Context
The FCA has published the drafted text of a speech delivered by Nisha Arora, Director of Consumer and Retail Policy, given at Westminster Business Forum. Although the main theme of the speech is perhaps a continuation of the FCA’s ‘outcomes’ rhetoric (it references appropriate outcomes, particularly for the vulnerable, and how that links with the FCA’s proposed new Consumer Duty), there is also some commentary about the potential regulation of ‘buy now pay later’ products.
This in itself was a topic that was the subject of findings in the Woolard review (“A review of change and innovation in the Unsecured Credit Market”), which was in turn driven by the FCA’s desire to review the boundaries of its regulatory perimeter to help prevent consumer harm. In this particular case, it is perhaps more what the speech does not say that will be of more interest to the insurance broking community.
Key relevant points to note
- In the FCA’s second Perimeter Report, for 2019/2020, in addition to commentary on high cost short term credit and the buy now pay later market, the FCA also commented on unregulated credit agreements by virtue of the ‘number of repayments’ exclusion (no interest or charges, payable within a year with no more than 12 instalments) and also about residual debt arising as a result of recourse arrangements in the insurance premium finance market.
- Neither of these issues (both of which are relevant and of interest to the insurance broking sector) featured in the Woolard review, and the FCA’s Business Plan 2021/22 included only brief commentary about their intention to bring the currently exempt Buy Now Pay Later sector (now referred to as ‘Deferred Payment Credit’) into regulation (and subject to the Treasury’s consultation on the scope of the regime, the FCA plans to consult on new rules in 2022).
- Perhaps in view of the fact that the ‘number of repayments’ exclusion only exists where no interest or charge is payable (so for example no issues of mounting debt purely as a result of interest costs or charges – or the ‘interest on interest’ syndrome), and residual debt following the default of premium finance agreements under recourse arrangements typically being collected by insurance brokers also taking advantage of the same exclusion, there is potentially not sufficient perceived risk for the Regulator to take particular action.
- These issues, however, have been on the FCA’s ‘perimeter’ radar and may remain there.
Next actions
None – for information and awareness