Inhibition
It’s done differently in Scotland

Published 09 February 2022

In the context of debt recovery litigation, the obtaining of a decree (judgment) should not be an end in itself and this is particularly true in relation to volume debt recovery litigation. The purpose of a court decree is to enable the creditor to obtain payment from his debtor of the sums of principal, interest and expenses (legal costs) due in terms of the decree. To achieve payment, either in full, or by instalments over a period of time, it is important that the creditor has a clear and defined strategy in relation to, firstly, the selection of accounts for litigation, to ensure that they are appropriate to be litigated on and, secondly, the enforcement of decrees to maximise the prospects of repayment. An inhibition is sometimes stated to be similar to a charging order in England and Wales and while both are generally obtained after the creditor has obtained a decree or judgment, there are significant differences. For example, a charging order is recorded against the debtor’s home or other property and entitles the creditor to thereafter apply to the court for an order to sell that property. An inhibition, however, is registered personally against the debtor and is a passive diligence (method of enforcement) in that an inhibition does not entitle the creditor to sell or to apply to sell the debtor’s heritable property (land or houses). As an inhibition is registered in the Register of Inhibitions against the debtor and not a particular property, it inhibits or prevents the debtor from selling any land or houses he may own in Scotland. While an inhibition does not entitle the creditor to sell the debtor’s land or house, it prevents the debtor from selling or re-mortgaging his heritable property, without the consent of the inhibiting creditor. Where a creditor has registered an inhibition against his debtor but has been unable to enforce his decree and get payment, it is not uncommon for the debtor, sometimes several years later, to try to sell his house, only to find that he is unable to do so, as there is an inhibition registered against him. In this situation he must arrange to pay the inhibiting creditor before he can sell the property affected by the inhibition. INHIBITION: SOME KEY POINTS • On obtaining the extract decree from court, a creditor does not need to make a separate application to court for an inhibition but is required to instruct Sheriff Officers to serve the inhibition on the debtor and register it in the Register of Inhibitions. • An inhibition is personal to the debtor and applies to all land or houses owned by the debtor in Scotland. The creditor does not need to specify a particular property to register an inhibition. • An inhibition only applies to heritable property (land and houses already owned by the debtor). It does not apply to heritable property acquired by the debtor after the inhibition has taken effect. • An inhibition prevents the debtor from voluntarily dealing …

A landmark judgment
Lloyd V Google LLC

Published 09 February 2022

BACKGROUND The dispute involved former director of consumer watchdog ‘Which?’, Mr Lloyd against Google LLC alleging breach of duties as data controller under the Data Protection Act 1998 (DPA). Mr Lloyd alleged that Google had been secretly tracking online activity of millions of iPhone users and had used the data for commercial purposes without the users’ knowledge/consent. He sought to bring the claim acting as representative for all individuals affected. Compensation of £750 was sought in respect of each individual, which would result in a total damages order of £3 billion if successful. SUPREME COURT As Google is a Delaware corporation, Mr Lloyd required the court’s permission to serve the claim form on Google. The Supreme Court refused permission, effectively preventing the claim from proceeding. It held that the DPA cannot reasonably be interpreted as conferring on a data subject a right to compensation for any (non-trivial) contravention without the need to prove material damage or distress to the individual and therefore the claim was ‘doomed to fail’. Further, it was held that a representative action is not a suitable vehicle for claims of this nature where damages were not identical on the basis that individual class members would not be participating in the action. WIDE-RANGING IMPACT The judgment has been held as a resounding victory for UK business in the wake of recent concerns as to the emergence of a ‘compensation culture’ surrounding low-value and/or minor infringements of data protection law. Data protection claims for loss of control of data have been squarely shut down. WHAT YOU SHOULD CONSIDER MOVING FORWARD 1. The judgment does not prevent group actions entirely moving forward, but rather adds some interesting clarity on the restrictive approach that the courts will adopt. The court did not state that Google could not be liable for damage caused to groups of consumers, but the damage claimed must be material and the losses sustained by each individual were not uniform and would differ. 2. Future representative claims may involve a class action. Claimants bringing class actions have tended to rely on group litigation orders to pursue their claims. As they are ‘opt-in’ (i.e. where individuals have to take active steps to join the claimant group) they can be a less favourable option for claimants as the economics and administrative burden are far less advantageous. 3. Very significant difficulties exist for claimants in bringing ‘opt-out’ class actions (such as in this case). Although there are fewer hurdles for claimants to overcome and the group of people represented may be far wider, this makes them a greater financial risk for businesses both in terms of the potential frequency with which such class actions may be commenced and their scale. 4. Representative claims remain an option for litigants, but in the light of this judgment, it is difficult to see how damages claims of this nature can easily avoid the individualised assessment discussed in this case. Accordingly, in many instances it is unlikely to be financially viable for individual claimants …

