Tag: credit

Shoppers to be protected by new Buy-Now, Pay-Later rules

  • Providers will have to ensure lending is affordable – stopping users from accumulating unmanageable debt  
  • Rules deliver better protection for shoppers and clarity for innovative sector after years of uncertainty

Millions of shoppers are set to be protected by new rules for Buy-Now, Pay-Later products.  

Buy-Now, Pay-Later products have become increasingly popular in recent years as they allow people to spread the cost of purchases over time, but users currently do not have access to a range of key protections provided by other consumer credit products.  

The Government has today launched a consultation on proposals to fix this by bringing Buy-Now, Pay-Later companies under the supervision of the Financial Conduct Authority (FCA) and applying the Consumer Credit Act, ensuring users receive clear information, avoid unaffordable borrowing, and have strong rights when issues arise.  

Economic Secretary to the Treasury Tulip Siddiq said: “Millions of people use Buy-Now, Pay-Later to manage their finances, but the previous government’s dither and delay left them unprotected.

“We promised to take action before the election and now we are delivering. Our approach will give shoppers access to the key protections provided by other forms of credit while providing the sector with the certainty it needs to innovate and grow.”

The new rules will allow the FCA to apply rules on affordability – meaning that Buy-Now, Pay-Later companies will have to check that shoppers are able to afford repayments before offering a loan, which will help to prevent people building up unmanageable debt.

Companies will also need to provide clear, simple and accessible information about loan agreements in advance so that shoppers can make fully informed decisions and understand the risks associated with late repayments.

Consumer Credit Act information disclosure rules will be disapplied so that the FCA can consult on bespoke rules that ensure users are given this information in a way that is tailored to the online setting in which Buy-Now, Pay-Later products are generally used.    

Buy-Now, Pay-Later users will be given stronger rights if issues arise with products they purchase, making it quicker and easier to get redress. This includes applying Section 75 of the Consumer Credit Act, which allows consumers to claim refunds from their lender, and access to the Financial Ombudsman Service to make complaints. 

Rocio Concha, Which? Director of Policy and Advocacy, said: “Which? has been a leading voice calling for the regulation of Buy Now Pay Later for years so it’s positive that new rules are coming in that should provide much-needed protections for users of these products.

“Our research found that many BNPL customers do not realise they are taking on debt or consider the prospect of missing payments, which can result in uncapped fees, so clearer information about the risks involved as well as the use of affordability checks and options for redress would be a win for consumers.

“We are keen to see legislation quickly passed to ensure that BNPL users are protected as strongly as consumers using other credit products.”

Sebastian Siemiatkowski, Co founder and CEO of Klarna, said: “Congratulations to Tulip Siddiq and the government on moving quickly!

“They have been working with the industry and consumer groups long before coming into office. We’re looking forward to carrying on that work to put proportionate rules in place that protect consumers while fostering growth.”

Michael Saadat, International Head of Public Policy at Clearpay said: “We welcome today’s update from City and FinTech Minister, Tulip Siddiq, on BNPL regulation.

“It is encouraging that HM Treasury has listened to industry feedback and evolved the previous framework to ensure a more proportionate approach to regulation.

“We have always called for fit-for-purpose regulation that prioritises customer protection, delivers much-needed innovation in consumer credit and that sets high industry standards across the board.

“We will continue to support the Government and the FCA to deliver fit-for-purpose regulation that ensures consumers are protected in a way that supports the UK’s thriving FinTech sector.”

Chris Woolard, Author of the 2021 Woolard Review, which looked at change and innovation in the unsecured credit market, said: “Today marks a significant milestone for consumer-focused financial regulation.

“The proposed package of regulation would implement the recommendations of the Review and mean millions of people up and down the UK will benefit from stronger financial protection as they borrow using BNPL, especially the most vulnerable in society. The incoming regulation will also provide long-term certainty and standards for the market.”

The consultation will be conducted quickly – closing on 29 November – to reflect the urgent need for action to protect consumers.  

Final legislation is expected to be laid in Parliament in early 2025. Once the legislation is laid, the FCA will finalise the rules so they can take effect in 2026 – bringing clarity to the sector after years of uncertainty about how it will be regulated.  

This follows the Prime Minister saying he would remove regulation that needlessly holds back investment and growth. Today’s announcement brings in much needed regulation that stops people spiralling into debt.

