News Buy now, Pay later to be regulated, FCA recommends

Sep 26, 2012
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The buy now, pay later scheme has gained popularity among consumers since the beginning of the Pandemic. This BNPL credit gives consumers a better alternative to the more expensive credit line, which became the preferred method by people - and its usage has nearly quadrupled in 2020.

This method also poses risks, due to it being an unsecured credit. As with that, the FCA has published a review headed by its former Interim Chief Executive, Christopher Woolard CBE, and weighed in on giving regulation policies for BNPL products.

As per Christopher Woolard:

‘Most of us will use credit at some point in our lives. So, it’s vital that we have a fair market that works for everyone. New ways of borrowing and the impact of the pandemic are changing the market, with billions of pounds now in unregulated transactions and millions of consumers at greater risk of financial difficulty.

‘Changes are urgently needed: to bring BNPL into regulation to protect consumers; to ensure that there is secure provision of debt advice to help all those who may need it; and to maintain a sustained regulatory response to the pandemic.

‘Alongside these urgent issues the Review sets out a series of recommendations for how the FCA, working with partners, can build a better market in future.’

The FCA has accepted the review and is recommending regulation on all BNPL systems, making sure that the people will be protected in some ways and ensure that BNPL systems will be future ready. The recommendation will be handed out to the government for further review and design the appropriate regulation.

As per Charles Randell, Chairman of the FCA:

‘Unaffordable credit can damage the lives of people who are already struggling to manage everyday expenses. While we have made progress in reducing unaffordable debt in the years before coronavirus, the pandemic has had an unequal impact on households. Many people have been able to reduce their debts, but some of the poorest in our society have exhausted any savings or run up more debts. All the authorities which cover debt and debt advice must act together systematically to prevent problem debt and to help people get out of a spiral of debt through properly funded debt advice.

‘Regulation should be consistent and the Review shows how we can ensure high standards in consumer credit regardless of the form of credit.

‘The Review has powerful recommendations on debt advice and insolvency including on the IVA market. We are ready to work with other regulators to reduce the harm that IVAs can produce for people that use them, and to reduce the scope for unscrupulous operators to prey on vulnerable indebted people through for-profit debt packaging.

‘As the market innovates and changes, regulators and legislators need to respond quickly and decisively to protect consumers by facilitating credit where it is beneficial and clamping down on it when it does harm. The FCA agrees that there is a strong and pressing case to bring buy-now pay-later business into regulation.’


More info about the review from FCA here:
https://www.fca.org.uk/news/press-releases/fca-publishes-woolard-review-unsecured-credit-market