Focus Intensifies on Buy-Now, Pay-Later

The Treasury has announced plans to regulate Buy-Now, Pay-Later (BNPL) products in a response to the BNPL consultation paper issued last year. The new rules aim to bring BNPL in line with other credit products and provide stronger rights and clearer protection for shoppers.

The proposals come at a time of increased focus by the Government and the FCA on the consumer credit sector - including the recently launched consultation paper on reforming the Consumer Credit Act 1974 and the new consumer credit regulatory return.

The new rules for BNPL firms include:

• Tightening Exemptions and FCA Oversight

Previous consumer credit exemptions often used by BNPL providers are being tightened. Under the new rules, third-party lenders offering BNPL products will need to submit an authorisation application to the FCA. Despite some industry concerns, merchants providing BNPL remain exempt.

• Financial promotions

Unauthorised merchants will need their financial promotions approved by an FCA authorised firm. Regulated firms that wish to approve third-party promotions must obtain specific permission from the FCA to do so.

• Affordability checks

To prevent unaffordable debt, BNPL providers must conduct upfront affordability and credit checks to make sure people can repay what they borrow.

• Access to the Financial Ombudsman Service (FOS)

BNPL customers will be given the right to complain to the Financial Ombudsman when things go wrong. This change grants shoppers’ access to a free and independent resolution service where they can escalate disputes with their lender.

We encourage all affected firms to review these latest proposals. The FCA will soon publish a consultation on its proposed rules for BNPL Lenders, and we expect the final rules to take effect next year.

How we can help

Adempi provides specialist advice, practical support and training to FCA-regulated firms and lenders. If you’d like to speak to one of our experts about the new Buy-Now,

Pay Later rules, Consumer Credit Reforms or anything else, you can reach us at contact@adempi.co.uk or 0203 925 4761.