The Retailer Spring Edition 2021

SPR I NG 202 1

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Consumer Credit monitor, adapt, plan for regulation change

Innovation, digitalisation, rule change: Plan and adapt

Buy Now Pay Later (BNPL)

Digital design guidance

BNPL authorisatoin by FCA

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Disclosure changes Customer outcomes

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Checking/monitoring Own authorisation, or Acting as an appointed representative - contractual obligations

Forbearance

consumer credit reform

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Lending decision processes

Customer interactions/modelling

Conduct rules

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What applies

Customer outcomes

• Who to • • Contracts

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Rule changes

Regular scrutiny

Customer protections

For those carrying out lending business, or credit broking, be aware of these proposals: • Digitisation of customer credit journeys: The report emphasises the impor - tance of informed decision-making by consumers. It recommends that the FCA puts in place guidance on digital design for consumer credit which focuses on good consumer outcomes and revises disclosure requirements to become more appropriate for the digital age. The FCA recognises that frictionless online jour - neys can benefit some customers, but they may inadvertently exclude or create problems for certain types of consumer, including the vulnerable. • Forbearance: The report acknowledges that affordability assessments and effective forbearance can help to reduce harm where consumers have difficulties making repayments. The report recom - mends that the FCA identifies how to improve the consistent application of forbearance, and how this is accurately reflected in credit information used for lending decisions.

• Outcomes-focused reform of con- sumer credit regulation: In an area with a legacy and patchwork regulatory landscape, proposals focus on achieving a “healthy credit market”. A priority is to reform the legacy Consumer Credit Act 1974 and move to more outcomes-fo - cussed regulation. This needs careful monitoring to check its implications for regulated credit business practices. • Relending: The FCA is being asked to look at repeat lending and persistent debt. This includes exploring whether borrowers with repeat fixed-terms loans need more protection. • Evolution away from EU rules: Recom- mendations that the FCA look at whether rules can be adapted post- Brexit are noteworthy. This might include a review of the effectiveness of disclosures such as the Annual Percentage Rate (APR) and the potential value in alternatives such as pound and pence credit cost disclosures.

Monitor and plan Those offering or involved in consumer credit shouldmonitor how these changes develop and may affect processes and compliance. Credit decisions, customer lifecycle and forbearance are all likely to need adapting. Interactions between the shopping and credit experiences will be key. Next steps The FCA and HMT will produce proposals for regulatory change. Formal public consultation will be part of the impact assessment before the changes take place. The FCA’s July business plan will contain more detail. More information about these changes and how to prepare are available here .

Sophie Lessar dlapiper.com/en/uk/ Sophie.lessar@dlapiper.com