UK supermarket chain Iceland is introducing an interest-free buy now pay later (BNPL) product for use in its shops due to the cost-of-living crisis.
According to Finextra, the Iceland Food Club enables members to apply for microloans of £25-100 on a pre-loaded card, which can be used in any of the company’s stores.
The loans will be repaid at the rate of £10 per week – on a day of the member’s choice – and are available in six annual windows coinciding with school holidays, when family finances can be usually most stretched.
Iceland boss Richard Walker defended the Food Club – which has come under some criticism – saying that critics are ‘middle-class people who have no difficulty accessing mainstream banks themselves and would not think twice about paying for their own weekly shop with a credit card’.
Walker mentioned that the Food Club has been developed in partnership with FCA-regulated Fair For You, a charity-owned ethical lender.
He added, “All the evidence we have seen from our own trials – and from researching the widespread use of microcredit around the world – is that it is a really helpful way of managing low and irregular incomes, and improving the quality of life and the self-respect of those taking part.”
The FCA said unauthorised companies may be committing a criminal offence if they don’t have an FCA-authorised firm approve their financial promotions.
The authority noted that authorised firms selling unregulated or exempt BNPL products must comply with the relevant rules unless an exemption applies. This includes that their BNPL promotions must be clear, fair and not misleading.
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