UK Government Aims to Provide More Protections to BNPL Users

The U.K. government said Thursday (Oct. 17) that it aims to provide buy now, pay later (BNPL) users with many of the protections provided by other consumer credit products.

It has launched a consultation on proposals to bring BNPL companies under the supervision of the Financial Conduct Authority (FCA) and apply the Consumer Credit Act, HM Treasury said in a Thursday press release.

These changes would ensure users receive clear information, avoid borrowing they can’t afford and have rights when any issues arise, according to the release.

“Our approach will give shoppers access to the key protections provided by other forms of credit while providing the sector with the certainty it needs to innovate and grow,” Economic Secretary to the Treasury Tulip Siddiq said in the release.

The new rules will require BNPL companies to check that shoppers can afford repayment before offering a loan; provide “clear, simple and accessible” information about loan agreements in advance; and provide refunds if BNPL users encounter issues with the products they purchase, according to the release.

The FCA will consult on the information disclosure rules to tailor them to the online setting in which BNPL products are generally used, the release said.

The consultation will close on Nov. 29 — an accelerated schedule that the press release said reflects “the urgent need for action to protect consumers” — and final legislation will go to Parliament in early 2025, per the release.

HM Treasury expects the rules to go into effect in 2026, according to the release.

Klarna Co-Founder and CEO Sebastian Siemiatkowski said in the release that Siddiq and the government have long been working with the industry and consumer groups.

“We’re looking forward to carrying on that work to put proportionate rules in place that protect consumers while fostering growth,” Siemiatkowski said.

Clearpay International Head of Public Policy Michael Saadat said in the release that it was encouraging that HM Treasury listened to industry feedback and adjusted its previous framework.

“We have always called for fit-for-purpose regulation that prioritizes consumer protection, delivers much-needed innovation in consumer credit and that sets high industry standards across the board,” Saadat said.

The FCA said in October 2023 that the U.K.’s cost-of-living crisis had fueled a surge in BNPL use and that while it does not regulate the BNPL sector, it had secured new protection for consumers using its powers under the Consumer Rights Act 2015.