Barclays has called for the buy now pay later (BNPL) sector to be properly regulated and subject to the same legislation as the wider credit market.
The bank believes that “a consistent and fit-for-purpose regulatory framework is crucial to protecting consumers from taking on unmanageable debt”.
The government recently announced that BNPL would be regulated by the Financial Conduct Authority (FCA), a move likely to take effect later this year, In response to concerns about consumer debt. However, it has not confirmed what this regulation will include.
Research from Barclays Partner Finance reveals that almost a quarter of BNPL consumers are concerned about their ability to repay their bills. In addition, over a third of consumers chose to use BNPL because of insufficient funds in their current or savings account.
Some 10% also said they chose it because their applications for a credit card had been rejected.
Almost a fifth of BNPL users aged 18-34 have seen their credit score impacted due to missed payments. Barclays report also said that the average BNPL user is paying off £293 in loans, and almost 50% have had loans from different providers at the same time.
A further 23% of 18-34 year-old BNPL users have had to reduce their spending on essential purchases like groceries, in order to keep up with repayments.
“Consumers are taking out unregulated contracts when they’re not in a financially stable position to do so,” a statement from Barclays read.
“When lending is regulated, robust affordability assessments are required on a customer’s personal financial circumstances before the loan is approved. This helps ensure that the customer is only borrowing what they are comfortably able to pay back.”
Barclays offers BNPL services but it claims that all lending is regulated “even where the product may fall within the definition of unregulated BNPL, because we believe it’s in the best interests of consumers”.