The UK government has announced a consultation on new legislations designed to regulate Buy-Now, Pay-Later (BNPL) products. The forthcoming rules, which will bring BNPL products under the supervision of the Financial Conduct Authority (FCA), are designed to provide the same key protections for BNPL as exist for other consumer credit products.
If you offer BNPL, what do you need to know?
Affordability checks and responsible lending
Under the new rules, BNPL providers will be required to perform affordability assessments to ensure that borrowers can afford repayments. This measure addresses concerns that consumers are at risk of accumulating unsustainable debt through easy access to BNPL products. For businesses offering these services, this will mean integrating new procedures to assess customers’ financial circumstances before approving BNPL transactions.
These checks are expected to be in line with those required for other consumer credit products, such as credit cards and loans, and will help to prevent customers from borrowing beyond their means.
Clearer information and consumer rights
The upcoming rules will require BNPL providers to offer clear, accessible information to users upfront, ensuring they can make informed decisions. Businesses that offer BNPL should anticipate needing to provide more detailed and user-friendly loan terms in their online interfaces.
Additionally, consumers will gain stronger rights if they experience issues with their purchases. Protections under Section 75 of the Consumer Credit Act will be extended to BNPL users, allowing customers to seek refunds from their lender if something goes wrong with a purchase.
Access to the Financial Ombudsman Service will also provide a clear avenue for complaints and dispute resolution. Affected businesses may need to look at beefing up their customer service teams to handle any increased demand for support or redress.
Timeline and next steps
The government’s consultation on the new rules is only open for a short period until 29 November. Legislation is expected to be laid in early 2025. Once passed, the FCA will finalise the rules, which are anticipated to come into force in 2026.
The consultation can be accessed here.
In the meantime, affected businesses should closely monitor updates on the legislation’s progress and consider consulting legal or financial advisers to ensure compliance.
For those already offering BNPL, this period presents an opportunity to review and enhance your credit-assessment systems, customer communications, and support structures, ensuring your business is prepared for a smoother transition once the rules take effect.
