Not upheld: disproportionate interest charges and alleged unfair relationship under Section 140A of the Consumer Credit Act complaint against Shop Direct Finance Company Limited (trading as Very)

Decision detail

Summary

Mr T complained that SDFCL charged £242.58 in interest on a remaining balance of £379.93 after his 12-month BNPL period ended, arguing the amount was disproportionate and that he was not clearly informed of the interest he would owe. He also alleged this created an unfair relationship under Section 140A of the Consumer Credit Act. SDFCL explained that interest was applied in accordance with the BNPL agreement terms because Mr T had not repaid the full balance by the end of the 12-month period. The ombudsman found that SDFCL had clearly set out the interest calculation method, provided timely warnings with accurate estimates, and charged a market-standard interest rate of 59.9% per annum, and therefore did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman found that SDFCL provided clear and timely information about how interest would be calculated, when it would be applied, and the estimated amount. The interest charged represented approximately one year's worth of accrued interest at 59.9% per annum (which is market-standard for similar lenders) and was calculated in accordance with the agreed BNPL terms. Although the lump sum appeared large relative to the remaining balance, this was because interest had accrued over the entire 12-month period and was compounded daily. Mr T had been given sufficient information to understand the consequences of not repaying the full balance by the end of the BNPL period.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website