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StepChange response to HM Treasury consultation on regulation of Buy Now Pay Later

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StepChange supports the government’s decision to bring new interest-free deferred payment buy-now pay-later (BNPL) products within the scope of financial services regulation.

We recognise the utility of BNPL to consumers as a form of no-cost payment smoothing. However, even no-interest loans can cause financial difficulty when repayments are unaffordable and we have concerns that aspects of the BNPL exploit consumer behavioural bias and vulnerability, including the marketing, placement and friction-free design of products, in ways that have the potential to cause or compound debt problems.

StepChange-commissioned polling shows that a high proportion of BNPL customers are in, or at risk of, financial difficulty. BNPL must therefore operate in a way that protects these consumers against avoidable harm.

In our response, we broadly support the government’s proposals and highlight in particular the need for:

  • Consistently applied standards for the placement of BNPL in online and offline retail to ensure consumers must always make a decision to use credit
  • HM Treasury and the FCA to work with firms and credit information providers to develop effective affordability assessments for BNPL products
  • Form and content agreements that include appropriate friction, information and warnings and are properly tested with consumers
  • Prompt support for consumers with BNPL agreements who are unable to keep up with repayments consistent with the rules that govern other credit products

You can download our full response here.