The Treasury Department in the UK today announced its plan to protect millions of Buy Now Pay Later (BNPL) customers in the country through strict regulations. The department noted that the lenders offering BNPL products will be required to receive approval from the Financial Conduct Authority (FCA).
Moreover, borrowers will be able to submit a complaint against BNPL providers to the Financial Ombudsman Service (FOS). The UK government is planning to publish a consultation on the draft legislation by the end of this year.
“Buy-Now Pay-Later can be a helpful way to manage your finances, but we need to ensure that people can embrace new products and services with the appropriate protections in place. By holding Buy-Now Pay-Later to the high standards we expect of other loans and forms of credit, we are protecting consumers and fostering the safe growth of this innovative market in the UK,” the Economic Secretary to the Treasury, John Glen, commented.
The country aims to introduce secondary legislation related to BNPL services by mid 2023.
BNPL Sector
The Buy Now Pay Later sector has witnessed a sharp surge in popularity in the past few years. In 2021, Square announced its plan to acquire Australia’s BNPL firm, Afterpay in a deal worth $29 billion. Due to the massive scale of BNPL services in the UK, the Treasury Department is planning to introduce efficient regulations to reduce the risks associated with the growing sector.
“People do not currently have the usual full range of borrower protections when taking out this type of loan, and they are rapidly increasing in popularity, resulting in a potential risk of harm to consumers. Under plans set out by the government today it confirmed that lenders will be required to carry out affordability checks, ensuring loans are affordable for consumers and will amend financial promotion rules to ensure Buy-Now Pay-Later advertisements are fair clear and not misleading,” the Treasury Department highlighted.
