Article by Phil
The FCA has expressed concerns about unregulated money advisor services. Particularly those offering “buy now pay later” (BNPL) credit.
The rapid increase in the number of these money advisor services schemes has grown across all aspects of the retail sector. Lenders like Klarna, Zilch, Revolut, Dekopay and of course PayPal are becoming household names. BNPL is even being offered by some companies to pay household bills.
These types of BNPL money advisor services are not regulated by the Consumer Credit Act because the credit is offered for less than 12 months and is repaid without interest or other charges.
Schemes work in different ways. Some offer payments over two to four months. Others offer payment in full after 30, 60 or 90 days. On the face of it there doesn’t seem to be much wrong with this type of offer, but the FCA is concerned.
The main concern is that customers are still taking on board credit, regardless of whether it is interest free or not. That brings with it the risk of non-payment which will affect credit ratings in the future. They are also concerned that the ease of credit may be encouraging overspending leading to debt problems building over time. There are often no affordability checks which mean that even people with credit problems are being encouraged to borrow more. If you cannot meet the payments, then charges will apply. These can be high when compared the relatively low amounts of credit. Using a BNPL type money advisor services scheme also removes any protection under the Consumer Credit Act, which you would automatically enjoy if you used a debit or credit card. That means that if you pay for faulty goods, you can’t get any help from the Lender.
The FCA says that it has written to the providers of these types of money advisor services to remind them of their regulatory obligations. With the new Consumer Duty rules coming into force next year the FCA wants Lenders to consider how they will be able to apply these requirements in their current operations.
