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BNPLs need to get approval from the CBUAE to offer credit: The Central Bank of the UAE (CBUAE) has introduced a new regulatory framework for short-term credit facilities, with new amendments to the country’s Finance Companies Regulation, according to a CBUAE statement. The new provisions come in response to “global shifts in consumer financial trends” and increased demand for buy now, pay later (BNPL) and similar credit products, the statement says.
SOUND SMART- Short-term credit refers to credit that is provided for a period of a year or less, without interest and without a need for collateral, according to the amendments.
The fine print:
#1- Agents of licensed banks or finance companies will need approval from the CBUAE to offer short-term credit, while entities looking to offer short-term credit will need to be licensed as “restricted license finance companies” or to partner with finance firms or bank agents.
#2- Short-term credit is capped at AED 20k or the total of three months’ worth of net income of the borrower, whichever is lower, and any amount above AED 5k will require validation on the borrower’s credit information with the Credit Information Agency.
#3- No interest can be charged on short-term credit, and any fees — including late payment fees — should be capped at 30% of the original credit amount.
#4- Restricted license finance companies must extend short-term credit within a maximum of a year after receiving the license.
