The layaway product is NOT a regulated product and is not subject to the new Buy Now Pay Later (BNPL) Rules. Although not a regulated product, pawnbrokers are regulated firms and operate under regulatory standards through Treating Customers’ Fairly (TCF) and the Consumer Duty for everything you do. The FCA expects firms to act in “good faith” across your entire business, which means you cannot be a “good” regulated lender and an “unfair” unregulated retailer.
Under the Consumer Duty, you must:
Avoid Foreseeable Harm - Firms should not sell a layaway product if they know a customer cannot afford it.
Support Financial Objectives – Firms should help to complete a purchase, not keep all the deposit.
Provide Fair Value – The price and any fees must be reasonable and reflect their actual costs. It’s worth remembering that customers have additional protection under the Consumer Rights Act 2015.
If a layaway is cancelled, or the customer cannot make the payments in full a store cannot simply keep any payments as a “penalty”. Firms are only allowed to keep an amount that covers their actual loss (e.g. the cost of the storage or the loss of a sale).
Pawnbrokers are required to identify “vulnerable” customers (e.g. those in financial distress). If the customer cannot complete the payments in full because of a sudden change in circumstances such as a sudden job loss or illness, a “fair” firm should consider an offer to extend the term or provide a full refund.
Pawnbrokers must have a costed risk report that justifies any retention of the deposit, and consider if these are protected in a separate bank account?
Some websites are advertising layaway above the authorised and regulated FCA message without stating any limitations. The Financial Ombudsman Service (FOS) may consider any complaints against all regulated firms.
The NPA recommends that any pawnbroker offering the layaway product reviews their processes, procedures and clearly document any amount/fee you charge customers to minimise risk and support your customers.
Product Sales Data Reports - Product sales data – credit agreements | FCA
Following the work that the NPA completed and with the support of our corporate members we have been able to complete framework templates, with guidance answers to help any member who is due to complete the new Product Sales Reports to the FCA, which include:
PSD008 (Credit Agreement Sales)
PSD008a (Agreement back book)
PSD009 (Credit Agreement Performance)
Firms with a permission for consumer credit lending who have reported in their CCR003 submissions with an annual total value of £2m or more in outstanding consumer credit balances and/or new consumer credit advances, must submit Credit Agreement Sales (PSD008) reports and Credit Agreement Performance (PSD009) reports for all their relevant regulated credit agreements. Submission must be completed in an XML format, and you may need IT support to facilitate this requirement.
When a lender first comes into the scope of these reports, you’ll need to submit a one-off Credit Agreement Back-book (PSD008a) report. This report will provide details of credit agreements that will be included in your first PSD009 report but will not be included in your first PSD008 report.
If these PSD reports appear on your firm’s RegData reporting schedule and you don’t believe your firm should be in scope, please check your firm’s CCR003 submissions.
Check your submissions have been reported correctly and in the correct currency amounts (that is, in thousands, rather than single units) and resubmit if necessary.
Firms with permission to enter into pawnbroking agreements who have not reported £2m or more in outstanding consumer credit balances and/or annual new consumer credit advances must submit Short Term Loans (PSD006) reports in relation to the sale of these types of agreements.
How to submit:
FCA explains RegData: Submitting and managing Product Sales Data (PSD) | FCA
Attached to the Newsletter are the Framework Templates to support your submissions. These are also available to download from the Members Area in the FCA Section
(please note first attachment has 2 tabs)