Conor D’Arcy, Head of Research and Policy, Money and Mental Health.

Three key takeaways from the Woolard Review into unsecured credit

2 February 2021

Today the Financial Conduct Authority (FCA) has published the Woolard Review into the unsecured credit market, which includes credit cards, overdrafts and payday loans. The standout finding from the Review is the welcome call to regulate ‘buy now, pay later’ (BNPL) products, and the government’s commitment to take action. But the Review also picks out a number of other areas where customers – including those with mental health problems – could be better supported and protected.

1. Buy now, pay later, regulate now

The most eye-catching element of the Review – which our chief executive Helen Undy was on the advisory board for – is its recommendations on BNPL. These products can be a useful way to smooth our spending. But concerns about affordability, consumer understanding and their massive growth had led to calls, including from us, for regulation. As our recent report on online retail discussed, the ability to pay nothing or just a fraction of the price upfront often incentivised people to spend more, and sometimes more than they could afford. The statistic cited in the Review, that more than one in ten customers of a major bank using BNPL were already in arrears, only heightens these fears. 

In our research, we heard how common symptoms of mental health problems could make it even harder to resist the impulse to shop with BNPL and made it more difficult to understand the terms, conditions and repayment timeline.

“[BNPL] is such an easy option and feels like the purchase doesn’t cost anything but when the payments are due later it’s unaffordable.” Expert by experience

“My experience wasn’t good as I used the service during a period of poor mental health then couldn’t afford to pay off the amount later on. The company were very unsympathetic towards my mental health problems.” Expert by experience

2. Supporting low-income borrowers

3. Learning from the pandemic and being prepared