NCA caps for incidental credit agreements
An incidental credit agreement is an account where a supplier charges a fee or interest because payment was not made by the agreed date. The page gives the maximum monthly interest rate, which does not depend on the repo rate, and states that no initiation fee applies, with the caps as decision table cells to copy into a credit decision.
What counts as incidental credit
An incidental credit agreement is an account where a supplier of goods or services charges a fee or interest because payment was not made by the agreed date. This definition is set out in Reg 39(1) and s.1.
For this type, the decision mainly checks the price charged to the account. The late-payment charge is limited by the monthly interest cap, and no initiation fee applies.
Maximum interest rate and fees
Reg 42 sets the maximum interest rate and initiation fee for incidental credit. The interest cap is a monthly rate and is disclosed as a monthly rate.
| Limit | Maximum amount | Rule |
|---|---|---|
| Interest rate | Monthly rate of 2% | Reg 42 Table A |
| Initiation fee | No fee | Reg 42 Table B |
Incidental credit caps as decision table cells
Each table below gives cells to copy into a decision table, with one column for each attribute. The attribute paths are examples to rename for your own data.
Maximum monthly interest rate
Sets the maximum monthly interest rate for an incidental credit agreement.
loan.Condition | pricing.Result |
|---|---|
=incidental | 2 |
Affordability assessment
Reg 23A does not apply to incidental credit under Reg 23A(2). For agreements subject to Reg 23A, repayment history is checked within seven business days before approval or a limit increase.
The decision is mainly a pricing rule for late charges on the account. It checks the monthly interest cap and the nil initiation fee.
Build the decision
Use the caps above as cells in the decision tables when building the decision. This page reads the regulations for that purpose, and the lender’s legal team checks the current text.
Other NCA credit types
Questions we get asked
What is an incidental credit agreement under the NCA?
It is an account where a supplier of goods or services charges a fee or interest because payment was not made by the agreed date. The definition is in Reg 39(1) and s.1.
What is the maximum interest on a late account?
The maximum is 2% a month under Reg 42 Table A. It is disclosed as a monthly rate.
Does a supplier charge an initiation fee on incidental credit?
Reg 42 Table B sets no initiation fee for incidental credit. The account may carry a fee or interest for payment after the agreed date.
Does an affordability assessment apply to incidental credit?
Reg 23A(2) excludes incidental credit from the affordability assessment. For agreements subject to Reg 23A, repayment history is checked within seven business days before approval or a limit increase.