A new law to formalise a fair method of buying products using credit facilities ‘on the never-never’ will be debated by newly-elected MPs later this year.
The bill, originally proposed by the Shura Council, has been drafted by the Cabinet and will be officially referred whenever National Assembly members are sworn in.
Under the law, traders without a proper licence, or those charging highly-inflated prices for the service, could face up to a year in jail and fines of between BD1,000 and BD5,000, or both.
The Justice, Islamic Affairs and Endowments Ministry told the Shura Council that court rulings have been issued in 2,447 cases of debts resulting from unpaid instalments, while 6,516 more are awaiting verdicts.
The Industry and Commerce Ministry welcomed the law, telling the committee that regulating the instalment payment practice was vital to protect trade.
However, the Central Bank of Bahrain (CBB) raised concerns that the law would disrupt businesses.
‘On the never-never’, a system of payment in which part of the cost of something is paid immediately and then small regular payments are made until the debt is reduced to nothing, is popular all over the world, although similar concern is often voiced over the higher price having to be paid for taking up the option and the risks if instalments are not covered as agreed.
The arrival of the law should be good news for those who have bought something using credit and face payments over many months because they haven’t had the funds to hand over a single lump sum.
Shura Council members earlier claimed that traders have been charging inflated prices through instalment plans.
The new rules, however, seek to benefit all parties as they also aim to ensure that customers pay the seller regularly, without delays or disruptions.
The original legislation, proposed by five members, has been spearheaded by Dr Bassam Albinmohammed.
Shura Council financial and economic affairs committee vice-chairman Redha Faraj told the GDN that unfortunate consumers are always at a disadvantage.
“Something that should cost BD500 is being sold for double through instalments by some providers and that’s something small compared to building kitchens or getting furniture, which is around BD5,000 and the amount collected is BD7,000,” he added.
“There appears to be no formal, proper margins regarding profitability and unfortunately consumers are often confronted by two tough choices, either do without or take out costly credit.
“The law must draw a line between what’s acceptable and what extra a consumer should pay for the privilege of being offered the option, with any extra costs and risks related to the purchase being clearly explained. Even if people are able to read through the agreements, most of the terminology is legalese and few understand it.”
Committee chairman Khalid Al Maskati said contractual agreements generally lacked clarification in easy to follow language.
“Some agreements don’t state the actual price of a product or the interest rate adopted to calculate instalments,” he said. “Court verdicts are issued on the total bill, as mentioned in the contract, even if the product sold is much lower in market value – should the consumer face difficulty in making the payment at any stage.
“This law aims to regulate the instalment procedure and ensure that items are not sold at an unfair inflated rate.”
He added the law has been linked with the 2015 Consumer Protection Law amongst other laws that aim to protect consumers and also guarantee businesses don’t lose out either.
“The current law deals with goods that are sold directly but not those purchased by instalments. We have linked the new legislation with the rights in the Consumer Protection Law and gave the power to determine acceptable percentages to concerned government parties.”
mohammed@gdnmedia.bh
&uuid=(email))