Tag: credit

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.” 

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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