The UK Treasury has announced new regulations for the Buy Now Pay Later (BNPL) market aimed at consumer protection, set for early 2025 implementation.
- These regulations will require affordability checks and enhanced consumer protection to prevent individuals from incurring unmanageable debt.
- A consultation period will involve BNPL companies and regulators to devise implementation strategies, closing on November 29.
- Economic Secretary Tulip Siddiq confirmed that this regulation aims to rectify previous delays in protecting BNPL users.
- The forthcoming rules are anticipated to align BNPL protections with existing credit product safeguards.
In a significant move, the UK Treasury has declared that new regulatory measures for the Buy Now Pay Later (BNPL) sector will be introduced in early 2025. These regulations are specifically designed to impose affordability checks and strengthen consumer protections, addressing concerns that consumers are vulnerable to accumulating excessive debt through these services.
The government, under the guidance of Economic Secretary Tulip Siddiq, is spearheading this initiative. A planned consultation will assemble BNPL providers and regulatory bodies to formulate effective ways to implement these new rules. This consultation is scheduled to conclude by November 29, 2024, with the legislative framework set to be proposed in Parliament shortly thereafter and expected to come into force by 2026.
Tulip Siddiq emphasized the significance of this initiative, stating, “Millions of people use buy now pay later to manage their finances, but the previous government’s dither and delay left them unprotected.” She further highlighted the commitment to providing BNPL users with protections akin to those enjoyed by consumers of other credit products, while also fostering innovation and growth within the sector.
During the tenure of the previous Conservative government, there had been attempts to classify BNPL as a credit product through draft legislation. However, fears of BNPL providers leaving the market halted progress. These concerns were dismissed by Financial Conduct Authority (FCA) head Nikhil Rathi as unsubstantiated. Moreover, Siddiq criticized the Conservatives for their inaction and highlighted the urgency of implementing these measures due to the increased financial strain on the public, exacerbated by the cost-of-living crisis.
Rocio Concha, Director of Policy and Advocacy at Which?, stressed the necessity of prompt regulatory action to safeguard BNPL consumers. Research conducted by Which? revealed that many users remain unaware of incurring debt through BNPL services or the consequences of missed payments, which can lead to unlimited fees. Concha advocates for clearer information about associated risks and the necessity of affordability checks and redress options, viewing them as crucial triumphs for consumer rights.
The upcoming BNPL regulations are poised to offer critical consumer safeguards, ensuring responsible financial practices within the industry.