Justin Basini, Co-Founder and CEO of The ClearScore Group said: “We welcome this consultation to bring Buy-Now, Pay-Later borrowers under the same protections and creditworthiness assessments as other mainstream financial products such as credit cards and loans.  

“It is a sensible step in ensuring that this new, important form of credit continues to provide much-needed flexibility for consumers while also managing any risks.”

New regulations for Buy-Now-Pay-Later lenders set to protect 10 million consumers

  • New regulations are to clamp down on unregulated Buy-Now Pay-Later creditors and ensure consumer protection
  • Andrew Griffith, City Minister will work with the financial services sector to ensure affordable credit is available to people who struggle to access it
  • At the “Financial Inclusion Policy Forum” in Birmingham the minister will meet debt advisors who will help deliver free debt advice to more than 1.5 million people in England over the next three years.

NEW regulations for Buy-Now Pay-Later consumers are set to help protect an estimated 10 million customers from unconstrained borrowing while still ensuring those who need it have access to interest-free credit.

With more people taking out these credit agreements and the potential risks of consumers being exposed to financial harm; the UK Government is setting out proposed new regulations.

It will mean Buy-Now Pay-Later credit products are set to be regulated by the FCA and consumers will have the new right to take complaints to the Financial Ombudsman Service.

Under new rules providers will have to give consumers key information about their loans and issue credit that is genuinely affordable.

Economic Secretary to the Treasury, Andrew Griffith said: “People should be able to access affordable credit, but with clear protections in place. That is why these proposed regulations are so important.

“Today’s summit will also help regulators and banks better understand the best ways to support people who feel boxed in by debt and open up the financial system to people who find it more difficult to access.”

A summit of banks and debt charities will also be convened today by the City Minister who will urge the group to work together to improve financial education, ensure affordable credit is available to people who struggle to access it and remove the barriers which people with disabilities, like sight loss, can face when accessing financial services.

The latest “Financial Inclusion Policy Forum” will take place at the Money Advice Trust in Birmingham, bringing together the leading lights from the financial services sector, charities, consumer groups and regulators.

They will discuss the best ways to ensure access to affordable credit and remove barriers which people with disabilities, like sight loss, can face when accessing financial services.

Buy-Now Pay-Later can be a quick, easy, and helpful way for people to manage their finances, allowing them to spread the cost of a full purchase over time without paying interest.

However, because many of the agreements aren’t currently regulated and rely on minimal credit checks, lenders are not required to give key information to borrowers, and some people may end up borrowing more than they can affordably repay.

For those who are facing financial difficulty, new contracts awarded by the Money and Pensions Service this year are expected to provide free debt advice to more than 1.5 million people in England over the next three years.

During the forum the City Minister will also discuss the most effective ways to help those in financial difficulty.

One in five Scots have NO savings

·        Overall, nearly a third of adults in Scotland have less than £100 put away. 

·        Almost half of people who use credit are anxious about how much they owe. 

·        Over a third are anxious about the number of credit products they have. 

·        Free help is available, but six in seven people still struggle to talk about money.

Almost a million people across Scotland have no savings and another 450,000 have less than £100, according to new research from the Money and Pensions Service (MaPS). 

The survey of 301 adults, carried out for Talk Money Week (November 7-11), shows that one in five (20%) have nothing put away and another one in ten (10%) have £100 or less. 

This leaves almost a third of adults living without a financial safety net to cope with the rising cost of living or unexpected bills, meaning some may have to use credit. 

MaPS says although credit is an important tool when used and managed well, it’s crucial that people understand what they can afford and have a plan to pay it off. 

However, the figures also reveal that many people are already finding this difficult. Among the 82% of Scotland residents who use credit, two in five (43%) are now anxious about how much they owe. Two in five (40%) are worried about the number of different products they have. 

As cost of living pressures start to hit home, MaPS says it’s more important than ever to talk about money before problems set in. However, the survey also reveals that 85% of people still avoid discussing their finances. 

Asked why, the most common responses were ‘not wanting to be judged’ (24%), ‘shame or embarrassment’ (20%) and ‘fear of burdening others’ (17%). 

During Talk Money Week, MaPS is encouraging everyone to open up about money, plan for their financial future and take free debt advice as soon as they need it. 

The organisation says its MoneyHelper service can be people’s first port of call, offering free guidance on topics like everyday money, savings and where to find free debt advice. 

