Deferred payment is an arrangement where the customer pays some or all of the price after the sale, either in one later payment or in installments. Regulation Z defines credit as "the right to defer payment of debt or to incur debt and defer its payment." So when a business lets a consumer pay later, it is extending credit. That credit triggers Truth in Lending disclosures when the business regularly extends consumer credit that carries a finance charge or is payable by written agreement in more than four installments, not counting a down payment.
What is deferred payment?
Deferred payment means the customer receives the goods or service now, or starts receiving it, and pays later. Common forms:
- One later payment, such as an invoice due in 30 days (Net 30).
- Installments, such as a payment plan with a deposit and monthly payments.
- Payment from a future date, such as a balance due when a program starts.
The seller carries the balance in the meantime. That balance is an account receivable.
Is deferred payment the same as credit?
Under federal consumer credit law, yes. Regulation Z, 12 CFR 1026.2(a)(14), defines credit as "the right to defer payment of debt or to incur debt and defer its payment." Any time you let a customer pay later, you are giving them credit in that sense.
That doesn't make every pay-later arrangement regulated. Regulation Z covers consumer credit, defined in 1026.2(a)(12) as credit "offered or extended to a consumer primarily for personal, family, or household purposes." Business customers on trade terms are outside it.
When does deferring payment trigger Truth in Lending?
When the business is a creditor. Under 1026.2(a)(17)(i), a creditor is a person who regularly extends consumer credit "that is subject to a finance charge or is payable by written agreement in more than four installments," not counting a down payment. The obligation must also be initially payable to that person.
"Regularly" means more than 25 times in the preceding calendar year, or more than 5 times for credit secured by a dwelling (1026.2(a)(17)(v)).
| Arrangement | Likely a creditor? |
|---|---|
| Consumer pays in full 30 days later, no charge | Not by these tests alone |
| Consumer pays in 3 installments, no finance charge | Not by these tests alone |
| Consumer pays a $1,500 deposit, then 12 installments, no finance charge, written agreement, 40 times a year | Yes, more than four installments |
| Any consumer plan with a finance charge, more than 25 times a year | Yes |
A creditor gives written disclosures before the transaction is consummated. See Truth in Lending Act.
Does deferred payment need interest?
No. A 0% plan is still deferred payment, and still credit under the 1026.2(a)(14) definition. Whether it needs disclosures depends on the installment count and how often you offer it, not only on interest. See Is a 0% payment plan a loan?
What should a deferred payment agreement include?
At a minimum, the total price, any deposit, the number, amounts and dates of payments, and what happens if a payment is missed. For a plan that makes you a creditor, Regulation Z sets the disclosure content. A written payment plan agreement is the place for all of it.
General information, not legal advice.
Every figure on this page was checked against these sources on Oct 6, 2026. General information, not legal or tax advice.