UK Publishes Draft Legislation to Regulate BNPL Credit
Reuters | Huw Jones | Feb 1, 2023
Britain on Tuesday set out draft legislation to regulate “buy now pay later” (BNPL) credit, saying the sector posed potential harm to consumers without thorough affordability checks.
- BNPL companies are largely unregulated (UK) and typically offer on-the-spot interest-free short-term loans that spread payments for retail goods like clothing. The sector nearly quadrupled during the pandemic in 2020 to 2.7 billion pounds ($3.28 billion).
- The finance ministry launched a public consultation on Tuesday on legislation to regulate BNPL, giving the Financial Conduct Authority (FCA) powers to authorise operators and their activities.
See: Walmart-backed Fintech Startup to Launch BNPL Loans
- Cause for concern:
- With Britain facing a cost of living crisis, consumer groups worry cash-strapped people are getting into debt by using BNPL to buy food or pay energy bills.The move had already been flagged for late 2022.
- BNPL agreements currently rely on minimal credit checks, with lenders not required to give key information to borrowers, and some people may end up borrowing more than they can afford to repay, the ministry said.
- “Buy Now Pay Later borrowing can be like quicksand – easy to slip into and very difficult to get out of,” said Matthew Upton, director of policy at consumer group Citizens Advice.
Apple Finally Unveils its BNPL Offering. 4 Things to Know Before Signing Up
Walmart-backed Fintech Startup to Launch BNPL Loans
- Changes coming: Last February, the FCA told BNPL operators Clearpay, Klarna, Laybuy and Openpay to change their contracts after identifying potential harm to customers. It had to use consumer rights law pending the new legislation.
- The ministry said consumers will also be given the new right to take complaints to the Financial Ombudsman Service
- Once the FCA has been given its new powers, it will consult on detailed rules for the sector, such as mandatory affordability checks, licensing of operators, and fair marketing.
Continue to the full article –> here
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