CCTA response to BNPL Consultation

Commentary | 19/01/22

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.