Changes In FCA Regulations And What They Could Mean For Your Business
The Financial Conduct Authority are one of the regulating bodies in the financial markets, established in 2013. Financial regulations and payday loans or buy now pay later schemes have been more strictly monitored ever since. This has made it harder for creditors and companies, whether they are operating directly in the financial markets or not, to adapt and survive. This is because stricter regulations have been implemented to help protect consumers, which has cut profitability for many companies. However, these regulations have failed to prevent frivolous claims against companies, encouraged by complaints companies. This is making it harder and harder to be a payday loans company, but also regulatory changes are hard to adapt to, but what does this mean for your business and SMEs in the UK?
Payday loans are not available for businesses so you probably won’t come across the FCA for work, but there are other areas they could affect you. Buy now pay later schemes are on the up in the UK, especially since the launch of Clearpay earlier in 2019. More than 4000 retailers in the UK work with Klarna, one of the biggest buy now pay later creditors. This means that a lot of SMEs and retailers will soon be jumping on the bandwagon to ensure they keep their existing client base and even attract a new audience, by providing this flexible payment option.
Companies that do provide buy now pay later options, should be aware that the FCA are clamping down on a couple of the specifics about how businesses can market this kind of credit. Previously, companies could be extremely promotional, but this meant that the gravity of BNPL (buy now pay later) was not being taken into consideration and consumers could find themselves in debt, unable to meet repayment terms. To ensure marketing content is compliant with new FCA regulations, companies must now ensure they “provide better information to consumers about BNPL offers”, “clearly prompt customers to avoid unexpected interest charges”.
More information about these guidelines is available on the FCA’s website, but companies must provide balanced content that reflects the risk as well as the benefits of this product, just like lenders have to highlight the risk associated with loans and other financial products.
Competition Could Be Fierce
One of the FCA’s key principles is that they promote healthy competition within financial markets. Regulations and investigations across the FCA’s jurisdictions and a range of markets ensures that they take action against any markets that are inhibiting competition. These regulations are set in place to ensure customers have access to a choice of products, helping to drive value, quality and innovation within any given industry.
In 2019, the FCA’s concurrent jurisdiction grew to include claims management services provided in the UK. This means that businesses operating in these areas will need to ensure they are being compliant. Moreover, the FCA’s competition objectives are set out to help avoid a monopolisation and to protect the risk (or the fallout) of a collapse, in any given market, which would have a significant effect of the UK’s economy. Yet for business owners, this could mean one of two things: the FCA are encouraging you to make room within your market or they’re helping you get a head start and a boost for effective competition to take place.