The Financial Conduct Authority (FCA) has today written to 3,500 executives in the financial sector, including all buy now pay later providers operating in the UK, encouraging consumer protection during the cost of living crisis.
The UK’s financial regulator wrote the ‘Dear CEO’ letter to remind financial service providers that the difficult economic situation currently being faced by the UK must be taken into account for new transactions.
The letter urged these companies to “make sure that their approach to taking on new borrowers takes account of the financial pressure they may face and the impact on their expenditure.”
Sheldon Mills, executive director of consumers and competition at the FCA said: “Many consumers are feeling the impact of the rising cost of living on their personal finances, and we expect this to increase over the next few months.
“Early action is important for those struggling with debt. We need all firms to get the basics right and provide good quality support. Where we see more serious wrongdoing, we are already acting to ensure these firms improve.”
The FCA included all BNPL providers in the recipient list, despite many currently not being regulated by the watchdog.
BNPL firms have been under considerable scrutiny from the FCA since the service’s rise in popularity. A report from data and analytics consultancy firm GlobalData recently revealed that BNPL purchases reached $120bn (£95bn) in 2021, making up 2.3% of the worldwide ecommerce market last year.
Much of the concern is over the product being essentially a credit-based loan, despite not facing the same regulatory requirements as a traditional loan.
The FCA’s warnings come after consumer protection groups Energy Support and Advice UK spoke out about the risks of relying on BNPL purchases during the cost of living crisis, particularly in regards to the payment of heightened energy bills.