Buy now pay later (BNPL) products are moving at fast pace. It was only 12 November 2019 when a 5 month implementation period of new BNPL rules began. At the time, the FCA were keen that the changes be implemented in early November to enable 2019 Christmas shoppers to benefit. The FCA estimated that the package of new measures would save consumers £40-60 million a year. At that time it was decided that not all BNPL products would be regulated. (Buy Now Pay Later (BNPL) issues in consumer e-commerce)
Fast forward to 2021 and the Woolard Review opens drawing 'attention to an urgent need to regulate all buy now pay later (BNPL) products. While the emergence of unregulated BNPL products has provided a meaningful alternative to payday loans and other forms of credit, BNPL also represents a significant potential consumer harm.' You may ask why the sudden change. I think the better question is, why did it take the FCA so long to realise this?
Long before the coronavirus pandemic the FCA acknowledged credit to be an important part of people's lives in the UK. Measures have been introduced to reduce consumer harm in pay day loans, overdrafts and credit cards. With consumer options being taken away or being made more difficult to access, monitoring unintended consequences should have always been a priority. With the BNPL sector growing it was only a matter of time before consumers turned to these products and became more heavily reliant on them. With the country going through various stages of lockdown, online shopping has significantly accelerated. Couple that with consumers facing coronavirus related economic difficulties, I don't think it should come as a surprise that the unregulated BNPL market trebled in 2020. It was the perfect storm.
The Woolard Review not only recognises the need for regulation but the urgency at which action is needed. The review contains 25 recommendations (that span across the unsecured credit market) to the FCA Board. Most importantly the review proposes that an immediate Financial Services Bill is passed to legislate BNPL products. The Woolard Review rightly points out that 'a sustainable market needs more alternatives to high cost credit'. Making that happen will take time. In the meantime, I'm with Christopher Woolard CBE: the FCA and HM Treasury need to work together to regulate BNPL in a proportionate manner. BNPL needs to be regulated now so we don't all pay later.
