The UK is set to introduce new regulations for a popular payment option. The forthcoming legislation mandates that Buy Now, Pay Later (BNPL) providers conduct affordability assessments to prevent consumers from racking up excessive debt, while also ensuring quicker refunds for shoppers.
A spokesperson for Clearpay said: “With the Government finalising Buy Now, Pay Later (BNPL) legislation, we will support the FCA to deliver fit-for-purpose regulation that ensures consumer protection, provides much-needed innovation in consumer credit and supports the UK’s thriving FinTech sector.
“Regulation will give clarity and consistency to the sector, establishing a consistent operating environment and compliance standards for all providers.
“Recent Clearpay research highlighted that nearly half of UK adults (48 percent) are more likely to use BNPL once regulation is passed, and with 71 percent believing that it is important for BNPL to be subject to UK financial legislation, today’s announcement (May 19) will help foster trust among consumers.
“It will also create a more sustainable foundation for the future of BNPL as it continues to grow as an everyday payment option for consumers.”
Emma Reynolds, Labour Party minister and economic secretary to the Treasury, spoke about the transformative effect of BNPL on shopping for millions. She also acknowledged the risks it posed, describing the sector as a “wild west”, reports Birmingham Live.
She said: “These new rules will protect shoppers from debt traps and give the sector the certainty it needs to invest, grow, and create jobs.”
Lisa Webb, a consumer law expert at the Which? consumer association, highlighted that their research showed “many users do not realise they are taking on debt or consider the prospect of missing payments”.
A Klarna spokesperson, representing one of the UK’s largest BNPL service providers, stated that the company has backed regulation for the sector since 2020. “It’s good to see progress on regulation, and we look forward to working with the FCA on rules to protect consumers and encourage innovation,” they said.
BNPL products currently operate outside regulatory frameworks, prompting Citizens Advice to hail the new measures as a “crucial step” towards bolstering shopper protections.
Tom MacInnes, Citizens Advice’s director of policy said: “For too long, people have been exposed to unaffordable debt from a BNPL sector that has operated in a regulatory grey area.” He added: “For some, this has had dire consequences. Many people are struggling to repay credit they can’t afford, falling behind on essential bills and often needing emergency support, like food bank vouchers.”
