A UK regulator has moved to toughen up the playbook for buy now pay later (BNPL) companies, which has been welcomed by the PwC.
The Financial Conduct Authority (FCA) has suggested that the regulations around BNPL companies should be tightened on the back of the completion of the Woolard Review.
“While all of the recommendations made by Chris Woolard seem sensible and will contribute to improving outcomes for consumers with unsecured credit, the FCA and Treasury will need to prioritise their actions,” David Kenmir, partner at PwC. “It’s clear that regulation of [BNPL] is the top priority and will be acted on imminently.
“From a fair competition and consumer protection angle, bringing all BNPL products within scope is a logical move for HM Treasury and the FCA. It will level up the playing field between BNPL and more traditional types of credit though the FCA must balance the need to protect consumers with the need to enable them to access simple, accessible and affordable credit.
“Aspects of the rules that relate to revolving credit products may usefully be applied to BNPL products, such as facilitating a smooth process at the point of sale, but without tempting customers to take every purchase on credit.
“The emphasis on improving the way the market works for the less well off in society; the potential detriment that arises from repeat lending; the importance of new market entrants into this sector; the potential benefits from a more consistent approach to forbearance and attempts to improve the quality of data provided to, and as a result by, credit reference agencies are all welcome.
“To help ensure customers remain fully informed and empowered to make their own borrowing decisions, work is needed across the board to update the FCA’s approach in a digital age. Not only should disclosures be considered, but the policy framework relating to the end product lifecycle would benefit from more digital alignment.
“The FCA’s approach to supervision needs to be adapted to a world of straight through processing and online self-service solutions for consumers that do not generate the traditional paper trails that the financial services market is used to.
“The world in which advertising has focused on speed of decision as opposed to any other elements of the product – or indeed the consumer’s ability to repay the loan – in order to increase the attractiveness of products to consumers, will also need to change.”
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