The FCA has published new rules for “Buy Now Pay Later” finance.  The changes are a positive step for consumers by the industry regulator as they will both simplify and improve BNPL credit options.

The new rules concern both how the credit option has to operate and how it can be marketed going forward, specifically:

  1. Backdated interest cannot be charged on any amount repaid by the customer during the BNPL offer period – comes into effect on 12th November 2019.
  2. Lenders will be expected to give prompts to consumers, to remind them when the deferral period is about to end, so that customers are more likely to repay the credit before they incur interest – comes into effect on 12th September 2019.
  3. Firms have to provide better information to consumers about BNPL. The information should be more balanced and appropriately reflect the risks as well as the benefits of the product. This must be done by a credit broker or the lender. This rule is accompanied by some guidance on what should be included in financial promotions – comes into effect on 12th September 2019.

How do the new rules affect you?

The impact on your business will be minimal. Hitachi already send out reminders to customers approximately 30 days before the end of the deferral period. And by November they will no longer backdate interest on any amounts repaid during the deferral period.

However, some retailers may potentially have to change their processes to comply with the third rule – to provide balanced information about BNPL, which covers both the risks and benefits of the product.  To assist with this, we recommend that the electronic Choice of Funding (eCOF) is adopted if it’s not already in place within your business. The eCOF can help ensure you remain compliant while also protecting yourself and your lender from any potential FOS complaints, mis-selling claims, etc.

Changes to financial promotions

With regards to financial promotions, the FCA has issued new guidance that states consumers need to be made aware of both the benefits and the risks of BNPL.  To achieve this, it’s likely that representative examples will need to be included within promotions.

If you have any queries, please contact CCS Compliance Manager Lewis Jenkinson on 0845 120 6666