Christians Against Poverty (CAP) has added its voice to a coalition of organisations and consumer advocates who are asking the Government not to shelve new regulation of the Buy Now Pay Later (BNPL) market.
CAP’s Director of External Affairs, Gareth McNab, said: “The draft legislation that will bring BNPL firms into Financial Conduct Authority (FCA) regulation is already published and has broad cross-party support. We are so close to achieving the necessary protections for people that are urgently needed, and mustn’t stop or slow down now.
“Over recent years we’ve seen an increase in the number of CAP clients who have used BNPL, as more providers and online retailers now offer these products. Our concern is that they fall outside the Consumer Credit Act and are unregulated by the FCA, meaning less protection for people in sometimes desperate situations.
“Our coalition partners at Citizens Advice recently published new figures showing that 1 in 6 people who are using BNPL are currently behind on their payments. Shockingly this doubles to 1 in 3 of those people who are on Universal Credit and have needed to use BNPL.
Along with its coalition partners, CAP is asking the Government to ensure that BNPL lenders are obliged to carry out affordability checks to protect against unsustainable borrowing, as well as to make it clear that BNPL is a credit product. Too many people don’t understand what they are taking on or the consequences of not being able to make payments
Gareth McNab said: “CAP is committed to working with the Government and all parties to make tackling poverty a key priority. This new regulation is just one element. To create a fairer society for all, everyone should have enough income to pay for the essentials they need, without borrowing. For this reason we are calling for a review of social security and minimum wage levels, to see them set in line with the Minimum Income Standard, so that they will always cover the basics.”
At CAP we know that low income households are increasingly having to pay for essentials with credit. CAP commissioned YouGov* polling earlier this year which showed that across the UK 7.9 million people have used credit cards, overdrafts or loans to cope with rising costs. Our concern is that the unregulated BNPL products are putting these vulnerable people at risk of unmanageable debt, with the offer of interest free credit that has high cost penalties if not repaid on time.