Significant challenges ahead
Review of the pre-action protocols

Published 09 February 2022

The start of 2022 sees the continuation of the Civil Justice Council review of the pre-action protocols (PAP), which may result in changes to the process. While some would be welcomed, others may present significant challenges to the debt collections industry. There are four key areas which are being looked at for debt claims; however, one key message should absolutely remain the same and that is to encourage engagement between the debtor and creditor (or their appointed representative). Increased engagement helps to reduce the number of claims being initiated through what is already a creaking justice system. The original debt PAP unfortunately did not have that desired effect. Here are the main areas being looked at: 1. TIMEFRAME TO RESPOND TO THE LETTER OF CLAIM Currently, the allowance is thirty days for the debtor to respond which, overall, is appropriate and we do not feel this needs to change. If a debtor were to engage before proceedings have been issued, stating they were seeking assistance from a third party in managing their debts, the industry standard is to offer a thirty day hold. It therefore makes sense to allow the same time for the customer to seek advice in responding to a claim and keep it consistent. 2. CONTENT OF THE LETTER CLAIM This was an area of contention in the original debt PAP with the potential requirement to include certain documents in the Letter of Claim, particularly a copy of the credit agreement. It is an area that we still believe is not necessary when considering what PAP is trying to achieve i.e. early engagement to avoid litigation. There are many reasons why someone chooses not to engage; for example, fear or embarrassment, but the number of people that do not engage because the debt is disputed is generally low. The information contained in the Letter of Claim would generally allow an individual to identify the debt in question. If not, and the debtor raises a dispute, the matter would be referred back to the Client with all activity temporarily suspended. 3. LANGUAGE AND LENGTH OF PAP The debt PAP is, after all, a legal document designed for a particular purpose and, while generally we welcome attempts to use more “plain English”, the language used currently is both clear and concise. 4. INTEGRATION INTO MONEY CLAIMS ONLINE Any steps being considered that would digitalise the process for all parties are very welcome. As a business, we have taken numerous steps to allow debtors to follow a digital journey, should they so choose and feel this progress is significantly overdue and fundamental to treating customers fairly. In summary, reform is something to be welcomed by the industry. However, it needs to strike the correct balance between encouraging early engagement and the fact that this is a legal process. Engagement is a barrier that is faced across the industry, from early stages of delinquency through to litigation and is something businesses continually strive to improve. While societal attitudes to debt have …

