The UK government has announced new plans to strengthen the regulation of interest-free buy now, pay later (BNPL) credit agreements.
According to GOV.UK, lenders will now be required to carry out affordability checks, ensuring that loans are affordable for consumers and will amend financial promotion rules to ensure BNPL advertisements are fair, clear and not misleading.
In addition, lenders offering the product will need to be approved by the Financial Conduct Authority (FCA) and borrowers will also be able to take a complaint to the Financial Ombudsman Service.
GOV.UK outlined that its response to the BNPL consultation confirmed its intention to amend the scope of regulation to capture BNPL and other short-term interest-free credit when they are provided by third-party lenders and extend this scope to also capture STIFC provided directly by merchants when it is offered online or at a distance.
The government claims its consultation response sets out the government’s proposals for regulation of the sector. It will also publish a consultation on draft legislation toward the end of 2022 and plans to lay secondary legislation by mid-2023, after which the FCA will consult on its rules for the sector.
Economic Secretary to the Treasury John Glen said, “BNPL can be a helpful way to manage your finances but we need to ensure that people can embrace new products and services with the appropriate protections in place.
“By holding BNPL to the high standards we expect of other loans and forms of credit, we are protecting consumers and fostering the safe growth of this innovative market in the UK.”
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