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FCA announce intentions to regulate Buy-Now-Pay-Later industry

Nevan McBride, Risk Practice Director

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Nevan McBride

Risk Practice Director

Buy-Now-Pay-Later: Transitioning into a new regulated world

The concept of owning a product yet deferring payment has been a credit option in the retail industry for several years. Buy-now-pay-later (BNPL) lenders enable customers to delay and divide payments for purchase of products, typically with no interest or fees – unless they fail to pay back on time.

BNPL has experienced rapid growth in the last year, with five million people in the UK racking up £2.7 billion worth of sales – a fourfold increase compared to the previous year. This growth has been fuelled by an increase in online retail through the pandemic and a reduction in alternative credit options for the underserved.

This surge in unregulated BNPL has caught the attention of the regulator with the industry forming part of the recent Woolard Review into the unsecured consumer credit market. The FCA is concerned about how easy it has become for consumers to buy more than they could afford and rack up high debts.

This review is the first step in the regulation of the BNPL industry – regulation that offers protection to consumers via thorough assessments of credit affordability and fair treatment for those who are vulnerable or struggling with repayments. BNPL lenders should begin to review their credit policies and perform a gap analysis against the FCA’s CONC rules to ensure they are compliant ahead of transitioning into a new regulated world.

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