What Are The Latest Buy Now, Pay Later Regulation Updates In The UK?
The UK government has announced that Buy Now Pay Later (BNPL) products will be subject to regulation starting Mon, Jul 15, 2024. The Financial Conduct Authority (FCA) will oversee the sector, requiring lenders to adhere to the FCA's Consumer Duty and new…
The UK government has announced that Buy Now Pay Later (BNPL) products will be subject to regulation starting Mon, Jul 15, 2024. The Financial Conduct Authority (FCA) will oversee the sector, requiring lenders to adhere to the FCA's Consumer Duty and new customer interaction rules.
Under these regulations, consumers must receive clear and upfront information regarding their agreements, including payment due dates, amounts owed, and consequences of missed payments. Lenders will also be required to conduct affordability checks before extending credit, ensuring that these checks are proportional and aim to confirm a customer's ability to repay.
Support must be provided to individuals facing financial difficulties, including referrals to free debt advice services when necessary. Customers will have the right to file complaints with the Financial Ombudsman Service if issues arise. Additionally, lenders must obtain FCA authorization to offer BNPL products, with a temporary permissions regime available from Thu, May 15, 2026, to Tue, Jul 1, 2026. Firms will then have six months to apply for full authorization.
The timing of the government's intervention is related to the expansion of the BNPL market. According to the FCA, the market's value increased from £0.06 billion in 2017 to over £13 billion in 2024. The FCA's 2024 Financial Lives Survey indicated that 20% of UK consumers, approximately 10.9 million adults, used BNPL in the year leading up to May 2024.
The UK government has announced that Buy Now Pay Later (BNPL) products will be subject to regulation starting Mon, Jul 15, 2024.
Prior to regulation, unregulated deferred payment credit agreements lacked consumer protections present in other borrowing forms. The new rules specifically address these unregulated agreements, classified as deferred payment credit in legislation.
The FCA acknowledges that BNPL can be beneficial for managing cash flow but emphasizes that it constitutes borrowing, necessitating affordable repayments. Guidance on debt management is available through MoneyHelper and the Debt Advice Locator tool.
Suppliers offering their own credit will remain exempt from regulation, following the government's decision in 2024 to maintain the exemption for merchant-provided credit.
The introduction of regulation will result in increased oversight for lenders, necessitating more rigorous customer affordability assessments. Additionally, the regulatory changes are expected to impact dispute management, requiring businesses offering BNPL at checkout to prepare for a more formalized landscape.
Credit assessments will need to evolve beyond static credit scores, focusing on real-time financial obligations management. This shift highlights the importance of timing, patterns, current capacity, and consumer intent in determining creditworthiness. The emphasis on consumers' payment instrument usage patterns underscores a movement toward comprehensive compliance and improved outcomes.
Based on reporting by techround.co.uk.