Latest news with #FinancialConductAuthority
Fashion United
a day ago
- Business
- Fashion United
UK watchdog calls for stricter regulations on buy now, pay later loans
The UK's Financial Conduct Authority (FCA) has proposed more stringent regulations for Buy Now, Pay Later (BNPL) providers with the goal of supporting borrowers in the event of financial difficulties. The organisation's rules are set to come into force when BNPL falls under the oversight of the FCA by July 2026, a shift the watchdog and debt-related charities have long campaigned for. In a statement, the FCA's deputy chief executive, Sarah Pritchard, said: 'Our regulation will help consumers navigate their financial lives, with checks on whether they can afford to repay, support when things go wrong and access the right information to make informed decisions.' The FCA said related BNPL products will come 'under proper regulation' in line with the rest of the consumer credit sector, requiring providers to ensure borrowers can afford repayments and offer backing where necessary. Among the suggestions is that of an extension of Section 75 protections, which would make BNPL firms and retailers jointly responsible for faulty or undelivered goods, placing more responsibility on merchant partners. Senior director of risk at Broadstone, Richard Pinch, said the move to tighten regulations will mean providers come under increased pressure to 'enhance creditworthiness and affordability assessments and also demonstrate robust consumer protections'. Pinch added: 'This marks a significant shift away from the relatively light-touch model BNPL firms have operated under, and places greater emphasis on affordability checks, credit reporting and fair treatment of borrowers.'
The Independent
a day ago
- Business
- The Independent
Young people! Here's what you need to know about ‘buy now, pay later' loans
Klarna and its pals have taken over the British High Street, with buy now pay later (BNPL) loans exploding in popularity. The market ballooned from £60m in 2017 to more than £13bn last year. One in five Britons used it to borrow money over the 12 months to May 2024. Regulatory oversight is long overdue and with legislation finally on the books, the Financial Conduct Authority has delivered its proposals. They are really quite mild. It is worth remembering that the government decided not to fully apply the Consumer Credit Act to these products even though, I repeat, they are loans. This has tied its hands to some extent. Under the plans, BNPL lenders will have to secure authorisation, check that people can afford to repay their loans, spell out the risks and charges for late payment, and offer more support to those who get into trouble. That could include forbearance (the sector will just love that one). Consumers will also be able to approach the Financial Ombudsman in the event of disputes. These loans are disproportionately popular among younger people (30 per cent of adults aged 25-34 used them at least once in the year to May '24), poorer people (nearly one in three adults with 'low resilience' took them out) and those living in the most deprived parts of Britain (29 per cent). I'm not about to deny that they can prove useful. Deferring the cost of purchasing a new school uniform for the kids for 30 days, or paying in three monthly installments, could be helpful to a low-income parent. But that's not how these things are typically used, and they are so easy to access it is very easy to get into trouble with them if they aren't used carefully. In my view, this is the crack cocaine of lending. The business model speaks to that. BNPL firms receive a commission on each transaction from the retailers they work with. Why are the latter willing to pony up? Because BNPL loans encourage consumers to spend more. Commissions aren't the only revenue stream available to firms in the sector, however. They also typically charge late fees and the FCA found what it called 'high arrears levels' in the sector with some firms generating 'significant revenue' from these charges. It further found that consumers weren't always aware that they could get hit for failing to pay on time. Critics of regulation argue that people shouldn't need handholding or nannying. The watchdog found that the most common use of BNPL in the 12 months to May 2024 was for lifestyle and beauty purchases (41 per cent), followed by 'treating myself or other people' (37% per cent). Surely it would be churlish to deny people the chance of a good time? I get the point. I do. But consumers should know what they're getting into and the sector hasn't always been good at explaining the risks. Indeed, the regulator criticised what it termed 'benefit framing' where firms emphasise the good bits and downplay the dangers. For the record, Klarna described the proposals as 'a win for the consumer' while rival Clearpay said it would 'support the FCA as it consults on and finalises its specific rules for the sector'. Make of that what you will. I still fear that BNPL's explosive growth, and some of the practices found by the regulator, means the potential is there for a serious scandal. Meanwhile we're likely to see snowballing numbers of cautionary tales, in which people find themselves plunging into financial hell. That being the case, it is regrettable that the wheels of regulation are still moving at the speed of a sloth with a stitch: After five years of consultation with the Treasury, oversight of the sector still won't finally come in until next July.
