Regulation of Buy-Now Pay-Later consultation launches

The government has announced its intention to regulate interest-free Buy-Now Pay-Later (BNPL) products.

The government consulted on policy options to deliver a proportionate approach to regulation in October 2021, followed by a consultation response in June 2022. It is now consulting on the proposed draft legislation that will bring BNPL into Financial Conduct Authority regulation. The consultation asks for stakeholders’ views on whether the draft legislation effectively delivers the policy positions set out in the government’s consultation response.

The proposed draft legislation will bring BNPL into Financial Conduct Authority (FCA) regulation, with consumers being given the new right to take complaints to the Financial Ombudsman Service.

Under new proposals, providers will have to give consumers key information about their loans and issue credit that is genuinely affordable as part of a bid to to protect at least ten million consumers from the risk of exposure to financial harm.

Economic Secretary to the Treasury, Andrew Griffith said: “People should be able to access affordable credit, but with clear protections in place. That is why these proposed regulations are so important.”

Jane Tully, Director of External Affairs and Partnerships at the Money Advice Trust, said “The government is right to bring Buy Now Pay Later products under FCA regulation, and it is now vital that legislation is brought forward as soon as possible. As the popularity of Buy Now Pay Later has grown, it is crucial that these firms are held to the same standards as those offering other forms of credit, including properly assessing whether customers can afford to repay in the first place.”

Some BNPL firms have have already stepped up the credit information they collect on consumers in anticipation of the imminent regulations. Zilch is set to begin sharing customer data with credit references agencies. Zilch partnered with credit agency Experian last year – a move which allowed it to carry out credit checks on customers without impacting their credit score.

Philip Belamant, CEO and co-founder of Zilch, said “As a payments technology firm that was one of the first providers of credit via Buy Now Pay Later (BNPL) to be regulated in the UK by the FCA back in April 2020, Zilch welcomes today’s proposals set out by HM Treasury to increase regulation in the sector – we have long called for the entire industry to be subject to the same high regulatory standards that we already provide to our millions of customers. A lot of firms have paid regulation lip service but have yet to act – that’s about to change.”

“Today marks a positive day – in the context of the cost-of-living crisis, it’s never been more vital for people to have access to interest-free credit, via responsible organisations that carry out appropriate affordability checks and enable others to do the same through reporting via the major UK Credit Reference Agencies. We hope that today’s announcement will spur the acceleration for proportionate regulation in both the BNPL and wider credit lending ecosystem, creating a responsible and sustainable environment for customers in the UK and, perhaps, a blueprint for regulators and governments around the world to learn from and replicate.” . The consultation asks for stakeholders’ views on whether the draft legislation effectively delivers the policy positions set out in the government’s consultation response.

Under new proposals, providers will have to give consumers key information about their loans and issue credit that is genuinely affordable as part of a bid to to protect at least ten million consumers from the risk of exposure to financial harm.

Economic Secretary to the Treasury, Andrew Griffith said: “People should be able to access affordable credit, but with clear protections in place. That is why these proposed regulations are so important.”

Jane Tully, Director of External Affairs and Partnerships at the Money Advice Trust, said “The government is right to bring Buy Now Pay Later products under FCA regulation, and it is now vital that legislation is brought forward as soon as possible. As the popularity of Buy Now Pay Later has grown, it is crucial that these firms are held to the same standards as those offering other forms of credit, including properly assessing whether customers can afford to repay in the first place.”

Some BNPL firms have have already stepped up the credit information they collect on consumers in anticipation of the imminent regulations. Zilch is set to begin sharing customer data with credit references agencies. Zilch partnered with credit agency Experian last year – a move which allowed it to carry out credit checks on customers without impacting their credit score.

Philip Belamant, CEO and co-founder of Zilch, said “As a payments technology firm that was one of the first providers of credit via Buy Now Pay Later (BNPL) to be regulated in the UK by the FCA back in April 2020, Zilch welcomes today’s proposals set out by HM Treasury to increase regulation in the sector – we have long called for the entire industry to be subject to the same high regulatory standards that we already provide to our millions of customers. A lot of firms have paid regulation lip service but have yet to act – that’s about to change.”

“Today marks a positive day – in the context of the cost-of-living crisis, it’s never been more vital for people to have access to interest-free credit, via responsible organisations that carry out appropriate affordability checks and enable others to do the same through reporting via the major UK Credit Reference Agencies. We hope that today’s announcement will spur the acceleration for proportionate regulation in both the BNPL and wider credit lending ecosystem, creating a responsible and sustainable environment for customers in the UK and, perhaps, a blueprint for regulators and governments around the world to learn from and replicate.”