The Analysis Editor’s Letter


Regulation of BNPL set out


Millions of people will be protected by strengthening regulation of interest-free Buy-Now Pay-Later credit agreements


Stephen Kiely Editor, CCRMagazine stephen@ccrmagazine.co.uk


Buy-Now Pay-Later credit agreements can


be a helpful way to manage your fi nances, allowing people to spread the full cost of a purchase over time. However, 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


last month it confi rmed that lenders will be required to carry out aff ordability checks, ensuring loans are aff ordable for consumers, and will amend fi nancial promotion rules to ensure Buy-Now Pay-Later advertisements are fair, clear, and not misleading. Lenders off ering the product will need to be


approved by the Financial Conduct Authority (FCA), and borrowers will also be able to take a complaint to the Financial Ombudsman Service (FOS). Economic Secretary to the Treasury,


John Glen said: “Buy-Now Pay-Later can be a helpful way to manage your fi nances 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 fos- tering the safe growth of this innovative mar- ket in the UK.” “The consultation


response sets out the


government’s proposals for regulation of the sector. Given its complexity, the government will publish a consultation on draft legislation toward the end of this year. Following this, the government aims to lay secondary legislation by mid-2023, after which the FCA will consult on its rules for the sector. “The government has also confi rmed that other forms of short-term interest-free cred-


June 2022


your fi nances 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


Buy-Now Pay-Later can be a helpful way to manage


it, such as those used to pay for dental work or larger items like furniture, will be required to comply with the same rules, given the risks posed are similar and consumers should receive consistent protections from similar products. “These rules will apply to businesses who


partner with a third-party lender to provide credit, and the government is asking for further stakeholder feedback to confi rm whether they should also apply to online merchants who directly off er credit for the purchase of their own products. “Today’s announcement forms part of the


government’s plan to grow the economy to tackle


the cost of living. The Chancellor


has provided £37bn of support to help, including providing the eight million most vulnerable British families with at least £1,200 of direct payments this year – and giving every household right across the UK £400 to help with their energy bills.” Caroline Siarkiewicz, chief executive of the


Money and Pensions Service added: “Research from our Debt Need Survey, which measures how many people need debt advice in the UK, has shown that four in ten people (38%) who had used Buy Now, Pay Later (BNPL) products in the last six months are in need of full debt advice. A further third (35%) are at risk of falling into problem debt, and only a quarter (27%) of those demonstrated that BNPL is appropriate in line with their fi nancial commitments. “This is worrying because it indicates that


some of the most vulnerable are using BNPL, which is unlikely to be in their best interests if they are already in problem debt or likely to fall into it. “Therefore, we welcome the drive to


regulate BNPL products to bring these under greater scrutiny and aff ordability checks.” Emjpy the magazine!


www.CCRMagazine.com 3


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