The UK government has initiated a consultation to extend consumer protections to users of Buy-Now, Pay-Later (BNPL) services.
These financing options allow consumers to defer payments but currently lack the comprehensive protections typical of other credit products.
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The proposed regulations aim to bring BNPL providers under the Financial Conduct Authority’s (FCA) oversight and apply the Consumer Credit Act to these services.
The consultation seeks to address the gap in consumer protections by mandating that BNPL companies conduct affordability checks to prevent unsustainable debt accumulation.
The FCA will have the authority to enforce rules ensuring that customers can manage repayments before being granted credit.
UK Treasury economic secretary Tulip Siddiq said: “Millions of people use Buy-Now, Pay-Later to manage their finances, but the previous government’s dither and delay left them unprotected.
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By GlobalData“We promised to take action before the election and now we are delivering. Our 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.”
Under the proposed rules, BNPL players will be required to present loan agreement details clearly and accessibly, ensuring that consumers are well-informed about the terms and risks of late repayments.
The FCA will have the flexibility to develop tailored rules for online BNPL transactions, diverging from traditional Consumer Credit Act disclosure requirements.
Additionally, BNPL customers will benefit from stronger rights when issues with purchased products arise.
The application of Section 75 of the Consumer Credit Act will enable consumers to seek refunds directly from lenders, and access to the Financial Ombudsman Service will be available for complaints.
