Asked by: Lord Kamall (Conservative - Life peer)
Question to the Department for Business and Trade:
To ask His Majesty's Government, further to the Written Answer by Lord Johnson of Lainston on 1 February (HL1695), what assessment they have made of the impact of not renewing the Recovery Loan Scheme on small businesses in deprived areas who have received loans from Community Development Financial Institutions after being turned down for loans from high street banks.
Answered by Lord Offord of Garvel - Parliamentary Under Secretary of State (Department for Business and Trade)
Lenders are currently offering over £100 million of additional lending per month through the British Business Bank’s Recovery Loan Scheme (RLS), with 85 per cent of facilities going to small and micro businesses. RLS is particularly effective at serving alternative and social lenders, with more than three quarters of lending delivered through smaller lenders, including Community Development Financial Institutions (CDFI). Since launch, RLS has enabled almost £50 million of CDFI lending: over 90% of the businesses which borrowed from CDFIs in 2023 had been turned down by another lender, and half were based in the UK’s most disadvantaged areas.
Asked by: Lord Kamall (Conservative - Life peer)
Question to the Department for Business and Trade:
To ask His Majesty's Government, further to the Written Answer by Lord Johnson of Lainston on 1 February (HL1695), what assessment they have made of the impact of not renewing the Recovery Loan Scheme on small businesses in deprived areas who have previously been turned down for loans by high street banks.
Answered by Lord Offord of Garvel - Parliamentary Under Secretary of State (Department for Business and Trade)
Lenders are currently offering over £100 million of additional lending per month through the British Business Bank’s Recovery Loan Scheme (RLS), with 85 per cent of facilities going to small and micro businesses. RLS is particularly effective at serving alternative and social lenders, with more than three quarters of lending delivered through smaller lenders, including Community Development Financial Institutions (CDFI). Since launch, RLS has enabled almost £50 million of CDFI lending: over 90% of the businesses which borrowed from CDFIs in 2023 had been turned down by another lender, and half were based in the UK’s most disadvantaged areas.
Asked by: Martyn Day (Scottish National Party - Linlithgow and East Falkirk)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what estimate he has made of the number and proportion of buy now pay later providers who voluntarily report their customers’ (a) borrowing and (b) repayment records to credit reference agencies.
Answered by Bim Afolami - Economic Secretary (HM Treasury)
HM Treasury regularly monitors the consumer credit market as part of its normal process of policy development.
Buy-Now Pay-Later (BNPL) is an interest-free product which gives consumers a time-limited means of spreading payments for their purchases. When used responsibly and provided affordably it can be a helpful way for consumers to manage their finances and make purchases.
Many consumers are attracted to BNPL because of its interest-free nature, which the Government considers makes it inherently lower risk than most other types of credit. The FCA’s most recent Financial Lives survey found that 46% of people of who had used BNPL in the past 12 months chose it because it was interest-free. In addition, the survey found that 88% of users found it easy to keep track of their repayments.
As such, BNPL represents a popular alternative to traditional, interest-bearing forms of credit like credit cards and personal loans. For some financially vulnerable consumers it may also provide an alternative to high-cost and illegal lending. Further data from the FCA shows that around 14 million adults used BNPL in the six months to January 2023 and that the average outstanding BNPL balance is low at £236.
While the department does not hold precise information on the number and proportion of BNPL firms reporting borrowing and repayment records for their customers’ agreements to credit reference agencies, it understands that several of the UK’s major BNPL firms have reporting arrangements in place with at least one credit reference agency.
Asked by: Martyn Day (Scottish National Party - Linlithgow and East Falkirk)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, if he will make it his policy to introduce interim measures to protect buy now pay later borrowers.
Answered by Bim Afolami - Economic Secretary (HM Treasury)
Buy-Now Pay-Later (BNPL) is an interest-free product which gives consumers a time-limited means of spreading payments for their purchases. When used responsibly and provided affordably it can be a helpful way for consumers to manage their finances and make purchases.
Many consumers are attracted to BNPL because of its interest-free nature, which the Government considers makes it inherently lower risk than most other types of credit. The FCA’s most recent Financial Lives survey found that 46% of people of who had used BNPL in the past 12 months chose it because it was interest-free. In addition, the survey found that 88% of users found it easy to keep track of their repayments.
As such, BNPL represents a popular alternative to traditional, interest-bearing forms of credit like credit cards and personal loans. For some financially vulnerable consumers it may also provide an alternative to high-cost and illegal lending. Further data from the FCA shows that around 14 million adults used BNPL in the six months to January 2023 and that the average outstanding BNPL balance is low at £236.
The Government’s consultation on proposed draft legislation to bring Buy-Now Pay-Later into regulation closed in April. Since then the Government has been carefully considering stakeholder feedback. The Government will publish a response to the consultation once it is finalised in due course.
In the meantime, BNPL users already benefit from broader consumer protection legislation, including on advertising and unfair contract terms. The FCA also has existing powers to take action against firms, which it used as recently as Tuesday 31 October to secure changes to firms' potentially unfair and unclear contract terms. Some BNPL firms have also introduced a credit ‘opt-out’ function for their customers.
Asked by: Martyn Day (Scottish National Party - Linlithgow and East Falkirk)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether he has made an estimate of the number of consumers that are using Buy Now Pay Later products to purchase essential items in the last 12 months.
Answered by Andrew Griffith - Minister of State (Department for Science, Innovation and Technology)
HM Treasury regularly monitors the consumer credit market as part of its normal process of policy development.
Buy-Now Pay-Later (BNPL) is an interest-free product which gives consumers a time-limited means of spreading payments for their purchases. When used responsibly and provided affordably it can be a helpful way for consumers to manage their finances and make purchases.
