Buy Now Pay Later regulation imminent: ‘FCA very keen to be on front foot’
Government proposals to regulate the interest free Buy Now, Pay Later market are expected by the end of October, according to industry insiders.
Buy now, Pay Later products have boomed in popularity in the UK over the past five years, The Buy Now, Pay Later (BNPL) industry was recently estimated to have financed £3billion in customer transactions in the UK alone.
Lenders offering these BNPL products have so far been unregulated. The new proposals are expected to be announced next week, according to professional services firm BDO.
The FCA intends to introduce these regulations to the BNPL sector to protect consumers from harm and ensure fair treatment by credit firms.
“When a sector of consumer finance grows as fast and as far as BNPL it is almost inevitable that the FCA is going to have to regulate it,” said Richard Barnwell, Financial Services’ Partner, of BDO, comments
“Part of the concern about this sector is that it has gained so much traction amongst a younger demographic, who might typically have less experience of dealing with financial products. They are also a demographic that can be vulnerable to personal insolvency caused by taking on too much consumer credit.”
The FCA is very keen to be seen as being on the front foot in terms of protecting consumers, so we expect it to fairly hands-on in its approach to this sector.
“What the Treasury will need to balance is the fair treatment of borrowers with allowing this fast growth sector to deliver what consumers want.”
It will now mean that firms will need to comply with new regulatory requirements. BDO expects this to include affordability assessments for product applicants and ensuring vulnerable customers and those who are struggling to pay are treated fairly.
Also the provision of forbearance (offering the borrower leniency eg by pausing or reducing repayments) by the lender when ‘borrowers’ defaults or fall behind on their payment as well as ensuring borrowers are aware of the terms and conditions when making purchases on credit.