New Government Rules on Wild West Buy Now Pay Later

The government has this morning confirmed it will be amending 50-year-old rules under the Consumer Credit Act to better protect both consumers and lenders in the booming Buy No Pay Later (BNPL) market.

With over 10 million people using BNPL, the government likened the market to the “Wild West” in that there is currently very little regulation, protection and monitoring as to the suitability and affordability of such financing arrangements.  BNPL is still currently not regulated by the Financial Conduct Authority (FCA).  This is all set to change:

• BNPL will become regulated by the FCA.
• Strict affordability rules will be set meaning lenders can only offer a BNPL deal if they have checked the affordability of the borrower, not just today but also if they suffer financial difficulty.
• Better protection will be offered to consumers to help in times of difficulty and even a complaints and dispute resolution policy via the Financial Ombudsman Service.
• BNPL lenders may face tougher action by the FCA including no rights to pursue those in default and easier for consumers to claim refunds if the lender has not complied with stricter lending criteria and rules.
• With the FCA then regulating, BNPL lenders will have much clearer guidance on what is acceptable lending policy rather than ‘making it up’ as they go along.
• It is hoped that regulation will also reduce the number of people getting themselves into financial difficulty as lending will be more responsible.

Comment

Amendments to the law, following a consultation period last year, will be laid before Parliament today and we hope it will offer clearer choices and transparency for both lenders and borrowers.  There will always be people that borrow too much and lenders that ‘over lend’ but with stricter rules, we hope it will make this sector of finance safer.

Regulation should also open the door to more product innovation in this ever-changing digital world.