Consumer groups have warned that millions of people could be excluded from 'buy now, pay later' (BNPL) credit as lenders prepare to introduce new affordability checks. The £14bn UK market has grown rapidly in recent years, with many retailers partnering with BNPL providers to offer consumers the option of paying for goods in instalments. However, the sector has come under increasing scrutiny over concerns about borrower affordability and the potential for exploitation.
The new checks, which are set to be implemented by lenders, will require borrowers to demonstrate that they can afford repayments without experiencing financial hardship. While the move is intended to protect borrowers, consumer groups have raised concerns that the changes could have the opposite effect, particularly for vulnerable individuals who may rely on BNPL credit as a means of accessing essential goods and services. 'We're worried that the new rules could exclude millions of people who need access to credit,' said a spokesperson for a leading consumer group. 'The BNPL sector has been a lifeline for many people during the cost of living crisis, and we need to make sure that these changes don't inadvertently harm those who need it most.'
The UK's Financial Conduct Authority (FCA) has announced that it will be reviewing the BNPL sector in light of the new checks. The regulator has stated that its primary concern is to ensure that lenders are prioritising borrower affordability, but consumer groups are calling for more support to be provided to those who may be excluded by the new rules. 'We need to see a more nuanced approach to regulating the BNPL sector,' added the consumer group spokesperson. 'We can't just throw vulnerable borrowers to the wolves and expect them to find alternative credit options.'
The introduction of new affordability checks is set to have significant implications for the UK's £14bn BNPL market. With many lenders already preparing to implement the changes, consumer groups are warning that the sector could contract significantly as a result. As the UK continues to grapple with the cost of living crisis, the impact of these changes on vulnerable borrowers will be closely watched.
Analysts have noted that the BNPL sector has experienced significant growth in recent years, driven by the increasing popularity of online shopping and the need for flexible payment options. However, the sector has also faced criticism over concerns about borrower affordability and the potential for exploitation. The introduction of new affordability checks is intended to address these concerns, but consumer groups are warning that the changes could have unintended consequences.