Buying goods and services on short-term credit

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Buying on credit is when you purchase goods or services now and pay for them in full later or by instalments over a short period of time.

Examples of short-term credit services, which are now regulated by Central Bank of Ireland, include hire-purchase, personal contract plans, consumer hire, in-store credit and buy now, pay later.

These types of credit have become increasingly popular with consumers in recent years to buy goods and services, such as cars, furniture, electrical and consumer goods.

Buying goods and services on credit is the same as taking out a loan

If you are thinking about using these types of short-term credit to buy a good or service, it is important to consider whether this is right for your needs. It may also affect your ability to borrow in the future.

Buying things using credit is the same as taking out a loan, even when no interest is charged. You will still have to repay the credit you have borrowed. You will also have to complete a credit assessment and agree a repayment plan with the credit provider.

The credit provider will have to explain costs to you. Short-term credit agreements can include additional fees and charges. For example, if you miss a payment, you will have to pay late payment fees, which could significantly increase your instalment cost and total cost of credit. Set-up or administration fees are also common.

If the loan is for €500 or more, the credit provider must submit this information to the Central Credit Register.

Buying goods and services with short-term credit - infographic

All firms providing these forms of short-term credit must now be authorised by Central Bank of Ireland

New legislation means that hire-purchase, PCPs, consumer hire and indirect credit agreements (e.g. BNPL) are now regulated activities, and firms providing them must be authorised by the Central Bank.

This also means these firms have to follow certain rules, including specific parts of the Consumer Protection Code 2012.

These rules require firms to complete creditworthiness and affordability assessments in advance of granting credit to a consumer. These assessments aim to protect consumers from getting into too much debt.

Firms are also required to meet requirements in relation to advertising, to ensure that advertisements are clear, fair, accurate and do not mislead.

Credit providers must also comply with the Minimum Competency Code 2017 and the Minimum Competency Regulations 2017, which set out minimum professional standards for persons providing certain financial services, particularly when dealing with consumers.

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