Innovate Finance suggests using P2P as model for BNPL regulation
The Treasury is being urged to consider P2P lending rules as a model when deciding on regulation of the buy-now-pay-later (BNPL) sector.
A Treasury consultation on giving the Financial Conduct Authority (FCA) regulatory powers over BNPL products closed this month amid fears that consumers may not understand that they are taking on credit and could fall into debt if they miss repayments.
Responding to the consultation, fintech trade body Innovate Finance warned that while more consumer protection is needed, regulations must be proportionate and not stifle innovation.
Rather than trying to fit BNPL into select existing consumer credit regulations, Innovate Finance has suggested that a single set of rules would make the responsibilities of providers and other firms in involved in the sector clearer.
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“The approach taken for P2P lending may also be relevant, where there is a single set of FCA rules in one place rather than spread across a number of subordinate regulations,” Innovate Finance said in its response.
Innovate Finance said the regulatory system has been slow to catch up with the growth of BNPL and said current consumer protection regulations are not as innovative nor suited to the digital age.
“There is an opportunity to develop a new approach to consumer regulation that provides better consumer outcomes and supports innovation,” Innovate Finance said.
BNPL has become a popular way for shoppers to pay for goods online but is also being used beyond the consumer market by P2P lenders such as Funding Circle and Fellow Finance to give borrowers access to credit so they can buy goods or pay suppliers.
Zopa, which is now exiting P2P lending, has also expressed an interest in BNPL.