Time of India
a day ago
- Business
- Time of India
Firstsource to acquire UK-headquartered Pastdue Credit Solutions
Synopsis The acquisition is subject to Financial Conduct Authority (FCA) approval, said Firstsource Solutions, a provider of domain-led Business Process Services (BPS).The RP-Sanjiv Goenka Group company, however, did not divulge the financial details or size of the buy.
Daily Mirror
a day ago
- Business
- Daily Mirror
Martin Lewis issues warning to anyone who uses buy now, pay later
The FCA has revealed there will be stricter affordability checks next year for people using buy now, pay later providers Martin Lewis has issued a warning to anyone who uses buy now, pay later (BNPL). The Financial Conduct Authority (FCA) has revealed there will be stricter affordability checks next year for people using BNPL providers. BNPL lets shoppers buy items on credit and pay for it later, usually spread out over several months, interest-free. However, debt charities have warned that it can lead to some people taking out loans that they cannot afford. You can get charged late fees if you miss a BNPL payment and some firms also report missed payments to credit referencing agencies. Martin Lewis has praised the new regulation, but warned that the protections are not in place just yet. He said: 'I was one of those who campaigned strongly to get buy now, pay later regulated. 'Not because it's wrong for everyone, but because we need to make sure it's safe. If you know what you're doing and you're using it to spread the cost over a few months interest-free – great. Too often, though, it was sold as a lifestyle choice. It isn't. 'It is a debt, and it needs to have the same protections as other debts. Now, today, we see the beginning of the process of regulating it, but the protections are not fully in place yet. 'For example, you won't be able to go to the Ombudsman if something goes wrong for at least a year. So if you're getting buy now, pay later at the moment, you should still be very careful.' Under new proposals, BNPL providers will have to check that people can afford to repay their loans and offer support if they get into financial difficulty. Borrowers will also be able to complain to the Financial Ombudsman Service if something goes wrong. The rules would come into effect when BNPL comes under FCA remit next year. According to FCA research, one in five (20%) UK adults – roughly 10.9 million people – used BNPL at least once in the 12 months to May 2024. This is up from 17% in 2022. In May 2024, 2% of UK adults (1.1 million people) had £500 or more outstanding unregulated BNPL debt, and 11% of UK adults (5.3 million people) had £50 or more outstanding. The FCA consultation is open for feedback until September 26, 2025, and the rules would come into force from July 15, 2026. Firms will have six months from the date the regime comes into force to apply for full authorisation. Sarah Pritchard, deputy chief executive at the FCA, said: 'We have long called for BNPL products to be brought into our remit, so people can benefit from BNPL while being protected. 'Our regulation will help consumers navigate their financial lives, with checks on whether they can afford to repay, support when things go wrong and access to the right information to make informed decisions. 'We're mainly relying on existing requirements, including the Consumer Duty, rather than proposing to make lots of new rules, supporting growth and allowing firms to innovate.'
Reuters
a day ago
- Business
- Reuters
UK's financial watchdog proposes protections for buy now, pay later borrowers
July 18 (Reuters) - Britain's financial watchdog on Friday proposed rules to protect buy now, pay later (BNPL) borrowers, including affordibilty checks, access to the Financial Ombudsman Service for complaints and support during financial difficulties. "Our regulation will help consumers navigate their financial lives, with checks on whether they can afford to repay, support when things go wrong and access to the right information to make informed decisions," Sarah Pritchard, deputy chief executive at the Financial Conduct Authority, said.