Many consumers are attracted to BNPL because of its interest-free nature, which the Government considers makes it inherently lower risk than most other types of credit. The FCA’s most recent Financial Lives survey found that 46% of people of who had used BNPL in the past 12 months used it because it was interest-free.
As such, BNPL represents a popular alternative to traditional, interest-bearing forms of credit like credit cards and personal loans. For some financially vulnerable consumers it may also provide an alternative to high-cost and illegal lending. According to the FCA’s most recent Financial Lives survey, nearly 9 million adults in the UK have used BNPL in the past 12 months, and the average user had £160 outstanding across their BNPL purchases.
HM Treasury does not hold precise information on the number of consumers using Buy-Now Pay-Later (BNPL) products to purchase essential items in the last 12 months. Instead, it draws on the research of various stakeholders, including consumer groups and the wider financial services industry, to inform policy development.
Asked by: Peter Dowd (Labour - Bootle)
Question to the Department for Business and Trade:
To ask the Secretary of State for Business and Trade, what steps she is taking to help (a) small businesses and (b) individuals access (i) Community Development Finance Institutions and (ii) other alternative lending sources.
Answered by Kevin Hollinrake - Minister of State (Department for Business and Trade)
The British Business Bank’s Finance Hub provides a comprehensive guide for small businesses seeking finance, including the role played by Community Development Finance Institutions (CDFIs) and other alternative lending sources. Several CDFIs are delivery partners for Start Up Loans, providing finance of up to £25,000 for business owners who have been trading for up to three years. CDFIs also provide loans to businesses through the British Business Bank’s regions and nations funds.
In addition, CDFIs play an invaluable role in enabling individuals to access finance who would otherwise be excluded.
Asked by: Emma Hardy (Labour - Kingston upon Hull West and Hessle)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether he has made an estimate of the number of buy-now-pay-later providers that are reporting their customers’ borrowing and repayment records to the credit reference agencies.
Answered by Andrew Griffith - Minister of State (Department for Science, Innovation and Technology)
HM Treasury regularly monitors the consumer credit market as part of its normal process of policy development.
Buy-Now Pay-Later (BNPL) is an interest-free product which gives consumers a time-limited means of spreading payments for their purchases. When used responsibly and provided affordably it can be a helpful way for consumers to manage their finances and make purchases.
Many consumers are attracted to BNPL because of its interest-free nature, which the Government considers makes it inherently lower risk than most other types of credit. The FCA’s most recent Financial Lives survey found that 46% of people of who had used BNPL in the past 12 months used it because it was interest-free.
As such, BNPL represents a popular alternative to traditional, interest-bearing forms of credit like credit cards and personal loans. For some financially vulnerable consumers it may also provide an alternative to high-cost and illegal lending. According to the FCA’s most recent Financial Lives survey, nearly 9 million adults in the UK have used BNPL in the past 12 months, and the average user had £160 outstanding across their BNPL purchases.
While the department does not hold precise information on the number of BNPL firms reporting information about their customers’ agreements to credit reference agencies, it understands that several of the UK’s major BNPL firms have reporting arrangements in place with at least one credit reference agency.
Asked by: Kate Osborne (Labour - Jarrow)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what plans his Department has to review the bank referral scheme and increase the (a) diversity of lending options and (b) availability of constructive support for rejected businesses.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The Government published a statutory Post-Implementation Review of the Bank Referral Scheme in December 2020, which is available here: https://www.legislation.gov.uk/uksi/2015/1946/pdfs/uksiod_20151946_en.pdf.
The Government remains committed to fostering a strong, diverse and competitive financial services sector to ensure that UK SMEs can benefit from high quality products and services at efficient prices. That said, I should be clear that after SMEs are referred to alternative lenders under the Bank Referral Scheme, the decision of whether to offer finance is at the discretion of each lender, subject to their commercial considerations.
Furthermore, the Government recognises the vital role that alternative lenders have played in the provision of credit to SMEs and is grateful for the way the sector has responded to the current crisis. It remains committed to promoting competition, and widening the funding options available to UK businesses, and as such, we will continue to review our policies and work with the sector to achieve those outcomes.
Asked by: Stephen Farry (Alliance - North Down)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what steps his Department is taking to mitigate potentially anti-competitive consequences of the Government's lending schemes via the (a) Bounce Back Loan, (b) Coronavirus Business Interruption Loan and (c) Coronavirus Large Business Interruption Loan for the UK banking sector.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
Over 1.6 million businesses accessed over £79 billion of finance through the Covid-19 business loan schemes. The Treasury recognises the vital role that non-banks and challenger banks play in the provision of credit to SMEs. It is grateful for the way the sector has responded to the current crisis, and remains committed to promoting the participation of a diversity of lenders in the market and widening the funding options available to UK businesses.We will continue to work with non-bank lenders to support their participation in the new Recovery Loan scheme following the closure of the previous loan guarantee schemes, as well as engaging closely with alternative lenders and continuing to promote competition more generally.
Asked by: Adam Afriyie (Conservative - Windsor)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether he has made an assessment of the viability of using more FinTech platforms to distribute Government-backed financial loans and support packages alongside established high-street banks and lenders.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The UK is home to a world-leading Fintech sector and an impressive amount of talent and expertise in this area. The government knows that Fintech firms play an important role in the lending market, especially for smaller businesses.
I am grateful for the way the sector has responded to the current crisis by identifying opportunities where technology may support the Government’s response.
The British Business Bank (BBB) has so far accredited 28 Bounce Back Loan Scheme (BBLS) lenders, including several non-banks and alternative lenders. In addition, the BBB has in excess of 100 accredited lenders for the Coronavirus Business Interruption Loan Scheme (CBILS) and this includes several UK Fintechs.