New buy now, pay later regulations ‘set to protect 10 million consumers'
Plans to strengthen rules around buy now, pay later (BNPL) lending are taking another step forward, with the launch of a consultation looking at how firms would be brought under the scope of the City regulator.
Under Government proposals, BNPL products will be regulated by the Financial Conduct Authority (FCA) and customers will have new rights to take complaints to the ombudsman.
An eight-week consultation is being launched on Tuesday, looking at how firms would need to comply with FCA rules, including how they would need to spell out the key information about loans to customers.
The Government said the new regulations are set to help protect an estimated 10 million customers.
BNPL can be a handy way to spread the cost of purchases, while potentially avoiding the need to pay interest.
But there have been concerns about the ease at which people can build up significant amounts of debt relatively easily, with many BNPL products appearing at online shopping checkouts. Some people may end up borrowing more than they can comfortably afford to repay.
Under the plans, customers will have new rights to take complaints to the Financial Ombudsman Service (FOS).
The Government has previously outlined plans to strengthen rules around BNPL firms.
In June last year it said lenders would be required to carry out checks to make sure loans are affordable for consumers, and financial promotion rules would be amended to ensure BNPL advertisements are fair, clear and not misleading.
The next stage after the new consultation will be legislation.
A summit of banks and debt charities is also being convened on Tuesday, to help ensure that affordable credit is available to people who may struggle to access it.
The latest Financial Inclusion Policy Forum is taking place at the Money Advice Trust in Birmingham, bringing together representatives from the financial services sector, charities, consumer groups and regulators.
Economic Secretary to the Treasury Andrew Griffith said: “People should be able to access affordable credit, but with clear protections in place. That is why these proposed regulations are so important.
“Today's summit will also help regulators and banks better understand the best ways to support people who feel boxed in by debt and open up the financial system to people who find it more difficult to access.”