The chief executive of the Financial Conduct Authority has said the regulator is “ready to go”, when asked about bringing buy now, pay later firms under its scope.
Questioned during a Treasury Committee hearing about reports that buy now, pay later regulation could be shelved, Nikhil Rathi told the MPs: “That has not been suggested to me in any of my interactions with ministers…
“We’re ready to go. The draft legislation has been published, it’s obviously a matter for ministers and Parliament to finalise the legislation. Upon its finalisation, we would look to bring these firms into regulation within 12 months.”
He added: “To the extent that this regulation might reduce the supply of credit, it will reduce the supply of unaffordable credit and irresponsible lending, which would be a positive thing and it will enable sustainable credit.”
There is convenience to buy now, pay later. It does support customers. We want to make sure that that can continue— Nikhil Rathi, FCA
Mr Rathi said: “We will make sure that there is proportionate regulation that supports innovation but also encourages responsible lending.
“There is convenience to buy now, pay later. It does support customers. We want to make sure that that can continue.”
He added: “I don’t buy the argument about supply of credit.”
Mr Rathi was asked about the buy now, pay later sector after Sky News reported that Treasury officials had been told during recent talks with the industry that some of its biggest players could quit the UK market if “heavy-handed” regulation took place.
In February, a consultation was launched to look at how firms would be brought under the scope of the FCA.
A Treasury spokesperson said on Monday: “Regulation of buy now, pay later products must be proportionate so borrowers are protected, while still being able to access these useful interest-free products.
“No decisions have been made as we are reviewing the responses to our recent consultation and will report back in due course.”
Citizens Advice, along with representatives from MoneySavingExpert, Which?, StepChange, the Money Advice Trust, and Christians Against Poverty wrote to Chancellor Jeremy Hunt this week to say “regulation is more important than ever”.
The Government previously said the new regulations could help protect an estimated 10 million customers.
Mr Rathi was also asked by the Treasury Committee about savings rates.
He said: “The pace has been slow. We have the consumer duty coming into force and you’ve seen I think in the last few weeks that that pace has quickened.”
He added: “We have powers to make sure that there is effective competition and that’s what we have been focusing on.
“The consumer duty goes further in extending the way in which we look at this to how are they communicating with their consumers, how they are ensuring good outcomes for consumers.”
He later said: “My advice to consumers would be to shop around and if your bank is not giving you a rate that you are satisfied with, move through, move on.”
Explaining the new consumer duty rules, which will come into force from July 31, Mr Rathi told the MPs: “They raise the standard for consumer protection in financial services we hope significantly.”
My advice to consumers would be to shop around and if your bank is not giving you a rate that you are satisfied with, move through, move on— Nikhil Rathi, FCA
He continued: “What we are saying here is through every part of their business, from the manufacture of products, the distribution, the pricing and the customer service support, firms have to think about how they’re placing consumers at the heart of the journey.”
Mr Rathi added: “What I hope you will see is more proactivity from firms in communicating with their consumers, making sure the products are fit for purpose for the target market, making sure that the value that they provide is reasonable, making sure the customer service is matching their promises.”
He added that, under the new duty, consumers “should be seeing products which are better serving their needs, more proactive communications from their financial services providers, better customer service, better ability to seek redress and address complaints when things go wrong”.
He said there will also be a greater focus on vulnerable customers under the consumer duty, for example making sure there is effective access for customers who may not be participating in the “digital economy”.
Asked about banking services and access to cash, Mr Rathi also said the Treasury will produce a policy statement on access to cash “and that we envisage will happen in the autumn”.
He later said: “The fact that businesses are accepting cash less and less is clearly an issue, it’s particularly an issue for lower income households.”
