The UK government is set to introduce new protections for users of Buy Now, Pay Later (BNPL) services, bringing them under the regulatory oversight of the Financial Conduct Authority (FCA). Under the proposed rules, BNPL providers will be required to assess shoppers’ ability to repay loans before approval and offer clear, simple, and accessible information about loan agreements.
In a significant change, the Consumer Credit Act will be expanded to cover BNPL products, while some outdated disclosure rules from the original 1974 Act will be removed to allow for more online-tailored guidance. These measures aim to provide consumers with a better understanding of BNPL agreements and the protections available to them.
Additionally, the proposals will give shoppers stronger rights to dispute transactions and claim refunds from lenders if issues arise, with complaints handled by the Financial Ombudsman Service.
The consultation on these amendments has been launched and will run until 29 November 2024, with legislation expected to be passed in early 2025 and come into effect by 2026. This initiative follows the government’s regulatory focus on BNPL, which began with a consultation in 2021.
Tulip Siddiq, Economic Secretary to the Treasury, stated that the new rules will provide shoppers with the same protections as other credit products, while giving the BNPL sector the clarity it needs to innovate and grow. The FCA, a strong advocate of the Woolard Review, supports these amendments to ensure BNPL services remain helpful while protecting consumers.
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