The new legislation will impose new standards on BNPL companies, as the lack of regulations has led to some of the 10 million people using it to take too much debt
Starting next year, shoppers can expect to buy now, with the introduction of new legislation introduced on Monday, Pay Later (BNPL) plans.
The upcoming rules will set new standards for BNPL companies, due to concerns about insufficient regulations, which could cause 10 million users to fall into excessive debt.
“Buy now, pay later changed millions of dollars in shopping, but it has long been a wild west that exposed consumers,” said Emma Reynolds, the Treasury Economic Secretary.
Under new legislation, borrowers will be subject to mandatory inspections before loans to ensure they can manage repayments, improve access to refunds, and the option of complaints to the Financial Ombudsman, and align BNPL services with other credit products.
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The move is in response to last year’s financial advisory, suggesting that BNPL companies fall within the scope of the Financial Conduct Authority (FCA) and comply with the Consumer Credit Act.
Ms. Renault envisions that these measures would “protect shoppers from debt traps” while providing “the certainty needed to invest, grow and create jobs”.
The announcement has been accepted by citizen advice and heralds a “critical step forward for better consumer protection”.
Tom Macinnes, policy director at the charity, added: “For a long time, people have been underdebted in the BNPL division operating in the regulatory sector.
“For some time, this has had terrible consequences. Many people are working to repay credit they can’t afford, lagging behind basic bills and often need urgent support, such as food bank vouchers.”
He further stressed that this is not the “end of the road” and called on the FCA to act quickly to develop strong consumer protection measures that are urgently needed”.
BNPL also approved a regulatory restructuring. Clearpay is expected to have more users in such a company.
A representative for ClearPay said the legislation would “create a more sustainable basis for the future of BNPL as it continues to be a daily payment method for consumers.”
