Consultation on Buy Now Pay Later
Buy Now, Pay Later Regulation
Tighter regulation of the buy now, pay later (BNPL) industry may be on its way as the treasury launches a consultation on the industry, though some campaigners fear the consultation will not go far enough as the government has concluded there is “relatively limited evidence” of widespread consumer harm.
BNPL allows customers to stagger payments for products such as clothes, footwear, beauty items and furniture with no interest or charges unless they fail to pay back on time, at which point some firms impose late fees. Citizens Advice said BNPL borrowing “can be like quicksand – easy to slip into and very difficult to get out of”.
The consultation (which closes in January 2022) is seeking views to inform the scope and nature of the regulation, but the document suggests that some existing regulations can be applied to BNPL. Some see BNPL as the future of credit finance (the use of BNPL nearly quadrupled in 2020, to £2.7bn of transactions), while others see it as a potential Wonga-style scandal.
Treasury proposals include introducing rules governing how BNPL firms treat customers in financial difficulty. Also, proportionate regulation should include the ability for consumers unhappy about the way a BNPL firm has treated them to complain to the Financial Ombudsman Service.
It could be late 2022 or 2023 before regulation takes effect. The Treasury consultation, which runs until 6 January, will be followed by an FCA consultation.