Crossing the waters
How to fund your business

Published 09 February 2022

Lending money is what you do. Swapping your lender hat for a borrower one requires careful consideration. Navigating the various funding options available with the specialist lenders in the market is about finding the best fit for your business. And what about raising funds via issuing shares? The following sets out the pros and cons of common funding options for consumer finance businesses. WAREHOUSE LENDING Loans are originated and sold to a new SPV (special purpose vehicle). The lender provides secured debt into the SPV, funding a pre-agreed percentage based on borrowing base calculations. Top-up funding needed for the balance will be locked in (“subordinated”). Loans are serviced under a servicing agreement entered into with the SPV. PROS • Risk is more balanced between parties • There is a limit on how much the credit provider can make CONS • Requires available capital or other additional funding • Initial set-up costs can be higher due to the relative complexity of the structure and need to ensure regulatory compliance FORWARD FLOW A form of asset purchase arrangement. Loans are originated in accordance with pre-agreed eligibility criteria, and those that fit the criteria (“eligible loans”) are automatically purchased by the lender. Pre-funding of the loans is made by the lender at regular intervals, based on pipeline, for 100% of each consumer loan. Loan origination and servicing fees are taken. PROS • 100% funded by the lender so better if access to capital is tight • Risk passes to the lender and the loan sits on the lender’s balance sheet from day one • Avoids paying interest on debt capital that may not be generating a return CONS • Can be difficult to find multiple funders as the ‘best loans’ are taken by the first lender • Additional risk for the lender is balanced by a lower return for the loan originator • Possible loan buy-back clauses for certain non-performing loans SPOT SALE A lending business with an identifiable or established loan book can enter into a one-off sale of the loans comprised in it. As with a forward flow arrangement this involves selling the economic interest in the loan but without any ongoing commitment to sell other existing or future loans. PROS • Helps active balance sheet management and economic risk passes to purchaser • No ongoing commitment to sell other existing or future loans CONS • Repurchase obligation for ineligible or otherwise recalled loans • Potential liability for redress events in respect of loans sold SENIOR LOAN FACILITY A more traditional secured loan arrangement, to refinance loans which have already been issued or provided as liquidity for entering into new loans. Funds drawn immediately begin accruing interest, so the loan originator may need to fund interest payments for loans that are not yet generating any return. PROS • Allows for the syndication of the loan, giving the possibility of a much larger facility • Control and ownership of the loans is retained (unless an event of default occurs) CONS • Requirement …

A culture of openness
Meeting the challenge of the Consumer Duty

Published 09 February 2022

There is quite often an assumption, that as all businesses offering financial services are regulated by the same governing body (the FCA), they’re all delivering the same level of service … wrong! The need for the new Consumer Duty reflects that whilst there is a basic standard that is required of firms, the bar can, should and has to be raised. The FCA want “firms to be incentivised to compete in the interests of consumers.” This is a competition we should all be fighting to win. The proposed new rules mention ensuring “retail” customers are getting the right outcomes and that “retail” products are suitable, so it would be very easy to think it doesn’t apply to those of us in organisations that don’t offer typical financial products. However, cast your minds back and the approach very much resembles the launch of Treating Customer Fairly (TCF) and how the six outcomes needed to be interpreted and adapted to financial institutions, across all industries who serve consumers. So how, as organisations not offering typical products, can we make sure that we’re measuring our ability to deliver what is in the interests of consumers? WHAT DOES RETAIL MEAN? For me, we should simply ignore that word and focus on it being about customers, and the outcomes our “products”/services drive. In our industry (Debt Purchase) as an example, that could be about how we ensure customers understand that they’re not incurring any interest or charges on their account with us, so they need to prioritise their outstanding bills that are increasing on an ongoing basis. That might feel counterintuitive, as surely we need to collect what we can, but if the customer is incurring more debt, is it really in their best interests to encourage them to use their disposable funds to repay cheaper outstanding debt? Conversely though, it might be in the customer’s best interest to clear outstanding defaults on their credit file, it’s a balance we must be able to evidence, to show that outcomes are in the overall best interests of the consumer. It’s important to consider how a firm’s behaviours and culture may affect good customer outcomes. For example, are your colleagues confident in flagging and addressing issues and incidents when things don’t go to plan? If not, those challenges may never be resolved, unintentionally giving the customer a poor outcome. It’s important to build a culture of openness to make sure you’re notified when things go wrong, so you can fix them and ensure issues are fully understood to allow changes to be made to drive improvements over the longer term. The Consumer Duty is simply an evolution of Treating Customers Fairly, one which we should all embrace and be able to comfortably believe and evidence that we are acting in the best interests of consumers at all times.