It also provides a range of information on dealing with money issues, including step-by-step guides on how to talk to your creditors or discuss money with family and friends. 

Allison Barnes, Scotland Manager at the Money and Pensions Service, said: “Over a million people across Scotland find it a challenge to save and this leaves them vulnerable when sudden expenditure items arise. When you add in the anxiety that they feel with their credit commitments, the weight of that worry can quickly become overwhelming.  

“This Talk Money Week, we want everyone to start the conversation with family or friends and share the burden of any money worries. By dealing with the problem head on, people can discover just how helpful free debt advice can be and see the importance of talking to their creditors early. They can also begin to find a way forward, no matter how difficult their situation might feel. 

“Free help and guidance on how to do all of this is available via our MoneyHelper service and I’d urge everyone who needs it to get in touch today.” 

TMW-2022-ParticipationPack-finalDownload

About Talk Money Week 

The week is an opportunity for everyone to get involved with events and activities across the UK which help people have more open conversations about their money – from pocket money to pensions – and continue these conversations year-round. 

This year’s Talk Money Week will focus on the theme of ‘credit’ – to help demystify some of the jargon, build people’s understanding of credit products, and what their options are, including other forms of support that might be suitable. However, we encourage people to use the week as an opportunity to talk about any aspect of money. 

More information is available at https://maps.org.uk/talk-money-week/. 

Scottish Government launches Community Lenders Fund

Affordable credit as we emerge from COVID-19

A new £15 million fund has been announced to support affordable lending services.

The fund will support Credit Unions and Community Development Financial Institutions (CDFIs) which offer financial help to those who have poor credit and are often turned away from high street banks.

Communities Secretary Aileen Campbell said: “We know the pandemic has had a financial impact on many people in Scotland and we want to strengthen services that support people with managing their money.

“Credit unions and CDFIs provide ways of saving, lending, and accessing affordable credit.

“They can be a financial lifeline for people who can’t always access what they need from high street banks, helping them to avoid riskier ways of dealing with debt, like going to pay day loan companies.”

The funding will support work which:

  • promotes the availability of affordable credit
  • strengthens the balance sheet of affordable credit providers

Organisations are being invited to submit applications by 3 March 2021, and they will be informed of funding decisions during the week commencing 8 March.

Successful applicants will receive funding by 31 March. 

Credit where it’s due: new support to help reduce the cost of borrowing

Low income families will have greater access to affordable credit through a new £2 million fund. Announced as part of the Tackling Child Poverty Delivery Plan, the Scottish Government will provide £1 million to the Carnegie Trust’s Affordable Credit Loan Fund, doubling the size of the fund. Continue reading Credit where it’s due: new support to help reduce the cost of borrowing

‘Common sense’ to prevail over mortgage lending

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‘Only borrow what you can afford to pay back’. That seems obvious enough now, but during the property boom the sky was the limit and credit was easy – with disastrous consequences. Lessons have been learned, and new rules come into force tomorrow (26 April) to protect borrowers and ensure a ‘common sense approach’ is taken for every lending decision.  

The rules – known as the Mortgage Market Review (MMR) – were drawn up by the Financial Conduct Authority (FCA) as a result of the recent financial crisis and are designed to protect consumers from the kind of reckless mortgage lending that would leave them unable to make repayments.

To ensure that people only get a mortgage they can afford, and to prevent a recurrence of the irresponsible lending practices of the recent past, every borrower will now have to prove that they can afford the repayments both now and in the future. The new scheme will include a new affordability check that will see applicants interviewed by a lender and asked about their income and outgoings.

The FCA has produced a short guide that explains the changes, and around half a million copies will be given out to prospective borrowers in branches of high street lenders, mortgage advisers and estate agents.

Martin Wheatley, the FCA’s chief executive, said: “In the past too many people got a mortgage by simply telling their lender they would have no problem repaying their debt, and that was that. Getting a mortgage can be one of the biggest financial decisions people will ever make, so it needs careful consideration. Our new rules will hard-wire common sense into mortgage lending, and the guide we have created will help explain those changes to borrowers.”

The mortgage industry has been busy getting ready for the changes for about 18 months and many firms are using the new approach already, so some borrowers will not notice the difference.

The FCA has also updated its consumer information pages on its website, at: www.fca.org.uk