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Klarna customers set to get more protection

Lenders such as Klarna, Clearpay and Laybuy who buy now and pay later (BNPL) may be regulated next year.

The Financial Conduct Authority’s (FCA) business plan for 2021/22 includes new protection for borrowers under BNPL regulations called “deferred credits”.

Regulators plan to discuss new regulations in 2022 and are developing an approach to oversee BNPL and postpaid creditors. The BNPL market has more than tripled in 2020.

The news comes when Apple plans to launch Apple Pay Later and there are rumors that users will be able to split their purchase costs in a similar way to Klarna. According to news reports, this feature allows Apple Pay users to split their payments into four interest-free installments, or interest-free for several months.

The FCA also plans to introduce new rules so that people with debt problems are treated fairly, debt advice is fair and effective, and people know about high-value credit alternatives. I will.

Sara Coles, a personal finance analyst at Hargreaves Slan’s Down, said:

“FCA faces risks that we are unaware of even borrowing money and are completely unaware if we do this using an unregulated post-pay provider like Klarna or Clearpay. Also, people who have used up all the available debt may run into real problems when the layoff system ends, lenders and some I’m also worried that the debt advisory company may risk exacerbating the problem. “

Some studies have sounded a warning over BNPL, emphasizing the fact that people didn’t really think of it as borrowing, giving them the same idea as when they take on other types of debt. did not. Which report?I found that BNPL was used regularly by people experiencing financial stress..

The basic credit valuation associated with BNPL borrowing means that people can undertake a huge number of these arrangements and carry out large amounts of debt without considering whether they can afford them.

A bank told FCA that of the 677,000 current account customers who paid to two major BNPL providers in November 2020, 10% exceeded their overdraft limits in the same month.

Coles said: “The FCA will discuss regulation of this market in 2022. This is a welcome development, but the timescale involved is that more vulnerable borrowers are likely to be tentatively at risk. In 2020 alone, the market has tripled in size, with 5 million people taking advantage of this type of borrowing between the outbreak of the pandemic and the Woolard review a little less than a year later. The sooner you start regulation, the better.

“Also, carefully monitor how vulnerable people are treated when borrowers are in financial difficulty and consider the support currently available, with industry-wide coronavirus support being phased out. I also promised that if there was a shortage of lenders, they would work on their own, but that doesn’t rule out setting new rules either. “

Klarna customers set to get more protection

Source link Klarna customers set to get more protection

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