Consumers using buy now pay later (BNPL) services will benefit from key protection measures already in place for other types of lending under new proposals from the UK financial regulator.
The proposals from the Financial Conduct Authority (FCA) include requiring BNPL providers to perform affordability checks before granting loans and to offer support to consumers facing financial difficulties.
These measures would also allow BNPL borrowers to complain to the Financial Ombudsman Service if something goes wrong.
Any proposals for the sector from the FCA would come into effect when BNPL officially enters the remit of the regulator next year.
“We have long called for BNPL products to be brought into our remit, so people can benefit from BNPL while being protected,” said Sarah Pritchard, deputy chief executive at the FCA.
“Our regulation will help consumers navigate their financial lives, with checks on whether they can afford to repay, support when things go wrong and access to the right information to make informed decisions.
“We’re mainly relying on existing requirements, including the Consumer Duty, rather than proposing to make lots of new rules, supporting growth and allowing firms to innovate.”
According to research from the FCA, a fifth of UK adults, around 11 million people, have used BNPL at least once in the 12 months preceding May 2024, up from 17% in 2022.
A spokesperson for Clearpay, part of Block and one of the largest providers of BNPL services in the UK, told UKTN: “Clearpay has always called for fit-for-purpose regulation that ensures consumer protection, provides much-needed innovation in consumer credit and supports the UK’s thriving fintech sector.
“Today’s announcement will help foster trust among consumers. It will also create a more sustainable foundation for the future of BNPL as it continues to grow as an everyday payment option for consumers.”
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