The UK federal government has actually revealed strategies to reinforce regulation around interest-free buy now, pay later on (BNPL) credit contracts to secure “millions of people”.
UK gov to reinforce BNPL guidelines
Under the strategies, loan providers will be needed to perform price checks to guarantee loans are economical to consumers and guidelines will be modified to ensure ads are “fair, clear and not misleading”.
Lenders offering BNPL services will require to be authorized by the Financial Conduct Authority (FCA) and debtors will be able to lodge grievances with the Financial Ombudsman Service (FOS).
“BNPL credit agreements can be a helpful way to manage your finances, allowing people to spread the full cost of a purchase over time,” the federal government states.
“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.”
The federal government intends on releasing an assessment on draft legislation by completion of this year. Following this, it intends to lay secondary legislation by mid-2023, after which the FCA will seek advice from on its guidelines for the sector.
“By holding BNPL 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,” states John Glen, financial secretary to the Treasury.
