Welcome to The Current Account! We hope you enjoy our latest round-up of the top news from the industry in February.
Headlines from the banking sector this month
In this edition of The Current Account, we look at two Consultations the regulators are focussed on: regulating BNPL products, and the digital Pound…
FCA to regulate BNPL products…
- BNPL is a credit product and to date has not been regulated to provide consumers with the same safeguarding and protection as with other credit products. A significant proportion of BNPL consumers are on low income and whilst the amount being borrowed is often small, the consequences of not being able to repay the debt aren’t. A recent survey showed that a third of 18-34 year olds have been charged late payment fees.
- New data reveals that the utilisation of BNPL services soared last year as more than 4 million new customers opted for these products to safeguard their finances against the surging cost of living crisis. Equifax reported that over 4.1 million shoppers used these services for the first time in 2022, and currently, more than a third of UK shoppers have used BNPL, a significant rise from 26% in 2021.
- At the beginning of 2021, the government declared its plans to regulate BNPL products and conducted consultations on policy options to implement a fair approach to regulation by October 2021. A consultation response was released in June 2022, and currently, the government is seeking input from stakeholders on the proposed draft legislation that will bring BNPL under the regulation of the Financial Conduct Authority (this consultation closes April 2023). The government says the new regulations would protect an estimated 10 million customers.
- The new rules will mean that:
- Lenders will need to ensure BNPL advertising is clear, fair, and not misleading.
- Consumers will get powerful Section 75 protection on purchases made using BNPL.
- Consumers will have the right to complain to the Financial Ombudsman Service.
- The FCA will make sure the new rules are being met by BNPL firms.
- The upcoming regulations do not seem to have deterred firms from offering these products and innovation in this area is still rife – with Santander recently releasing a business-to-business (B2B) buy-now-pay-later service described as a ‘game changer’.