Moving from lip service to action
Treating vulnerable customers fairly

Published 09 February 2022

The media has recently been flooded with government and royal scandals and, while the fuel crisis has received some airtime, the potential impact on millions of households has not received the publicity it merits. The decision of to ‘Eat or Heat’ is a very real threat to many. The negative impact on household expenditure a risk to us all. It is more important than ever to be able to identify who our vulnerable customers are and give them the appropriate level of support. The Vulnerability Registration Service (VRS) recently published a report highlighting the need for businesses to, not just acknowledge that vulnerability is an issue, but start to take action to address it. The full report can be viewed on the VRS website. The figures are already alarming – a dramatic increase in the cost of living will only exacerbate the situation so now is the time to act. Delays blamed on resource, data protection challenges or not acknowledging that a customer base has an element of vulnerability should no longer be an option. Over a third of the population already deem themselves to be in vulnerable circumstances and, of those, 41% feel unfairly treated by organisations with 15% finding it difficult to communicate. Some of these issues can start to be addressed through tailored and efficient customer service but it is essential to be able to establish who those customers are in order to do so. Data sharing is an essential component in vulnerability identification. Society has made big strides in recognising the impact mental health can have on all aspects of people’s lives. 25% of the people VRS surveyed had experienced mental health issues in the last twelve months, identifying individuals who are affected and treating them appropriately is a major element in the quest to support vulnerable customers. Some of the findings in the report are surprising – typically, younger people (potentially those without a weighty credit history) identify as vulnerable. Those who would be classed as living in comfortable circumstances also form a large minority – possibly as a result of unexpected issues arising from the pandemic who, again, will be affected by rising household bills. VRS obtains data from non-traditional sources providing an extra layer of insight for its customers. This allows companies to overlay the information it obtains through credit reports, affordability models and fraud prevention services and determine which customers may need to be referred out of the customer journey. VRS holds Court of Protection data obtained from local authorities and solicitors whereby the individual often should not be obtaining credit and is not responsible for their own financial affairs; referrals from charities supporting a range of individuals suffering from gambling addiction to financial abuse including the victims of loan sharks. In addition, individuals can self-register or service providers who are clients of VRS can share information about their customers where there is a legal basis to do so. The VRS database is accessible directly to VRS clients or through solutions providers …

Teetering on the edge
Fair For You partners with Iceland

Published 09 February 2022

As a responsible lender focused on providing ethical credit to those unable to access mainstream credit, Fair for You hears a lot of our customers say that they are teetering on the brink of financial crisis all year round. They live in dread of unexpected bills and out of the ordinary expenses. For many, a free school meal is a crucial part of their children’s diet, often the only hot meal they get. And when the school term ends, so does that, leaving those parents needing to find a way to bridge the financial gap during the holidays and feed their families. Even during term time, the wait until income arrives at the end of the month can present a major headache – and an empty stomach. It’s very sad that this should be the case in the UK today. But I’m proud that Fair for You, the ethical lender I lead, has been able to alleviate that burden, smoothing out incomes and ensuring families can put food on plates all year round, thanks to our new and growing partnership with the retailer Iceland. In 2020, Fair for You debuted the Iceland Food Club, making thousands of micro-loans of £25 to £75 to help customers feed their families during the holidays. A £75 loan paid back over eight weeks will accrue interest of £2.89. For a £25 loan, it is just 40p. It’s intended to bridge gaps in customers’ expenses at times of peak need rather than as a year-round solution. Those loans, which are loaded onto a dedicated Food Club card, were initially available to families in two locations in Yorkshire and North Wales. Following an initial trial, the Iceland Food Club has been rolled out across the North West of England and South Wales. It’s heartening to hear the impact it has had – one unemployed single mother in Yorkshire has told us she’d barely eat for the last week of the month without Food Club. Another in Wales, who works as a teaching assistant, said it had been a “godsend” at Christmas, commenting: “I do have an alright monthly income, but it’s not much after the rent and the car comes out. The Food Club has been really good, you’ve got that option of filling up for the holidays, it’s good peace of mind knowing that it’s there.” They are far from alone – Food Club social impact reporting shows that 83% of customers no longer need to use food banks; 80% report improved mental health; and 75% say their kids’ diets had improved. Crucially, 85% say that they are less worried about meeting their monthly expenses. We are delighted that Iceland has committed to sharing further results with other retailers, allowing them to think about whether they could replicate the scheme. Depending on the success of the pilot and the availability of investors, our ambition is to use our unique position within the market – lending exclusively to customers seen as risky or unsustainable by mainstream …

