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25 Sep 2021

Curve launches 'buy now, pay later' feature called Flex - should you use it?

The feature loans you the value of previous transactions from the past year

Curve has launched a new 'buy now, pay later' (BNPL) product called Flex, allowing customers to 'go back in time' and convert past payments from up to a year ago into three, six, nine and 12 instalment loans.

Unlike other BNPL options, the instalment plans aren't interest-free, instead, you will get an APR based on your profile.

Curve says this addition to the BNPL market will 'simplify and unify credit', offering customers the opportunity to pay later for almost any purchase from any retailer from any card from up to a year ago, thanks to its 'go back in time' technology.

The launch was announced shortly after Monzo released details of its own similarly-name BNPL feature called Monzo Flex last week. Curve's Flex feature has been in testing since September 2020 with 1,600 beta users trying it out. There is, however, still a waiting list if you want to sign up.

Here, Which? explains what Curve's Flex feature offers, and what you need to consider before you use it.

Have you ever had an issue with a BNPL scheme? Tell us about it using our new BNPL complaints form.

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How does Curve's Flex feature work?

With the Curve app, you can connect all of your bank and credit card accounts in one place, and choose which account to spend from when you pay using your Curve card.

The account already has the 'go back in time' feature, which allows you to move a payment from one account to another - for instance, if you've paid for something on the wrong card or realised you don't have enough cash in one of your accounts.

Curve Flex adds an extra layer to this. To use it, you can swipe a transaction in the app and select the number of instalments you want to repay the amount back with - this can be three, six, nine or 12.

The transaction amount must be within the limits set by Curve, and the merchant must have received the funds in order to be used for Curve Flex.

So, in cases where it takes a couple of days for money to be sent to the merchant, you may have to wait to select it with Curve Flex.

The transaction will then be refunded in full - Curve says this should happen almost instantly.

You first Flex repayment will be due 30 days after the transaction was refunded.

Could Curve Flex affect my credit score?

Only those who pass Curve's affordability checks can use the Flex feature. These initial checks will involve a soft credit search, and an assessment of your financial situation via open banking technology that looks into the accounts you have linked to Curve. Neither of these checks will appear on your credit report or impact your credit score.

After these checks, Curve will let you know how much it may be willing to lend you in total. However, if you choose to go ahead and use the feature to take out an instalment plan, a hard credit search will be registered and other lenders will be able to see how much money you've borrowed.

While having lots of hard credit searches can reduce your credit score, successfully taking out a loan and making the repayments can improve your credit score, as it shows you can be trusted to pay back debt.

If you fail to keep up with your repayments, known as defaulting, this can be noted on your credit report and the mark can stay there for six years.

What happens if you can't make a repayment?

If you're refunded for a past transaction, your app will generate a Flex plan showing you how much money you're due to pay back - including the cost of credit and the APR.

Late repayments are fee-free for the first seven days. After that, Curve says it will work with customers struggling to make repayments to come up with a tailored plan of action for repayment over a longer period of time.

According to Curve's general terms and conditions, it may immediately charge money owed to Curve by immediately charging such amounts to any of your payment cards.

It says it reserves the right to collect the amount of your debt to Curve by using any payments received to your account, and may also recover amounts owed through legal means including the use of debt collection agencies.

Should you use Curve Flex?

Curve says its Flex feature makes borrowing simpler and more unified, but you'll need to weigh up whether or not it's right for you.

You might be able to get a cheaper rate elsewhere

The APR you're offered on Curve Flex instalments will vary depending on the duration of the loan, and the 'risk profile' Curve has configured after carrying out its affordability checks.

Curve says APR rates will be lower than standard credit card rates, and all customers will be told the rate in advance of taking out a loan.

Depending on the APR you're offered by Curve, you might be able to find an alternative way of borrowing that's interest-free.

For instance, many 0% purchase credit cards offer interest-free purchases for over a year, while some bank accounts offer interest-free overdrafts.

You need to factor in other BNPL debt

While Curve's affordability checks will factor in your earnings and borrowing through things like credit cards, loans and mortgages, some other BNPL debt won't appear on your credit report and Curve won't necessarily know if you've entered into other credit agreements.

This means Curve might think you can pay back more than you actually can, and may give you a credit limit that's too high. You don't have to use the whole credit limit you're offered, and should make a note of how much you'll need to repay each month before you spend.

Section 75 protection could be diluted

Section 75 of the Consumer Credit Act 1974 is a powerful legal protection that means when you make purchases on your credit card worth £100 to £30,000 the credit card company is jointly and severally liable for any breach of contract or misrepresentation by the retailer or trader.

Curve told Which? if Curve Flex is used to refinance a transaction, Section 75 protection only applies to the purchase of e-money from Curve OS, which is then redeemed to reimburse the account originally charged.

If you've bought something using your Curve card with a linked credit card and then choose the transaction for Curve Flex, only the money Curve has reimbursed you with (the purchase of e-money) would be covered.

So, if a product turned out to be faulty, it would not be covered under Section 75, however, all transactions made using the Curve Card are covered under its 'Curve Customer Protection' (explained on its website).

Why BNPL needs urgent regulation

Which? is calling for greater regulation of BNPL firms to ensure the risks of using these schemes is made clear to customers signing up for them.

We're particularly concerned about the potential harm BNPL schemes pose to vulnerable consumers.

While Curve offers a BNPL product that runs affordability checks to protect customers from falling into debt, there are many other BNPL schemes that don't.

Previous Which? research has found that almost a quarter of BNPL users spend more when they use the schemes than they normally would.

The Financial Conduct Authority (FCA) announced in February 2021 that BNPL schemes pose a risk to consumers and should be regulated to prevent harm.

Which? believes the FCA must step in and regulate this market as soon as possible.