UK government looks to strengthen BNPL protections with launch of latest consultation
The UK government is proposing new protections for users of buy now, pay later (BNPL) products under the regulatory supervision of the Financial Conduct Authority (FCA).
UK government proposes new rules for BNPL
The planned amendments will require BNPL providers to assess shoppers’ ability to repay loans before approval, as well as mandate the provision of “clear, simple and accessible information about loan agreements” by expanding the scope of the Consumer Credit Act.
Current disclosure rules contained within the act, which was first incepted in 1974, will be disapplied to enable the FCA to provide this information in a way that is “tailored to the online setting in which BNPL products are generally used”.
If issues arise throughout the lending process, the proposed protections will grant shoppers stronger powers to dispute transactions and claim refunds from lenders, with complaints to be processed by the Financial Ombudsman Service.
A consultation on the amendments was launched this week, and will be “conducted quickly” before closing on 29 November. The legislation is expected to pass to parliament in “early 2025”, before taking effect in 2026.
The government first sought to increase its regulatory focus on the sector in October 2021, when it launched a consultation on policy options. This led to the formation of draft legislation in February last year.
Economic secretary to the treasury, Tulip Siddiq, says the government’s latest approach will “give shoppers access to the key protections provided by other forms of credit while providing the sector with the certainty it needs to innovate and grow”.
The FCA, a key supporter of 2021’s Woolard Review, says it seeks to “ensure those who find BNPL helpful can still benefit from it, firms can innovate and grow, and consumers are appropriately protected” through its participation in this latest amendment.