Nurturing loyalty
Are you building loyalty in your new recruits?

Published 09 February 2022

Covid has turned our view of the world on its head. Our sense of belonging and connection has changed significantly, our habits and routines have altered, and our appreciation of things has shifted. Businesses discovered that it’s a face-to-face transaction that generates real loyalty, customers connect with people and the impressions they make, their helpfulness, service and attitude. In contrast, the web-based world is as loyal as the service is good. Without the face of a person and someone to connect with, once something goes badly, loyalty is switched off and it’s just too easy to go somewhere else. It’s now just the same for employees. More and more employers are finding it challenging as individuals continue to look for flexibility and security, whilst also placing increasing importance on the work-life balance. If you’ve taken the plunge and moved to a “working from home” policy permanently then engaging your employees from the outset and gaining that connection will be critical. Today, new recruits can move onto the next job within days of starting with you, being remote from the outset makes the connection with new recruits incredibly important. Just like customers, it’s easy to go elsewhere. Wages have also been pushed higher and recruits are no longer willing to accept travel costs to their place of work. On the contrary, they are looking to increase their wages to pay for their home working costs such as electricity and heating. The home working or hybrid package is yet to settle down, recruiters are competing with some impressive packages right now. In the pre-Covid office environment, there was generally a team approach that was nurturing for new recruits, easing new members into the team with a buddy or support system. Now with hybrid or home working, the way new recruits find their feet within the team has changed considerably and has become challenging on both sides. To add to the complexity, for the first time in history, there are up to five generations in the workforce at one time: the Traditionalists, the Baby Boomers, Generation X, Millennials, and Generation Z, are all making up the modern workforce and vary in ideals and expectations. Creating the right hybrid model for workforces will be a key challenge for business leaders in 2022. This new way of working requires additional investment, balancing the right amount of online manager time for everyone, helping new recruits get the right support from training, team leaders and colleagues and additional mental health awareness support and engaging online activities. Getting a laptop in the post and a quick call with IT and HR isn’t going to create any loyalty in those critical first few days for your newest recruits. At TieTa we have been managing these challenges continuously over the last twenty months. Most of our clients, who are choosing to outsource their customer contact strategies or simply bolster their internal teams with additional support from our experienced agents are happy to adopt a hybrid approach. Some in highly regulated …

