- EQ Credit Services’ Martin Kisby, Head of Compliance provides comment on the FCA’s announcement to review the unsecured credit market following ‘The Woolard Review’
- Report from former Financial Conduct Authority (FCA) interim chief executive Chris Woolard recommends that the ‘Buy now pay later’ sector be formally brought under the regulator's scrutiny.
The review comes after the use of buy-now-pay-later credit nearly quadrupled in 2020 to £2.7bn in 2020
The FCA has yesterday issued a board report titled ‘The Woolard Review - A review of change and innovation in the unsecured market’ conducted by Chris Woolard CBE.
To have a long-term, healthy market certain new credit products that are current unregulated need to be brought within the regulatory framework with a matter of urgency
The economic effects of the pandemic will drive demand for debt advice.
Providers of free debt advice need access to secure, long-term sources of funding to ensure that advice is available to those in need.
For the good of consumers and firms, a more focused approach to regulating the credit sector that looks at how products are used in the real world. Regulation should focus not just on affordability, but on conduct across the lifetime of the product.
Learnings from the experience of COVID-19, there also needs to be a more consistent approach to forbearance across firms.
The review also indicates that whilst the emergence and expansion of the BNPL products has given consumers more access to alternative and the more expensive credit options there is still potential for significant harm, with more than one in ten customers of a major bank using BNPL already being in arrears. Regulation would protect people who use these credit options and make the market sustainable, ensuring customers are treated fairly no matter what credit option they choose. Also, the provision of debt advice will be critical with demand increasing to as many as 1.5 million cases following the pandemic.
Regulation is an important part of keeping the industry in touch with consumer behaviour and credit preferences. The fast, digital nature of BNPL is an attractive option for many to spread their budget and is reported to be the fasted growing form of credit in UK.
Regulation would protect people who use these credit options and make the market sustainable, ensuring customers are treated fairly no matter what credit option they choose.
The FCA has welcomed the Woolard Review and supports the recommendations. The Board agrees that there is a strong and pressing case to bring buy-now pay-later business into regulation. They will publish their 2021/22 Business Plan in April, and will then provide further details of the response to the Review.
Read the full comment from the FCA here