Inside the recent report on change and innovation in the unsecured consumer credit market the FCA have stated that better regulations on buy now, pay later loans are a matter of urgency.
The call for more regulations has been mentioned after buy now, pay later products nearly quadrupled in 2020 with 5 million people using these products since the beginning of the coronavirus pandemic. According to the FCA more than one in ten customers of a major bank using BNPL were already in arrears.
The introduction of stricter regulations could mean much more complex affordability checks are put in place before a customer is able to buy something and reduces the likelihood of customers falling into debt.
Buy now, pay later plans have been a hit during the unpredictable pandemic for consumers who may for example have had reduced incomes. It has enabled them to spend beyond their immediate income without worrying about how to pay for it upfront. PayPal for example recently introduced their Pay in 3 loans which boasted to help businesses drive checkout conversion, revenue, and customer loyalty.
Considering the rise in debts and the expectation that people using buy now, pay later plans would double by 2023 it is not surprising that more regulation on the subject is being pushed. Payment plans are helping those who are running into financial troubles caused by the pandemic, but with so much uncertainty and vulnerability looming, being able to take loans with a lack of regulation is possibly a risky business.