What lies ahead
A view of potentially worrying trends

Published 09 February 2022

Members will no doubt be aware of the continued focus by the FCA on the assessment of consumer vulnerability as part of their ongoing Consumer Duty consultation. They have made it clear that more is expected from lenders with a recent survey highlighting 27.7 million adults in the UK with characteristics of vulnerability such as poor health, low financial resilience or recent negative life events. Having listened to and participated in many discussions over the last twelve months, there seems to be a general consensus that of course this should be taken seriously, but the regulator must assess each lenders approach proportionately and relative to their offering and customer base. There is no one-size-fits-all approach, but data and process should lead the way. Although some may feel this is a topic that has been talked to death, it is not without good reason given the current landscape. In the wake of the pandemic, lenders, regulators and the government came together to provide unprecedented measures to support consumers through what was an extraordinary situation which very few had planned for. However, moving into the “new normal” it is clear that as that support may be reduced there are some significant challenges. At Data On Demand we have seen some potentially worrying trends from our own ID.VU data which aggregates consumer loan application data to highlight changes in circumstances. We are also able to map this back to the FCA’s characteristics. The below excerpt highlights some of the statistics and application volumes we saw in October following the raft of changes to government backed support including furlough ending, cuts to universal credit and the end of payment holidays: • 729,000 individuals making high-cost credit applications • 92,000 making high-cost credit applications who had not before • 10,000 making high-cost credit applications to pay household bills • 6,000 applications from individuals stated as newly unemployed • 2,000 applications to consolidate debts These stats highlight customers who are clearly in very difficult circumstances and in need of support. The return to “business as usual” has been something we have all been striving for, but the reality is that we may be much closer to the start than the finish when it comes to identifying and supporting consumer vulnerability. IS THERE TECHNOLOGY THAT CAN HELP? Absolutely. Many organisations may already have the platforms and process in place to identify customers in potentially vulnerable circumstances and facilitate the required bespoke customer journeys. However, there are now several businesses and offerings that can help create new, or adapt existing processes and platforms to achieve this, such as Aveni, Callminer, Cerebrion and IE Hub. CAN DATA REALLY IDENTIRY VULNERABLE CUSTOMERS? I’m slightly biased and there is no silver bullet, but yes. We can clearly see from our own data instances of consumers who have recently suffered a significant life event such as loss of employment, income reduction, or a bereavement. We can also identify people who are making applications for high-cost short-term credit to cover bills. Data like …

Forewarned is forearmed
The impact of Consumer Duty and why firms should act now

Published 09 February 2022

In May 2021, the Financial Conduct Authority (FCA) published its Consumer Duty Consultation paper, setting out its expectations of firms to provide higher standards of care for their consumers. We commented on this and how long firms had to prepare for changes (CCTA publication July 2021) and we now further explore what firms should be doing, and what we are already seeing in the sector in anticipation of the final policy statement expected later this year. WHAT IS THE CONSUMER DUTY? The Consumer Duty consists of three key elements: 1. The consumer principle will set out a clear tone for firms, and the language used will reflect the overall standards of behaviour the FCA will come to expect moving forwards 2. The ‘cross-cutting rules’ provide guidance on how businesses should be conducting themselves in practice 3. The ‘four outcomes’ is a suite of rules and guidance that set more detailed expectations for firms in relation to key elements in the firm-customer relationship: Communications, Products and Services, Customer Service, Price and Value. PRACTICAL IMPLICATIONS AND WHAT FIRMS SHOULD DO NOW The impact the new rules will have for firms will naturally differ, however, there are actions all firms can take now to ensure they are well prepared for the imminent changes: Project management – firms should consider establishing specific projects to understand the scope and impact of the expected rules on their business model, taking early action where possible. Any implementation projects should reflect statements of responsibilities and should be sufficiently resourced, reflecting its fundamental importance to the firm and its business plan. Customer journey – firms will need to consider the entire product lifecycle and the way that they engage with their clients at each point to ensure customers achieve their agreed outcomes. This will include focusing on initial interactions within the sales journey, such as the accuracy and fairness of financial promotions and other marketing material for products. Here, firms will also need to interrogate customer behaviour more rigorously to understand where behavioural biases may lead to poor outcomes, and how information provision and communication strategies should be re-engineered to help customers achieve their financial objectives. Product governance – firms will wish to carefully consider the ways in which the expectations around value delivery and benefits can be accommodated within existing product governance processes, and where changes are needed. Within this context, it is clear that firms will need to regularly monitor customer behaviour and product performance to satisfy themselves that they are achieving the outcomes required by the new duty. WHAT WE ARE CURRENTLY SEEING We are seeing firms complete scoping and impact assessment exercises and the mobilisation of Consumer Duty project teams. We strongly recommend that firms take a similarly proactive approach, as results from initial deep dives have revealed the need for a greater focus on outcomes testing and general weaknesses in firms’ overall control frameworks. Whilst not under the Consumer Duty banner, we can see that the FCA have already engaged with firms regarding the customer journey, …

