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The way these schemes work (both in VM's case and O2's case) is that they've just shrugged off the entire responsibility for providing you with a handset to somebody else, in this cause a pseudo-bank set up by Virgin group to provide financial services. They are now quite literally operating as a broker in order to get you to apply for a loan from a third-party company.

Frankly the separation of a plain credit agreement (loan) for your handset and an airtime agreement for your airtime is a huge step forward considering all the awkward legal complexities and loopholes involved in selling a 'Free' handset with a subsidised-airtime contract. It provides more clarity for both the consumer and the retailer, although not all changes are to the customer's benefit - it's a lot easier to contest the handset part of the contract if you have a faulty handset for example, which was previously a rather obnoxious position to be in if you didn't purchase your handset directly from the network.