In February 2021 Grace began experiencing financial difficulty and was unable to repay her buy now pay later (BNPL) account. Grace’s BNPL provider was able to reschedule payments, but in March the BNPL provider said they could not delay payments any further and, if the debt was not repaid within three weeks, it would be referred to a collection agency which would impact her credit score.
There was no further action on Grace’s account until October 2021 when Grace asked the BNPL provider for information about their hardship process because she wanted to reopen her account.
The BNPL provider explained that the debt had been referred to a collection agency and that they were unable to reopen her account. The BNPL provider went on to say that they had deferred payments for one week in February 2021 and had offered hardship relief for one month in April 2021. Unfortunately, there was nothing more they could do because they are a short-term lender and cannot provide long-term repayment plans.
In February 2022 Grace fully repaid the BNPL debt and asked if she could reopen her account. The BNPL provider declined to reopen Grace’s account.
In June 2022 Grace complained to FSCL that the BNPL provider had not properly considered her hardship application, had not corrected her credit record to show that the debt had been paid in February 2022, and was refusing to reopen her account.
We referred the complaint to the BNPL provider’s internal complaints process. The BNPL provider corrected the credit record, to show the debt had been paid, but said they had offered Grace hardship relief and were not prepared to reopen her account.
Grace did not accept the BNPL provider’s response and complained to FSCL.
Grace complained that the BNPL provider did not have an adequate hardship process saying that she had similar debt with other short-term lenders, and they had been prepared to work with her to find a way for her to repay the debt without impacting her credit score. Grace also complained that, even after she had fully repaid her debt, the BNPL provider refused to reopen her account and did not ask the credit reference agency to update their records for four months, causing her problems getting power and gas supplied.
The BNPL provider agreed they had delayed updating Grace’s credit reference agency information but said the default listing was caused by Grace not repaying the debt as she had agreed. The BNPL provider reiterated that they were unable to offer Grace the hardship relief she was looking for because they are short-term lenders and do not enter into long term repayment agreements. Finally, the BNPL provider was not prepared to reopen Grace’s account.
At the time of considering this complaint, BNPL providers are not covered by the Credit Contracts and Consumer Finance Act 2003, so the BNPL provider was not legally obliged to consider Grace’s hardship application. The BNPL provider had provided short-term relief, but their business model does not allow them to provide the relief Grace was looking for.
Under our rules we cannot interfere with matters arising from the exercise of commercial judgement. We explained that if the BNPL provider has made the commercial decision that they will not enter into long term lending, we cannot require the BNPL provider to lend on these terms. Other lenders might have different financing arrangements that allow more flexible lending terms, but this does not mean that this BNPL provider are obliged to do the same.
We were also unable to require the BNPL provider to reopen Grace’s account because this is also a matter for the BNPL provider’s commercial judgement.
However, we considered that the BNPL provider had delayed updating Grace’s credit reference information affecting her ability to receive power and gas services. We accepted it was very likely that an adverse credit listing would affect a person’s ability to have these services supplied. In the circumstances, we considered it reasonable for the BNPL provider to compensate Grace for the inconvenience and disruption caused by their delay in updating her credit reference information.
We decided that the BNPL provider should pay Grace $250 to compensate her for the inconvenience associated with their delay in updating Grace’s credit record. We also decided that we could not take the complaint about the hardship process further and could not require the BNPL provider to reopen Grace’s account.
Insights for participants
It is important that information on a consumer’s credit record is accurate and up to date. Although the debt may have been legitimately owed and the default correctly recorded, once the debt has been repaid the creditor should promptly update the credit reference agency. A delay can have serious consequences for the consumer affecting their ability to find a rental tenancy and have power, gas, and other utilities supplied.