Consumer rights and Buy Now Pay Later 

By Andy Paver
Head of UK Partners
November 2017

Are customers unwittingly giving away their rights?

Increasingly, retailers are joining forces with payment service providers (PSPs) to offer customers alternative & flexible payment methods. You may have seen the birth of ‘buy now pay later’ operated by payment service providers (often called Invoicing); I started to wonder if this really is a good deal for the customer and how their Section 75 rights stack up against more traditional methods of credit. Do customers get the same protections and is it easy to understand?

Are customers fully aware of their Section 75 rights?  How & when they apply and more importantly, how to enact them?

I think it’s fair to say that 20, 15 even 10 years ago consumers didn’t really understand their Section 75 rights and many did not know Section 75 existed. It’s a very different matter today with the amount of publicity that’s been given to the financial services sector over the last decade and, of course, our friend Google. That said it’s still surprising how many consumers don’t understand their basic rights provided by the legislation.

If I buy a watch for £500, pay a £25 deposit with my credit card and pay cash for the balance I’m protected by the legislation as only a portion of the purchase is needed on credit to make Section 75 applicable, so long as the purchase amount of a single item was between £100 and £30,000. How many people (outside of financial services) fully understand that? Definitely a larger chunk than a few years ago but still not as high as you’d hope.  Paying on credit really is a smart way to protect your purchase and, ultimately, your bank account so long as you’re getting your statutory protection.


How are consumer rights affected by PSPs becoming established in retail?

The legislation states that there must be a direct link between the retailer, the provider of the credit and the customer.

If you buy a jacket for £100 using a high street credit card and pay directly to the retailer either online or in-store then you’ll have Section 75 protection.  BUT, if that retailer uses a 3rd party payment processor and, therefore, breaks the customer-creditor-retailer chain then Section 75 will not apply and you’re left without regulatory protection.

The key issue here is that it’s really difficult for a general consumer to understand and notice the difference. I mean, you’re buying a jacket not working out who is actually processing your purchase on behalf of the retailer and why would you even think to question this part of your transaction? It’s even worse if you’re tempted by a payment service provider offer to take the goods now and provide limited personal details with no need to pay until after a defined period of time with no interest. Who wouldn’t want to take advantage of such an offer? Nobody points out that you are losing your Section 75 protection.

Are customers being misled? No, it’s all legal and compliant.

Could it be clearer and fairer? Absolutely and I’d hope that the regulator is looking closely at this discrepancy between the obligations that bind ‘traditional’ lenders but make no similar demands of payment service providers.


Are some of the nation’s best loved retailers leaving unwitting customers without the protections that, today, they expect to receive?

I fear they are.  Consumers should choose where they shop wisely and pay special attention to how they pay to ensure they don’t fall foul of this loophole in consumer rights. Despite all of the developments in consumer protection laws over the last 40 years I can’t help but think back to what my Gran used to say: caveat emptor….buyer beware.

Ikano Bank offers a complete range of white label retail finance solutions that offer customers convenience, affordability & protection. Our brand promise, On Fair Terms means that we’ll always do what is right to protect our customers and treat them fairly.




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