The buy-now pay-later (BNPL) finance industry in the UK is facing increasing pressure for regulation amidst rising living costs. Chris Woolard, the former boss of the Financial Conduct Authority (FCA), has joined the chorus of voices calling for urgent regulation in the sector. However, concerns have been raised over the slowdown in the regulatory process since January. Woolard, who authored the significant Woolard review of the BNPL sector, highlighted the initial swift response from the Treasury, which pledged to regulate BNPL and make changes to primary legislation.
Despite the FCA’s eagerness to regulate the sector, Woolard noted that they are currently waiting for the results of a Treasury-led consultation that concluded in early January. He stressed the importance of granting the FCA the necessary powers to establish and enforce rules that will protect customers, as the pace of regulation has slowed down since the consultation period.
Over the past couple of years, BNPL products have gained popularity, especially in the fashion retail sector, as consumers look to spread the cost of their purchases over installments. However, concerns have emerged regarding the lack of regulation in the sector, particularly with the increasing prices and inflation. Recent data from Hargreaves Lansdown revealed that nearly 10% of consumers have used BNPL products to buy essential items. The rising cost of living has further emphasized the need for regulatory measures in the BNPL industry, according to a spokesperson for the FCA.
The spokesperson for the FCA highlighted the importance of adapting the law to keep up with market innovations, stating, “It is vital the law, which sets our remit, adapts as the market innovates.” One of the leading BNPL providers, Klarna, expressed its support for regulation and its commitment to implementing the recommendations from the Woolard review. While waiting for the publication of the Treasury’s results, Klarna stressed the urgency of regulation to protect consumers as more providers enter the BNPL space.
Useful links:
1. FCA Call for Input on Consumer Harms in the BNPL Market
2. UK Government Supports FCA Action on BNPL Market
