Britain plans to regulate ‘buy now, pay later’ lenders -Breaking
Elizabeth Piper, Huw Jones
LONDON (Reuters] – Britain is preparing to allow companies to “buy now, and pay later (BNPL),” which will enable them to carry out affordability checks, get approved by the Financial Conduct Authority, and make sure that ads are accurate and clear. This was announced Monday by the government as part of a regulatory scheme.
BNPL companies, which do not have to be regulated, offer short-term, interest-free loans. These spread the cost of retail goods like clothing. They are rapidly growing in popularity, according to government data.
John Glen, the economic secretary of the finance ministry, stated that “Buy-now and pay-later” can help you manage your finances. However, we must ensure people are able to embrace new products with appropriate protections.
It stated that it would release a draft of legislation by the end of the year. The secondary legislation will then be laid, which would fill in details for Acts, by mid-2023. The FCA will consult about its sector rules, it said.
Martin Lewis, founder of consumer campaign group MoneySavingExpert.com, said progress to ensure proper checks has been “painfully slow”.
It’s often misunderstoodly promoted as a quick payment method. It’s not. Lewis explained that it’s a loan.
After identifying possible customer harm, Clearpay, Klarna Laybuy, Openpay were notified by the FCA that their contracts had to be changed. It used Britain’s consumer rights laws.
Online merchants are subject to a fee from BNPL for every transaction.
Gary Rohloff, cofounder of Laybuy, stated that the company supports the government’s approach and has supported proportionate rules to reflect the low risk of BNPL.
The BNPL business model developed in the era when interest rates were very low. But, it could face trouble if interest rates rise steadily.
Britain last week said that it will update its decades-old consumer credit law https://www.gov.uk/government/news/uk-commits-to-reform-of-the-consumer-credit-act?utm_medium=email&utm_campaign=govuk-notifications-topic&utm_source=e6a7d4d4-1a94-420e-8e2c-28a7c6e07341&utm_content=immediately to simplify rules and cut costs, with a public consultation due by the end of the year.