BNPL regulation could protect almost one million consumers

The study showed the rising cost of living is having an impact on the popularity of BNPL usage – over a third (36%) said the lending has become more appealing since inflation and energy costs began to climb. 

However, unregulated lending can bring serious risks – as three in 10 (30%) of Brits who have used BNPL to purchase goods, 31% said the lending got them into problem debt because repayments became unmanageable.
 
The average BNPL user’s outstanding balance currently sits at £254.10, and 23% said they have used BNPL to make purchases they could not otherwise comfortably afford. 

As most BNPL lending happens during the checkout process, either in-store or online, the retailer plays a vital role in the consumer appetite for this short-term, interest-free credit. 

Around one in 14 (seven per cent) shoppers plan to use BNPL for the first time this year, and three quarters (75 per cent) of those say that their decision will be influenced by the retailer at the point-of-purchase.

More than half (54%) of retailers wrongly think most BNPL companies perform a full credit check prior to lending money, and almost as many (52%) believe all BNPL providers re[prt their lending to UK credit reference agencies. 

The industry is waiting for the government’s publication of a consultation on draft legislation towards the end of 2022, to introduce regulation of BNPL. 

In the meantime, Barclays and StepChange Debt Charity have warned more consumers are being exposed to potential harm, and are calling on retailers to ensure they fully understand the BNPL products they are offering, and that they re-evaluate whether those products are right for customers in the long term.

Antony Stephen, chief executive of Barclays Partner Finance, said “Retailers are a vital gatekeeper in the lending process and it is crucial that they perform due diligence on the BNPL products they offer. 

“Our research shows that the ambition is there: around nine in 10 retailers support Barclays’ view that all credit providers should be subject to the same checks and balances. Businesses such as Amazon and Apple, who have already chosen to partner with regulated providers like Barclays, deserve credit for prioritising good customer outcomes over short-term profits.”

Richard Lane, director of external affairs at StepChange, said “The gears are grinding slowly towards consistent regulation and consumer protection between Buy Now Pay Later and other consumer credit. 

“When it happens, this will give retailers the reassurance that their finance partners are expected to uphold the same kind of affordability approaches and forbearance strategies expected of regulated firms. 

“In the meantime, retailers can help to protect their customers by actively managing their expectations of the firms they partner with at the checkout.”