Are we subject to FSA rules if we do this?

[Frimley111R]

We build large climbing frames and treehouses, the typical cost is £3-4000 although this can easily go up £10,000 or £20,000. We'd like to offer finance but because we're too new/don't do £1m T/O/don't have £300,000 of assets etc no finance provider will work with us. It's a case of if we had the finance we could grow big enough to meet the criteria ... catch 22.

So, today, whilst talking it over my bus partner suggested we just offer to allow customers to pay in instalments with a deposit. This will cost more than if they pay in one go. Are we technically offering finance? i think so, he doesn't.

[Countdown]

My understanding is that, for the circumstances you describe, you would need a consumer credit license.

[PurpleMoonlight]

Or even a consumer credit licence.

And it's FCA not FSA now.

[AyBee]

Can you partner with a firm to avoid this? i.e. you advertise their services, they offer a special rate for your customers and you take a cut of their earnings?

[Frimley111R]

Maybe but we can't find anyone to partner with. I am sure there are companies out there but finding them is a challenge.

[Simpo Two]

Trading Standards should be able to tell you how you need to present the deal to be legal.

[insurance_jon]

Frimley111R said:

We build large climbing frames and treehouses, the typical cost is £3-4000 although this can easily go up £10,000 or £20,000. We'd like to offer finance but because we're too new/don't do £1m T/O/don't have £300,000 of assets etc no finance provider will work with us. It's a case of if we had the finance we could grow big enough to meet the criteria ... catch 22.

So, today, whilst talking it over my bus partner suggested we just offer to allow customers to pay in instalments with a deposit. This will cost more than if they pay in one go. Are we technically offering finance? i think so, he doesn't.

if it meets ALL the following criteria then you wont need a licence

it is repayable by no more than 12 instalments (eg monthly),
within no more than 12 months it is a borrower-lender-supplier agreement (ie it finances the acquisition of specific goods or services)
it is for a fixed amount
it involves no charges or interest (eg there can be no admin fee) or is secured on land - See more at: https://small-firms.fca.org.uk/instalment-credit-a...

If you charge interest or is longer than 12 months then you will.

Its not scary to apply though

[insurance_jon]

AyBee said:

Can you partner with a firm to avoid this? i.e. you advertise their services, they offer a special rate for your customers and you take a cut of their earnings?

That potentially still needs authorisation AND/OR they will need to be appointed introducers

[Frimley111R]

insurance_jon said:

if it meets ALL the following criteria then you wont need a licence

it is repayable by no more than 12 instalments (eg monthly),
within no more than 12 months it is a borrower-lender-supplier agreement (ie it finances the acquisition of specific goods or services)
it is for a fixed amount
it involves no charges or interest (eg there can be no admin fee) or is secured on land - See more at: https://small-firms.fca.org.uk/instalment-credit-a...

If you charge interest or is longer than 12 months then you will.

Its not scary to apply though

Yes, we are aiming for 12 months period
We allow the customers to spread their payments, no other party/lender involved and it just relates to the build
Fixed amount a month? Yes. Fixed amount for the build Yes
No admin fees/interest

What if it is, for example £3000 as a one off payment or £3600 if paying by instalments?

[PurpleMoonlight]

Frimley111R said:

What if it is, for example £3000 as a one off payment or £3600 if paying by instalments?

Surely that's £600 interest.

[Mr Overheads]

PurpleMoonlight said:

Frimley111R said:

What if it is, for example £3000 as a one off payment or £3600 if paying by instalments?

Surely that's £600 interest.

How about if it's 12 payments as standard but £600 discount for payment in full upfront.

[Frimley111R]

PurpleMoonlight said:

Frimley111R said:

What if it is, for example £3000 as a one off payment or £3600 if paying by instalments?

Surely that's £600 interest.

I think so, Checking with FCA.

[hotchy]

Can you afford someone to not pay on a £20k build? Imagine you have 2-3 and they all cannot pay one reason or another. Sure you can use debt collectors etc but its a long process and they take a cut.

[Frimley111R]

Mr Overheads said:

PurpleMoonlight said:

Frimley111R said:

What if it is, for example £3000 as a one off payment or £3600 if paying by instalments?

Surely that's £600 interest.

How about if it's 12 payments as standard but £600 discount for payment in full upfront.

Funny you should say that but that's just what we've been talking about

[Frimley111R]

hotchy said:

Can you afford someone to not pay on a £20k build? Imagine you have 2-3 and they all cannot pay one reason or another. Sure you can use debt collectors etc but its a long process and they take a cut.

No, but tbh those looking at £20,000 builds have enough money not to have to need payment plans. This is more for the £3-5,000 builds

[Simpo Two]

Mr Overheads said:

PurpleMoonlight said:

Frimley111R said:

What if it is, for example £3000 as a one off payment or £3600 if paying by instalments?

Surely that's £600 interest.

How about if it's 12 payments as standard but £600 discount for payment in full upfront.

Then I think you fall foul of the Consumer Credit Act. Free finance means exactly that. The financed price is the same as the cash price. In other words, any cost of the extended payment period comes out of your pocket.

[Frimley111R]

Checking with the FCA now on this one.

[PurpleMoonlight]

DFS always maintain they cannot offer a discount for cash payment because it would mean the 0% interest deal, well, isn't.

I would say the same principle would apply to you.

[sideways sid]

Two immediate thoughts:
1. Why do you want to get involved in providing credit? You say that those who buy top-end pay cash. Surely those potential customers without cash can borrow from conventional lenders such as bank/credit card/P2P etc. You're exposing yourself to extra headaches, with no obvious benefit.
2. I have a hunch that you would experience lots of defaults. If someone borrows to buy a climbing frame to use during summer, they have probably borrowed to buy the car etc as well. I suspect that when hard times fall in winter, paying for that climbing frame will be the lowest priority with non-payers suggesting you come and collect it instead of cash. Even more headaches.

[insurance_jon]

you would definitely fall foul of the rules with that one.

to be fair it isn't as scary as you think (its not like an insurance permission from the FCA). The cost is about £800 PA IIRC