What next?
A closer look at Buy-Now Pay-Later

Published 09 February 2022

The payments and financial services sector has changed radically, with shifting consumer and business preferences accelerated by the Covid-19 pandemic. As we move into 2022, I expect to see further innovation and growth, in line with the huge digital shift and prioritisation of personalised consumer experiences that we have seen in 2021. While there is still uncertainty, the payments sector must leverage collective transformation efforts to align with the changing needs of the future customer. Over 2.5 million UK consumers and businesses now use open banking-enabled products, a number expected to grow in 2022. Open banking enables third-party financial service providers to access consumer data from external financial institutions, allowing consumers to seamlessly manage their finances and have more choice over banking services. In response, there has been a boom in new fintech platforms championing innovation and economic growth. SMEs can benefit from this development, connecting directly to financial institutions via APIs, making it easier to accept payments and focus on business growth. As the demand for accessible financial services continues to rise, I predict that over 30 million UK consumers and four million businesses will use open banking by the end of 2022. This year we have seen B2C Buy-Now Pay-Later (BNPL) platforms, such as Klarna and Zilch, grow in popularity. Now providers are looking to expand into the B2B market, solving the issue of a lack of funds for buyers and the sellers by creating a credit line for B2B buyers. When it comes to B2B BNPL, companies that make purchases do so with the intention of positively impacting revenue and growth, reducing the risk of defaulted payments. B2B BNPL allows businesses to make purchases on margin, while the BNPL provider pays the seller in full, taking on the customers’ default risk. I foresee a possible evolution of B2B BNPL models to take advantage of the huge benefits of creating efficiencies within the accounts payable and receivable cycle. B2B BNPL will alleviate the time taken for purchase order and invoice processing, creating efficacy within payments. The future of B2B BNPL innovation will rely on data. Through adopting machine learning, BNPL providers can assess the chances of recovering any overpayments, allowing them to predict problematic businesses. These benefits of data analysis are not just limited to BNPL. According to IDC’s Digitisation of the World study, by 2025, every person in the world will produce a data interaction every eighteen seconds on average. By analysing customers’ data, businesses can identify the consumption habits of existing customers, enabling the personalisation of experiences. Embedded AI tools will be key in achieving this, as their capabilities allow businesses to analyse an incredible amount of customer data quickly. So far, fintechs have been using these technologies for automation and fraud detection but increasingly will help businesses access and understand their data, creating added value. It is difficult to predict how far innovation within the payments sector will go in the next five years. The role of payments is now more than a simple exchange …

CCTA response to BNPL Consultation

Published 19 January 2022

HM Treasury’s consultation on Buy-Now Pay-Later (BNPL) products has recently closed. Here we share the main points from our response. These are key principles we believe HM Treasury needs to consider when shaping the future regulation of consumer credit. • HMT wants a proportionate regulatory regime for BNPL. However, BNPL is often used as a substitute for other credit products. It is important that there is consistent regulation – and consumer protection – for substitutable products. • Many credit products are already offered in a digital online environment. The online nature of a product does not necessitate a different or lighter-touch regulatory approach. Lenders have made digital products work for customers and firms under the current regulatory regime. • If the provisions of the Consumer Credit Act are not fit-for-purpose for one credit product, it is not fit for-purpose for any credit product. • The customer journey for any credit product needs to be structured in a way that ensures consumers have all the information they require, presented in a clear way, and opportunity to exit the process if they decide it is not the right product for them. • Comprehensive reporting of credit usage and repayment is vital – to protect customers and lenders. • Affordability checks must be required for BNPL in the same way as these checks are required for other credit products. No interest does not necessarily mean lower risk. A BNPL loan can be unaffordable, even if no interest is payable.