Why you should not abuse this facility of …

With the Covid crisis and inflation, split payment (or payment in installments) is on the rise. According to a study carried out in April 2021 by Kantar for Floa Bank, approx1/3 of the French used installment payments between 2020 and the beginning of 2021. With rates often reduced to zero, this payment facility is very attractive but can cause financial turmoil. We take stock with Pauline Dujardin, federal lawyer at the Crésus federation, Olivier Gayraud, lawyer at the Consumer, housing, living environment (CLCV) association and Matthieu Robin, project manager of the financial sector at UFC que Choisir.

What is installment payment?

Split payment or payment in installments (in three or four installments most of the time), is a payment facility spread over a maximum period of 3 monthsoften offered by online business sites, but not only. Pay by credit card the first monthly installment on the same day of purchase then the other payments, also paid by credit card, are spread over the next 90 days. This is the principle of “buy now, pay later”, inevitably tempting in this period of inflation. “The split payment is often less than 200 euros. It can be free or have negligible interest rates.”, explains Olivier Gayraud, lawyer at the association Consumers, housing, living environments (CLCV). When there is expensesthey are expressed as a percentage of the total amount of the purchase.

How is it different from a consumer credit?

A consumer credit must be for a period of 3 months minimum, which is not the case of a split payment, necessarily less than 3 months). So it is not regulated by the Lagarde law which protects consumers in matters of consumer credit. “When you take out a loan, there are obligations such as the consultation of the client’s FICP file (National Individual Loan Repayment Incident File) which lists the consumer or real estate loans to which he has subscribed,” Matthieu points out Robin, project manager for the financial sector at UFC, who chooses. there is no rule governing these split paymentss and in theory, you can use this payment method as many times as you want…

To take advantage of a split payment, ID and credit card are enough. Sometimes you have to be store loyalty card holders to have the right to pay in installments. A very light legal framework that explains the boom in installment payments.

Also read: Clothes, smartphones, appliances, toys…: buy second-hand to save money!

What are the risks of split payments?

Without supervision, the split payment can be a risk for the consumer. There are no assessment of the solvency of the loan, so even someone already overdrawn can use this payment method. And its ease of access can very quickly push the client to multiply and quickly get into trouble. “The risks of paying dearly for repayment and multiplying split payments can worsen your financial situation,” warns Matthieu Robin.

If the monthly payments are not paid, it can cost you dearly! Indeed, as split payments are not regulated by law, the costs in case of a payment incident are not capped and can be very expensive! According to the UFC Que-Choisir association, some companies practice “late payment penalties that reach 30 or 40% of the outstanding capital”. While for a classic credit, the penalties are limited to 8%. Reasons that explain why the European Union seeks to regulate the split payment.

Should split payments be avoided?

No, it is the excess that is bad! Lawyer at the Crésus association, Pauline Dujardin points out that this payment facility can help with unexpected purchases: “The split payment idea is not bad. Maybe one day the washing machine breaks down and paying another one in three installments helps. Paying in installments can be a rather interesting management solution.”

What precautions should be taken before giving to the charm of the split payment?

If you want to pay for a purchase in installments, find out about the split payment conditions: “Do it right explain what your repayment terms will be and find out about the fees, if any. Also ask for the effective annual base rate and repayment examples,” urges Olivier Gayraud.

Pauline Dujardin advises to have a true understanding of your budget to be sure that the next payments will be guaranteed. “There are charges that are not monthly such as fuel, or electricity that is every two months. Make an amortization plan as if you were taking a classic loan”, indicates the lawyer of Cresus. In case of financial problemsPauline Dujardin recommends you ask for help from associations (budget advisory points, consumer associations).

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