Barclays calls for more robust regulation of all BNPL products
Banking giant Barclays is calling for the ‘buy now, pay later’ market to be subject to the same stringent regulation as the wider consumer credit sector.
The call comes as the UK Government considers how to regulate the industry, and Barclays said it “believes that a consistent and fit-for-purpose regulatory framework is crucial to protecting consumers from taking on unmanageable debt”.
BNPL has become hugely popular in the fashion and luxury sectors as it offers a way to spread payments across several months, interest-free.
However, there are concerns that it’s too easy to get approved for the finance and that consumers could build up a large amount of debt that they can’t pay off easily.
New research from Barclays Partner Finance reveals that as many as a quarter of BNPL users are concerned about their ability to repay their BNPL bills. And the reason more than a third of them chose to pay with this method in the first place was due to insufficient funds in their current or savings account. Some 10% said they chose it because their applications for a credit card had been rejected.
Nearly a fifth of 18-34 year-old BNPL users have had their credit score impacted due to missed payments, while the average BNPL user is paying off £293 in such loans, and almost half have had loans from different providers at the same time. Some 23% of those 18-34 year-old BNPL users have had to reduce their spending on essential purchases like groceries, in order to keep up with their repayments.
“Consumers are taking out unregulated contracts when they’re not in a financially stable position to do so”, Barclays said. “When lending is regulated, robust affordability assessments are required on a customer’s personal financial circumstances before the loan is approved. This helps ensure that the customer is only borrowing what they are comfortably able to pay back”.
Barclays itself offers BNPL options and as recently as December the company extended its partnership with Amazon to enable customers to pay in instalments on purchases of £100 or more on the site.
But it said it treats all such lending as regulated, “even where the product may fall within the definition of unregulated BNPL, because we believe it’s in the best interests of consumers”.
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