Today HM Treasury has opened a consultation on draft legislation to bring Buy Now, Pay Later (BNPL) lending under regulation of the Financial Conduct Authority (FCA). StepChange Debt Charity, having campaigned for regulation of the sector, warmly welcomes this announcement.
Responding to launch of the draft legislation, Richard Lane, Director of External Affairs at StepChange Debt Charity, said:
“Buy Now, Pay Later has seen huge growth in popularity over the last few years, with services now available at a wide range of retailers offering anything from clothing to groceries.
“We know that these products work well for millions of consumers, but it’s more important than ever, particularly during a cost of living crisis, that consumers are protected from falling into problem debt when taking out BNPL loans.
“The Government and the FCA should be commended for taking action. The lack of regulation has meant that current policies around late fees and affordability assessments vary significantly between providers. At present some consumers may hold multiple BNPL agreements that are unaffordable to them, which puts them at risk of escalating fees if they miss repayments. This is especially concerning as our research suggests a significant crossover between use of BNPL and financial difficulty, with many people borrowing to pay bills or make credit repayments.
“Transparency around advertising of BNPL is equally as important, and we’re pleased to that promotions will be addressed as part of these proposals. The way BNPL is marketed at checkouts tends to present it as a means of payment rather than a form of credit, which can be particularly problematic when its users are more often younger consumers with less financial experience.
“Until regulation is in place, we would urge BNPL providers to do all they can to prevent consumers from being faced with unmanageable debt.”
Notes to Editors
- HM Treasury’s consultation on draft BNPL legislation