to seek authorisation as a retail credit firm or as a credit servicing firm, as appropriate, though companies already operating in the market will be given time to transition.

“The Central Bank expects firms and their staff to meet the necessary minimum competency standards required of staff with a particular emphasis on staff dealing with consumers in relation to retail financial products, at the earliest possible opportunity,” it said.

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Agreements

Draft laws on the matter were introduced last July to implement a key recommendation of a 2018 government-commissioned report on the issue of hire purchase and the then fledgling area of PCP agreements.

The resulting Act also introduces an interest rate cap of 23 per cent annual percentage rate (APR) on all credit agreements provided to consumers, other than money-lending agreements which have a separate regulatory framework. It ensures that all retail credit firms must comply with a section of the Consumer Credit Act 1995, and notify the Central Bank if they wish to introduce any new charges or increase any charge that has been previously notified to the 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,” said Gerry Cross, director of financial regulation in the areas of policy and risk. “Our aim is to ensure that consumers have the same level of protection no matter where they source their financial services.”